Perform a Fama-French factor model analysis of Kellogg. Assume a value premium of 3 and size premium
Fantastic news! We've Found the answer you've been seeking!
Question:
Perform a Fama-French factor model analysis of Kellogg. Assume a value premium of 3 and size premium of 2.?
1. Given what you know about Kellogg, what is a reasonable value beta and size beta??
2. Given your assumptions above, what is Kellogg's Fama-French required return? Comment on why this required return is different from the required return derived from CAPM.
Transcribed Image Text:
Kellogg Balance Sheet $ Millions Excess Cash (Projected Years Only) Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total current assets Property, Plant & Equipment, Net Goodwill Other intangibles, net Investment in unconsolidated entities Other Assets Total assets Current Liabilities Additional Borrowings (Projected Years Only) Current maturities of long-term debt Notes payable Accounts payable Other current liabilities Total current liabilities Long-term debt Deferred income taxes Pension liability Other liabilities Total Liabilities Equity Common stock, $.25 par value Capital in excess of par value Retained earnings Treasury stock, at cost 69,403,567 shares in 2016 and 70,291,514 s Accumulated other comprehensive income (loss) Total Kellogg Company equity Noncontrolling interests Total equity Total liabilities and equity Hist 2017 443 1,276 1,279 342 3,340 3,769 4,971 2,295 1 777 15,153 607 828 1,528 1,401 4,364 5,935 726 777 500 12,302 105 678 Hist 2018 2,851 15,153 251 1,344 1,250 391 280 1,231 1,238 191 3,236 2,940 3,621 3,569 4,968 2,268 456 702 15,251 Hist 1,266 1,204 1,907 1,362 2019 5,166 2,369 438 629 15,111 631 438 2,014 1,391 4,474 6,698 525 105 745 6,689 6,597 6,571 (3,997) (3,470) (3,943) (1,213) (1,376) (1,575) 2,789 1,910 62 2,128 10 16 2,138 1,926 15,251 15,111 5,739 5,275 685 946 1,024 468 464 13,113 13,185 105 806 Proj 2020 280 1,261 1,274 199 3,015 725 438 1,991 1,410 4,564 6,067 565 1,024 464 12,684 Proj 2021 5,166 2,369 438 438 629 629 11,617 11,671 105 806 280 1,286 1,300 203 3,069 5,166 2,369 320 438 2,031 1,449 4,238 5,342 609 1,024 464 11,677 105 806 (3,997) (3,997) (1,575) (1,575) (4,661) (4,661) 16 16 (4,645) (4,645) 8,039 7,032 Proj 2022 280 1,312 1,326 207 3,125 5,166 2,369 438 629 11,727 275 438 2,072 1,478 4,262 5,022 621 1,024 464 11,394 105 806 (3,997) (1,575) (4,661) 16 (4,645) 6,749 Kellogg Balance Sheet $ Millions Excess Cash (Projected Years Only) Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total current assets Property, Plant & Equipment, Net Goodwill Other intangibles, net Investment in unconsolidated entities Other Assets Total assets Current Liabilities Additional Borrowings (Projected Years Only) Current maturities of long-term debt Notes payable Accounts payable Other current liabilities Total current liabilities Long-term debt Deferred income taxes Pension liability Other liabilities Total Liabilities Equity Common stock, $.25 par value Capital in excess of par value Retained earnings Treasury stock, at cost 69,403,567 shares in 2016 and 70,291,514 s Accumulated other comprehensive income (loss) Total Kellogg Company equity Noncontrolling interests Total equity Total liabilities and equity Hist 2017 443 1,276 1,279 342 3,340 3,769 4,971 2,295 1 777 15,153 607 828 1,528 1,401 4,364 5,935 726 777 500 12,302 105 678 Hist 2018 2,851 15,153 251 1,344 1,250 391 280 1,231 1,238 191 3,236 2,940 3,621 3,569 4,968 2,268 456 702 15,251 Hist 1,266 1,204 1,907 1,362 2019 5,166 2,369 438 629 15,111 631 438 2,014 1,391 4,474 6,698 525 105 745 6,689 6,597 6,571 (3,997) (3,470) (3,943) (1,213) (1,376) (1,575) 2,789 1,910 62 2,128 10 16 2,138 1,926 15,251 15,111 5,739 5,275 685 946 1,024 468 464 13,113 13,185 105 806 Proj 2020 280 1,261 1,274 199 3,015 725 438 1,991 1,410 4,564 6,067 565 1,024 464 12,684 Proj 2021 5,166 2,369 438 438 629 629 11,617 11,671 105 806 280 1,286 1,300 203 3,069 5,166 2,369 320 438 2,031 1,449 4,238 5,342 609 1,024 464 11,677 105 806 (3,997) (3,997) (1,575) (1,575) (4,661) (4,661) 16 16 (4,645) (4,645) 8,039 7,032 Proj 2022 280 1,312 1,326 207 3,125 5,166 2,369 438 629 11,727 275 438 2,072 1,478 4,262 5,022 621 1,024 464 11,394 105 806 (3,997) (1,575) (4,661) 16 (4,645) 6,749
Expert Answer:
Answer rating: 100% (QA)
A reasonable value beta and size beta for Kellogg can be estimated by looking at the companys financ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Given what you know about the involvement of nicotinamide nucleotides in oxidative and reductive metabolic reactions, predict whether the following intracellular concentration ratios should be 1, >...
