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i need help with how to insert it as an excel format, thank you. CAPM & Stock Valuation Project The estimation of company betas is
i need help with how to insert it as an excel format, thank you.
CAPM \& Stock Valuation Project The estimation of company betas is normally brushed over in many introductory finance texts. This often leads students to view beta as some magical number and not until later courses in finance that they realize that the choice of different returns, indices and intervals examined can deliver different beta estimates. This internet exercise takes you through the basic calculation of beta using Excel in order to help demystify a company beta. Along the way you will find how to download share price and index data of the internet which can then be manipulated in Excel. Finally, you will tie the concept of beta and the CAPM to stock valuation. The Yahoo Finance site has a wealth of financial information on companies and countries from all over the world. Once you arrive at this site you will find a box titled "Get Quotes" which you need to type in the stock symbol (if you are unsure of the stock symbol go to "Symbol Lookup"). To download financial data from the internet follow the detailed instructions in the text box below: Instructions for Downloading Stock Data - In the Get Quotes box type in the stock symbol (for example, Verizon is VZ and the S\&P500 index is (GSPC) and click the GO box, bles - Click on Historical Data from the Quotes section under the more on VZ (for example) column. Click on the Time Period his the Set Date Range (then and enter the date range as instructed below and click Done button, Show: Historical Prices, set Frequency to Monthly, and click Apply. flle? - The first page of data should now be visible on the screen. Click the Download link. Save the data to a file. it will be saved as a CSV file. Wi. - Open Excel and then open the file you saved. Wit - At this point you should have seven columns including: Date, Open, High, Low and Closing share prices for that month, plus Volume and Adj Close data for each month. You can only need the Date, Open and Close columns for each stock or indexi ith. - To download dividend payments, change the Show setting to Dividends Only, click Apply and export and save this info to a spreadsheet. You will need to do this for any of your stocks that have paid dividends 1. First download into Excel the Ford (F), Tesla (TSLA) and Russell 3000 Stock Index (^RUA) monthly price data for the 5-year period from the Oct. 1, 2017 to Sept. 30, 2022 using the instructions outlined above. Using the Open and Close price data for each month (the date given is the first trading day for that month: i.e. the open and close for the month) to calculate the monthly percentage holding period returns for each stock and index where each month's Open price is the beginning of the month price and each month's Close price is the end of the month price. You can get rid of the other data provided for each month. In addition, you will need to include dividend payments for each stock to calculate monthly returns for the months that they made a dividend payment (the index doesn't have dividend payments). For example, September's monthly return is (Sept Close - Sept. Open + any Sept Div)/Sept Open. You should have 60 monthly returns for each stock and index from Oct. 1, 2017 to Sept. 30, 2022. Helpful Hint: I strongly urge creating a table of the appropriate opening \& closing prices and dividends for each stock along with opening and closing prices for the Russell 3000 Index on a separate worksheet and then do your calculations on this "fresh" worksheet. Also, Tesla hasn't paid dividends. 2. What is the average monthly return for each stockdind the Russell 300 index over the entire time period? Convert the average monthly return for each stock and index into an APR (annualized rate) by multiplying your monthly average for each stock by 12 . Please convert your answers to percentages with 2 decimal places. 3. Calculate the (population) standard deviation of monthly returns for each stock and the index using Excel. (i)6 4. Now calculate the beta for each stock using Excel's slope function to use estimate the slope of the linear regression line, which is beta. Use the Russell 3000 index as the market portfolio in finding beta. 116 5. Now use the CAPM/SML Equation to estimate each stock's required return. Use 10.3% as the required market return and the recent 10-year Treasury rate of 4.1% as the risk-free rate. Would you recommend buying Ford and/or Tesla if your APR average for each stock from \#2 is your expected return? Explain your answer. Ahe 6. Construct a graph of the Security Market Line given by the parameters in \#5. Point out the SML returns you calculated in \#5 on your SML Also, find and plot Ford's and Tesla's expected returns from the information given below gathered from their recent Yahoo Finance stock quotes against each stock's beta on your SML graph. Would you recommend buying Ford and/or Tesla based on this information? Explain your answers. Note: you are evaluating each stock individually, not in comparison in one another. 7. Value Line Investment Survey projects an annual 8% growth rate in dividends for Ford over the next 5 years. Let us assume this is a constant annual growth rate and Ford is a constant growth stock. What is your valuation for Ford using this 8% growth rate, the expected dividend in the table for #6 and your CAPM estimate for the required return? Would you recommend buying Ford stock based on your valuation and the current price from part 6 ? 