Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please solve the first and second parts Project Description This project is designed to apply the risk and return we learn in class on companies

Please solve the first and second parts image text in transcribed
Project Description This project is designed to apply the risk and return we learn in class on companies in the real world. It is a group project, with each person in the group picking one company to value. The project analysis is due in two parts: Part one 1:Risk and return (12 points) 1. Pick the companies Go to yahoo finance choose U.S companies which one company in the financial sector (bank), one industrial company one service and the index S&P500 get the adjusted closing price for the last 4 years starting Jan I, 2015-Dec31, 2019 2. Use the excel to: calculate the average return of each stock the standard deviation of each stock calculate the covariance and correlation between each pair of stocks calculate beta for each stock one time using the beta equation and the second time using the regression Calculate the average return of a portfolio that consist of 30% banks, 20% service companies and 50% industrial companies What is the portfolio risk for a portfolio consist of 40% banks and 60% service companies | Part two stock valuation (8 points) Free cash flow to firm for Alpha is currently $300 million but is expected to grow by 4% each year forever. If the risk free is 5% and the market return is 8.34%, beta is l. 5. Cost of debt after tax is 10% , if the capital structure is 70% equity and 30% debt - what is the WACC?. How much is it worth? If market value of debt is $3,000 million and FC has 200 million shares outstanding, find per share value of FC. Project Description This project is designed to apply the risk and return we learn in class on companies in the real world. It is a group project, with each person in the group picking one company to value. The project analysis is due in two parts: Part one 1:Risk and return (12 points) 1. Pick the companies Go to yahoo finance choose U.S companies which one company in the financial sector (bank), one industrial company one service and the index S&P500 get the adjusted closing price for the last 4 years starting Jan I, 2015-Dec31, 2019 2. Use the excel to: calculate the average return of each stock the standard deviation of each stock calculate the covariance and correlation between each pair of stocks calculate beta for each stock one time using the beta equation and the second time using the regression Calculate the average return of a portfolio that consist of 30% banks, 20% service companies and 50% industrial companies What is the portfolio risk for a portfolio consist of 40% banks and 60% service companies | Part two stock valuation (8 points) Free cash flow to firm for Alpha is currently $300 million but is expected to grow by 4% each year forever. If the risk free is 5% and the market return is 8.34%, beta is l. 5. Cost of debt after tax is 10% , if the capital structure is 70% equity and 30% debt - what is the WACC?. How much is it worth? If market value of debt is $3,000 million and FC has 200 million shares outstanding, find per share value of FC

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Financial Accounting Tools for Business Decision Making

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

6th Canadian edition

1118644948, 978-1118805084, 1118805089, 978-1118644942

Students also viewed these Finance questions

Question

What are some ways to resolve a conflict of interest?

Answered: 1 week ago

Question

What was the first language you learned to speak?

Answered: 1 week ago

Question

During WUI event who will set up DOC and EOC

Answered: 1 week ago

Question

Create a Fishbone diagram with the problem being coal "mine safety

Answered: 1 week ago