4. (46%) Given the portfolio data on Blackboard, with 5 years and 10 firms ranked by PE in 2008, you are required to perform stock valuation methods to analyze individual stock and Capital Asset Pricing Model to determine your final portfolio performance. With five years of financial fundamentals for each firm, you will need to first determine the predicted value of each firm: Question A: Apply P/E ratio and P/Book value ratio analysis to predict the expected values for 10 firms and identify firms which are undervalued and which are overvalued. (Hint: Use P/E and PB average ratio and growth rates of earnings and book value) Question B: With both methods used above, determine and screen over the final selected 7 firms into your portfolio. The final firms are determined BOTH undervalued by both P/E and P/B methods. Question C (separated from question A and B): Using Dividend Valuation Model to determine the intrinsic values of selected firms, you would need to calculate dividend growth rate and required rate of return. To calculate the required rate of return, use CAPM. Risk free rate is assumed to be zero (very close to 0 now) and use weekly market S&P 500 (1/1/2011-11/30/2013) to obtain market return. Then determine the following firms' intrinsic values: Zero dividend growth: Yahoo, Google Constant dividend: Bank of America Constant Growth on dividend: IBM, Microsoft Question D: In your final portfolio with selected undervalued firms from question B, with required rate of return and beta calculated for each firm (regressed on market return by using weekly data from 1/1/2011-11/30/2013), please find the portfolio risk(beta, assume equally weighted) and portfolio required return. Note: (Calculating Beta by using regression is optional. If you don't know how to use the regression to find firm's beta, you can use yahoo finance or google finance to get it) Ticker Symbol Company Name Cash Data Dale Data Year Fiscal OVO Common Shares Outstanding Not Income (L.68 Parent SCHIE 2008 AAT NAPI APPLE INC APPLE INC BMW 2 ALIEN 9363 113 15 WE 2011 AAM NISAAL IVES 2613 APRE INC APPLE INC POR MOTOR CO FORD MOTOR CO FORD MOTOR CO FORD MOTOR CO CV RE TRA . 2013 . 0001231 01011 2001111 20121231 11 231 30101231 RE FREE OPE 161 19 1959 LL DE WOONCORDE 1 Stockholders Equity - Dividends per Share Price Close-Annual Pay Date - Fiscal Fiscal 3100 LI 25 16 TR 10 21 29 To 4IT 24 2711 72 16 2 10 15 12:05 134 12 DI 11 116 TH 041 I 11410 05 17 as 12 041 10 344 201 N 2011 2012 2004 GE SUGGE 12234 OM DIR 2009 723 TKO HE w PSI HER ! 101011 ISINI SORE WO M 20121231 1211 45 77356 105 2289 23001 12! 461 TI TO W LI GE 2008 GM WUM NOM NOM EN 11CM OM WHO MO RE 20111231 JOIN NICO 2 w ME IN CI RESTRE ME HE 20 E PAN CHE LIPOP She 72 DIE KE N 2 23 W 51 2014 013 013 GENERAL LECTRO GENERAL ELECTRO ENERAL ELECTRICO GENERAL CIRCO GINERAL PLE GENERAL MOTORSCO GENERAL HORNO GENERAL MOTORS CREW CINERAL MOTORS GENERAL MOTORSCO HEWLETT PACKARDCO HEWLETT PACKARDCO HEWLETT MOKARDCO HEWLITTIM XARDCO HEWLETTIXARDCO INTL LSINESS MACHINENCOR INTL BUSINESS MACHNINCORP INLINESS MACHINE SOORP INIL SINESS MACHINES.COM BUSINESS MACHINES CORP BANK OF AMERICA CORP BANK OF AMERICA COOP BANK OF AMERICA BANK OF AMERICA COOL BANK OF AMERICA MNROOFT CORP MATCH Te 40148 1823 33430 14 26 M18 2018 3901 NE 61 11 011 LEO 1921 NA DIN NII 1104 30138 2 211 20 201210 12 01013 2011 20131211 11 DI 2002 2012 20111231 1922 1041 13831 TY IR 1913 16 2012 M 2008 