Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Choose a stock category from Table 1 below. Collect the historical monthly price information from Yahoo Finance (wwwyahoofinancecom) for 5 stocks belonging to your category

image text in transcribed
Choose a stock category from Table 1 below. Collect the historical monthly price information from Yahoo Finance (wwwyahoofinancecom) for 5 stocks belonging to your category choice from July 2015 to date. Also collect the historical prices for the S&P 500 index for the same period. Use the price data to find the monthly return of the individual stocks from August 2015 to the present date. Also note the current earnings per share (EPS) for each of the companies. Assume each of the companies has had earnings growth of 25% for the past 5 years and has a reasonable expectation that earnings will continue at that rate for the next 5 years. Most analysts believe that the growth rate will decline each year by 1% until it reaches a steady long-term growth rate of 4%. Assume each company pays out 25% of its earnings as dividends and will continue to do so in order to maintain the current growth scenario. Use the data to answer the following questions. . a. Assuming that a reasonable annual market return is equal to the monthly 5&P average return times 12, what is the annual rate of market return? b. Using the slope function, calculate the Beta of each of the 5 companies stock. c. Suppose that the risk free rate would be 2.5%, what is the appropriate required rate of return of each of the company's stock? [Hintz use the answers to questions (a) and (b) and the CAPM macro developed in problem 3] d. What would the expected price of the stocks be

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Strategic Brand Management

Authors: Alexander Chernev

3rd Edition

193657263X, 9781936572632

More Books

Students also viewed these General Management questions