8. Use the Corporate Valuation model to value Tesla. Here's Free Cash Flow projections (in millions of \$) needed to value Tesla as a firm. CAPM \& Stock Valuation Project The estimation of company betas is normally brushed over in many introductory finance texts. This often leads students to view beta as some magical number and not until later courses in finance that they realize that the choice of different returns, indices and intervals examined can deliver different beta estimates. This internet exercise takes you through the basic calculation of beta using Excel in order to help demystify a company beta. Along the way you will find how to download share price and index data of the internet which can then be manipulated in Excel. Finally, you will tie the concept of beta and the CAPM to stock valuation. The Yahoo Finance site has a wealth of financial information on companies and countries from all over the world. Once you arrive at this site you will find a box titled "Get Quotes" which you need to type in the stock symbol (if you are unsure of the stock symbol go to "Symbol Lookup"). To download financial data from the internet follow the detailed instructions in the text box below: Instructions for Downloading Stock Data - In the Get Quotes box type in the stock symbol (for example, Verizon is VZ and the S\&P500 index is (GSPC) and click the GO box, bles - Click on Historical Data from the Quotes section under the more on VZ (for example) column. Click on the Time Period his the Set Date Range (then and enter the date range as instructed below and click Done button, Show: Historical Prices, set Frequency to Monthly, and click Apply. flle? - The first page of data should now be visible on the screen. Click the Download link. Save the data to a file. it will be saved as a CSV file. Wi. - Open Excel and then open the file you saved. Wit - At this point you should have seven columns including: Date, Open, High, Low and Closing share prices for that month, plus Volume and Adj Close data for each month. You can only need the Date, Open and Close columns for each stock or indexi ith. - To download dividend payments, change the Show setting to Dividends Only, click Apply and export and save this info to a spreadsheet. You will need to do this for any of your stocks that have paid dividends 1. First download into Excel the Ford (F), Tesla (TSLA) and Russell 3000 Stock Index (^RUA) monthly price data for the 5-year period from the Oct. 1, 2017 to Sept. 30, 2022 using the instructions outlined above. Using the Open and Close price data for each month (the date given is the first trading day for that month: i.e. the open and close for the month) to calculate the monthly percentage holding period returns for each stock and index where each month's Open price is the beginning of the month price and each month's Close price is the end of the month price. You can get rid of the other data provided for each month. In addition, you will need to include dividend payments for each stock to calculate monthly returns for the months that they made a dividend payment (the index doesn't have dividend payments). For example, September's monthly return is (Sept Close - Sept. Open + any Sept Div)/Sept Open. You should have 60 monthly returns for each stock and index from Oct. 1, 2017 to Sept. 30, 2022. Helpful Hint: I strongly urge creating a table of the appropriate opening \& closing prices and dividends for each stock along with opening and closing prices for the Russell 3000 Index on a separate worksheet and then do your calculations on this "fresh" worksheet. Also, Tesla hasn't paid dividends. 2. What is the average monthly return for each stockdind the Russell 300 index over the entire time period? Convert the average monthly return for each stock and index into an APR (annualized rate) by multiplying your monthly average for each stock by 12 . Please convert your answers to percentages with 2 decimal places. 3. Calculate the (population) standard deviation of monthly returns for each stock and the index using Excel. (i)6 4. Now calculate the beta for each stock using Excel's slope function to use estimate the slope of the linear regression line, which is beta. Use the Russell 3000 index as the market portfolio in finding beta. 116 5. Now use the CAPM/SML Equation to estimate each stock's required return. Use 10.3% as the required market return and the recent 10-year Treasury rate of 4.1% as the risk-free rate. Would you recommend buying Ford and/or Tesla if your APR average for each stock from \#2 is your expected return? Explain your answer. Ahe 6. Construct a graph of the Security Market Line given by the parameters in \#5. Point out the SML returns you calculated in \#5 on your SML Also, find and plot Ford's and Tesla's expected returns from the information given below gathered from their recent Yahoo Finance stock quotes against each stock's beta on your SML graph. Would you recommend buying Ford and/or Tesla based on this information? Explain your answers. Note: you are evaluating each stock individually, not in comparison in one another. 7. Value Line Investment Survey projects an annual 8% growth rate in dividends for Ford over the next 5 years. Let us assume this is a constant annual growth rate and Ford is a constant growth stock. What is your valuation for Ford using this 8% growth rate, the expected dividend in the table for #6 and your CAPM estimate for the required return? Would you recommend buying Ford stock based on your valuation and the current price from part 6 ? 8. Use the Corporate Valuation model to value Tesla. Here's Free Cash Flow projections (in millions of \$) needed to value Tesla as a firm Step by Step Solution
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