RAC BAC 2010 A 2011 HAL 2012 2004 MNT 11191 901143 034 199 Thes: 33 ENTE 064 64 064 0.04 04 DRE SALI 104 11 11 PER INI LTE SESTRO 30101231 2001121 2010 GE 2011 NIGE 103001 0:42 0:30 IK 17.11 14131 1 MON 0 IEEE WIEM 41043) W 38049 8450 79156 100 23 210 14 1 20091331 2010111 201211 0491 M 2010 M 2011 OM 2012 M HIPO 150131 156421 6123 90 3813 16344 CE VID LEL PLE SIRE RE RE RE ELO ELEE U 403 N SHOP 64 7661 N14 2010 2011 2012 O IM IM 0.13 012 04 55+ I! HER PERCE B IL 1141 1316 PET LEE IM 110 S01 30001001 20101001 30011001 011001 01231 20091231 50101231 2001133 20121231 WWW 2013 21 2013 2011231 20121231 11465 33831 21046 2011 RIDIC 211 225 22 vel 15 11923 10412 1981 120 11 011 COOR GENERAL ELECTRICO GENERAL ELECTRICO GENERAL ELECTRICO GENERAL MOTORS GENERAL MOTORSCO . CINERAL MOTORS KIINERAL MOTORS GENERAL MOSCO HEWLETT PACKARDOO HIWLETT PACKANDCO HUWLETT-PACKARD.CO HEWLETT-PACKARD CO TWITT-PACKARDCO muren INTL BUSINESS MACHINES CORP INTL USINESS MACHINES.COM INTL BUSINESS MACIONES CORP INTL BUSINESS MACHINES CORP INTL BUSINESS MACHINES CORP RANK OF AMERICA CORP BANK OF BANK OF AMERICA CORP BANK OF AMERICA COP BANK OF AMERICA CORP MERCE MERCISOFTCORP MICROSOFT CORP MICROSOFT CORP MICROSOFT CORP YARDIM YARDIN YAKIN YARDIM YARDIM ORHIN INC CHOKIHIN HM 1 ML 19 OXILLING HO 2012 RAC 200 BAC 2010 BAL Smar HI HA AL 2012 HAC 173 13144 2304 W 18 101 HC 13 TA 39 064 004 004 159 108354 10 11002 1003 ! KI FI MS 16 IM MS 041 So DARMST le 211 LAND 5505 CAT SUNT I 052 OC 114 59 23 Iw YO MICROSOFT CORP ST 1908 07 31 1 1 MAHU M 2 YIK YIK 2010 YIK TO ENS RETI SUT 121 2010 WE! FIP HI 4 9 191 1281 ICONS REIRO X 110 I SEL 12 YAHOON S 19 2200 MIS . W1 OP 33 HY WREST PEOR MO GEXX GENI SI GO 2012 60 31 645 M TIT 666 4. (46%) Given the portfolio data on Blackboard, with 5 years and 10 firms ranked by PE in 2008, you are required to perform stock valuation methods to analyze individual stock and Capital Asset Pricing Model to determine your final portfolio performance. With five years of financial fundamentals for each firm, you will need to first determine the predicted value of each firm: Question A: Apply P/E ratio and P/Book value ratio analysis to predict the expected values for 10 firms and identify firms which are undervalued and which are overvalued. (Hint: Use P/E and PB average ratio and growth rates of earnings and book value) Question B: With both methods used above, determine and screen over the final selected 7 firms into your portfolio. The final firms are determined BOTH undervalued by both P/E and P/B methods. Question C (separated from question A and B): Using Dividend Valuation Model to determine the intrinsic values of selected firms, you would need to calculate dividend growth rate and required rate of return. To calculate the required rate of return, use CAPM. Risk free rate is assumed to be zero (very close to 0 now) and use weekly market S&P 500 (1/1/2011-11/30/2013) to obtain market return. Then determine the following firms' intrinsic values: Zero dividend growth: Yahoo, Google Constant dividend: Bank of America Constant Growth on dividend: IBM, Microsoft Question D: In your final portfolio with selected undervalued firms from question B, with required rate of return and beta calculated for each firm (regressed on market return by using weekly data from 1/1/2011-11/30/2013), please find the portfolio risk(beta, assume equally weighted) and portfolio required return. Note: (Calculating Beta by using regression is optional. If you don't know how to use the regression to find firm's beta, you can use yahoo finance or google finance to get it) Ticker Symbol Company Name Cash Data Dale Data Year Fiscal OVO Common Shares Outstanding Not Income (L.68 Parent SCHIE 2008 AAT NAPI APPLE INC APPLE INC BMW 2 ALIEN 9363 113 15 WE 2011 AAM NISAAL IVES 2613 APRE INC APPLE INC POR MOTOR CO FORD MOTOR CO FORD MOTOR CO FORD MOTOR CO CV RE TRA . 