-
Given what you know about the relationship be- tween corn and beef and corn and soybeans and corn and gasoline, an increase in the price of corn (due to a new insect that eats the roots out of corn)...
-
Given what you know of taxes in the United States, explain whether U.S. tax policy is consistent with the IMF policy advice given in Table 21.2. If not, explain why not.
-
On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 100,000 rubles in four months (on January 31, 2018) and receive $39,000 in U.S. dollars. Exchange...
-
Procter & Gamble Co., is an American multinational corporation that manufactures a wide range of consumer goods, such as laundry and homecare (Ariel, Mr Clean), feminine protection (Always),...
-
1. What kinds of market research has the Y conducted? 2. Which questions has the Y sought to answer with each different type of market research it has conducted? 3. Who are the main stakeholders that...
-
You will compute the (Fourier) convolution of two box functions of the same width. Recall that the box function is given by \[f_{a}(x)= \begin{cases}1, & |x| \leq a \\ 0, & |x|>a\end{cases}\]...
-
Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated...
-
Garden Sales, Incorporated, sells garden supplies. Management isplanning its cash needs for the second quarter. The company usuallyhas to borrow money during this quarter to support peak sales ofla 2...
-
On December 1, Year 1, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and...
-
Massmart is an African retail and wholesale group with widely recognised and differentiated formats, represented in 408 stores in 13 sub-Saharan countries. It has leading market shares in the general...
-
Nicole's Necklaces purchased a diamond necklace two years ago for $700. However, due to a decrease in the popularity of pearls, the necklace is now only worth $400. What journal entry will Nicole...
-
An investor owns a $8,000 diversified portfolio. a.) He adds in $2,000 worth of stock A to this portfolio. What is the expected monthly return and volatility of this new portfolio? Original...
-
As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 30% of Nursery Supplies Incorporated's 8 million shares of capital stock for $30 million. The fair...
-
Determine the formal charge on each of the atoms in the following Lewis structures. (Enter your answer using the format +1 and -2.)
-
How does a computerized software system help eliminate errors?
-
You've borrowed $17,000 on margin to buy shares in Ixnay, which is now selling at $34 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 30%. Two days...
-
Portal Manufacturing has total fixed costs of $520,000. A unit of product sells for $15 and variable costs per unit are $11. a). Prepare a contribution margin income statement showing predicted net...
-
The most obvious pattern in poverty rates isthe degree to which they are higher during a. Democratic administrations. b. Wars. c. Odd years. d. Recessions.
-
Why might an agreement like NAFTA increase GDP but not be favored by union members?
-
How much would an individual receive in benefits if she had a constant (wage-inflation adjusted) monthly income of $6,000, and how would that compare to someone who had an income one-third that size?
-
In the 2006 Wells Report, what was the third most common way of detecting fraud? a. Tips b. Internal audits c. External audits d. By accident e. Reports from the police
-
What would not be a type of prediction for purposes of a CFE? a. Anonymous tip b. Complaint c. Audit inquiry d. Conflict of interest e. None of the above
-
What was the major fraud scheme used by the Baptist Foundation of Arizona? a. Ponzi scheme b. Created many fake purchase orders c. Improperly capitalized a number of expenses d. Bill and hold...
Study smarter with the SolutionInn App