Analyzing two stocks of your choice

We begin by breaking down the prices of these stocks using the dividend discount growth model. (a)Report the stock price and book value per share alongside the forecasted dividend and earnings per share using any reasonable estimate. Going by these statistics which of your stocks looks more like an income stock and which looks more like a growth stock? (b)For each stock calculate the payout ratio and return on book equity and compute the growth rate that this implies. (c)For each stock calculate the market capitalization rate and break down the share price into the level earnings and growth opportunities components. 2.For the sake of simplicity assume that in each year each company has a single investment opportunity to plow back some percentage of its earnings to generate annual cash flows at a rate equal to the its current return on book equity. (a)For each company consider the investment opportunity available next year (t = 1). Calculate the payback period internal rate of return and net present value NP V1 of next year’s investment opportunity. Are these projects worth pursuing? (b)Now consider each company’s investment opportunity at t = 2 with annual earnings permanently increased by the cash flows from the year 1 investment. If the firm continues to plow back the same proportion of earnings and earns the same return on equity what is the net present value NP V2 of the project? (c)If each company continued to plow back earnings at the same rate and earn the same return on equity what would be the present value of all its future growth opportunities? Does this match your answer from #1? 3.We will now analyze the historical returns of your chosen stocks. You may choose any time period and frequency you deem suitable but make sure that all of your returns are reported as annualized rates. You will want to use the adjusted closing price to automatically account for the effects of dividends and splits. (a)For each stock as a well as a suitable market index report the mean and standard deviation of returns. (b)Find the variance-covariance matrix of the two stocks and the market index and report the beta of each stock. (c)We now consider the benefits of diversifying by constructing a portfolio consisting of both of your stocks. For each value of x = {0 0.1 0.2 . . . 1} consider a portfolio with a proportion x of your wealth invested in your first stock and 1−x invested in the second and compute the mean and standard deviation of the portfolio return. (d)Assume a risk free rate of rf = 0.01. In a well-diversified portfolio only market risk matters so the risk premium of any stock should be proportional to its beta. If this were true what should be the returns you expect to earn from your two stocks and how does this compare to their historical averages?

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!
Open chat
1
You can contact our live agent via WhatsApp! Via + 1 3234125597

Feel free to ask questions, clarifications, or discounts available when placing an order.

Order your essay today and save 25% with the discount code CLASS