Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to evaluate them. The client has $2 million invested in the stock of Blandy, Inc., a company that produces meat-and-potatoes frozen dinners. Blandy's slogan is "Solid food for shaky times." Unfortunately, Congress and the president are engaged in an acrimonious dispute over the budget and the debt ceiling. The outcome of the dispute, which will not be resolved until the end of the year, will have a big impact on interest rates one year from now. You have also gathered historical returns as follows for the past 10 years for Blandy, Gourmange Corporation (a producer of gourmet specialty foods), and the stock market. The risk-free rate is 496 and the market risk premium is 596. Year Historical Stock Returns Market Blandy Gourmange 269 -54 47% 40 -22 -15 -14 2 10 -18 26 42 -1030 -3 -32 -23 -4 8.00% 20.10% 9.2096 38.6096 Average return: Standard deviation: Correlation with the market: Beta: 0.678 1.3 1 ? 3. Several factors, both internal and external impact a company's stock price and the subsequent perceived valuation of a company. Sometimes that perceived value matches that of the financial statements, and other times it is vastly different. Therefore, discuss the factors that lead to a valuation of a company's worth compared to that of the financial statements and how company executives create the most value for all stakeholders. Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to evaluate them. The client has $2 million invested in the stock of Blandy, Inc., a company that produces meat-and-potatoes frozen dinners. Blandy's slogan is "Solid food for shaky times." Unfortunately, Congress and the president are engaged in an acrimonious dispute over the budget and the debt ceiling. The outcome of the dispute, which will not be resolved until the end of the year, will have a big impact on interest rates one year from now. You have also gathered historical returns as follows for the past 10 years for Blandy, Gourmange Corporation (a producer of gourmet specialty foods), and the stock market. The risk-free rate is 496 and the market risk premium is 596. Year Historical Stock Returns Market Blandy Gourmange 269 -54 47% 40 -22 -15 -14 2 10 -18 26 42 -1030 -3 -32 -23 -4 8.00% 20.10% 9.2096 38.6096 Average return: Standard deviation: Correlation with the market: Beta: 0.678 1.3 1 ? 3. Several factors, both internal and external impact a company's stock price and the subsequent perceived valuation of a company. Sometimes that perceived value matches that of the financial statements, and other times it is vastly different. Therefore, discuss the factors that lead to a valuation of a company's worth compared to that of the financial statements and how company executives create the most value for all stakeholders