2013 . 0001231 01011 2001111 20121231 11 231 30101231 RE FREE OPE 161 19 1959 LL DE WOONCORDE 1 Stockholders Equity - Dividends per Share Price Close-Annual Pay Date - Fiscal Fiscal 3100 LI 25 16 TR 10 21 29 To 4IT 24 2711 72 16 2 10 15 12:05 134 12 DI 11 116 TH 041 I 11410 05 17 as 12 041 10 344 201 N 2011 2012 2004 GE SUGGE 12234 OM DIR 2009 723 TKO HE w PSI HER ! 101011 ISINI SORE WO M 20121231 1211 45 77356 105 2289 23001 12! 461 TI TO W LI GE 2008 GM WUM NOM NOM EN 11CM OM WHO MO RE 20111231 JOIN NICO 2 w ME IN CI RESTRE ME HE 20 E PAN CHE LIPOP She 72 DIE KE N 2 23 W 51 2014 013 013 GENERAL LECTRO GENERAL ELECTRO ENERAL ELECTRICO GENERAL CIRCO GINERAL PLE GENERAL MOTORSCO GENERAL HORNO GENERAL MOTORS CREW CINERAL MOTORS GENERAL MOTORSCO HEWLETT PACKARDCO HEWLETT PACKARDCO HEWLETT MOKARDCO HEWLITTIM XARDCO HEWLETTIXARDCO INTL LSINESS MACHINENCOR INTL BUSINESS MACHNINCORP INLINESS MACHINE SOORP INIL SINESS MACHINES.COM BUSINESS MACHINES CORP BANK OF AMERICA CORP BANK OF AMERICA COOP BANK OF AMERICA BANK OF AMERICA COOL BANK OF AMERICA MNROOFT CORP MATCH Te 40148 1823 33430 14 26 M18 2018 3901 NE 61 11 011 LEO 1921 NA DIN NII 1104 30138 2 211 20 201210 12 01013 2011 20131211 11 DI 2002 2012 20111231 1922 1041 13831 TY IR 1913 16 2012 M 2008 RAC BAC 2010 A 2011 HAL 2012 2004 MNT 11191 901143 034 199 Thes: 33 ENTE 064 64 064 0.04 04 DRE SALI 104 11 11 PER INI LTE SESTRO 30101231 2001121 2010 GE 2011 NIGE 103001 0:42 0:30 IK 17.11 14131 1 MON 0 IEEE WIEM 41043) W 38049 8450 79156 100 23 210 14 1 20091331 2010111 201211 0491 M 2010 M 2011 OM 2012 M HIPO 150131 156421 6123 90 3813 16344 CE VID LEL PLE SIRE RE RE RE ELO ELEE U 403 N SHOP 64 7661 N14 2010 2011 2012 O IM IM 0.13 012 04 55+ I! HER PERCE B IL 1141 1316 PET LEE IM 110 S01 30001001 20101001 30011001 011001 01231 20091231 50101231 2001133 20121231 WWW 2013 21 2013 2011231 20121231 11465 33831 21046 2011 RIDIC 211 225 22 vel 15 11923 10412 1981 120 11 011 COOR GENERAL ELECTRICO GENERAL ELECTRICO GENERAL ELECTRICO GENERAL MOTORS GENERAL MOTORSCO . CINERAL MOTORS KIINERAL MOTORS GENERAL MOSCO HEWLETT PACKARDOO HIWLETT PACKANDCO HUWLETT-PACKARD.CO HEWLETT-PACKARD CO TWITT-PACKARDCO muren INTL BUSINESS MACHINES CORP INTL USINESS MACHINES.COM INTL BUSINESS MACIONES CORP INTL BUSINESS MACHINES CORP INTL BUSINESS MACHINES CORP RANK OF AMERICA CORP BANK OF BANK OF AMERICA CORP BANK OF AMERICA COP BANK OF AMERICA CORP MERCE MERCISOFTCORP MICROSOFT CORP MICROSOFT CORP MICROSOFT CORP YARDIM YARDIN YAKIN YARDIM YARDIM ORHIN INC CHOKIHIN HM 1 ML 19 OXILLING HO 2012 RAC 200 BAC 2010 BAL Smar HI HA AL 2012 HAC 173 13144 2304 W 18 101 HC 13 TA 39 064 004 004 159 108354 10 11002 1003 ! KI FI MS 16 IM MS 041 So DARMST le 211 LAND 5505 CAT SUNT I 052 OC 114 59 23 Iw YO MICROSOFT CORP ST 1908 07 31 1 1 MAHU M 2 YIK YIK 2010 YIK TO ENS RETI SUT 121 2010 WE! FIP HI 4 9 191 1281 ICONS REIRO X 110 I SEL 12 YAHOON S 19 2200 MIS . W1 OP 33 HY WREST PEOR MO GEXX GENI SI GO 2012 60 31 645 M TIT 666
