W Home = Menu Format Painter W FIN 500 Mod6 Assignment6 Ins X + Home Insert Page Layout References Review View Tools Garamond 12 A+ A Aa Paste B I U A X2 A A A Page: 2/2 Words: 739 Al Spell Check Type here to search 1 Upgrade now WPS AI Share Hyperlink Title List Paragraph Find and Replace S 3. Amazon's stock price is currently (Jul 1, 2023) $127 per share with earnings per share over the next year estimated to be $2.57. What is the net present value of its growth opportunities (per share) if the required rate of return is 9 percent? (1 pt) Note, for this question, you may find information from the live session in Module 6 useful. 4. On May 9th, 2023, Airbnb (ABNB) announced that earnings were $0.18 per share, beating analyst forecasts of $0.10, additionally actual revenue was $1.82 billion, beating forecasts of $1.79billion. However, the stock price fell from $126.60 on May 9 to $109.85 on May 10. Does this example indicate that markets are not efficient? Explain your answer. (1 pt) Case Questions For the next three questions you will have to read the case Warren E. Buffet, 2015. Please use your own words to answer the following questions in well-composed sentences. You may refer to the case and internet, but please do not copy verbatim from the case, internet, or other sources. Note that this case will form the basis of the material in the Module 7 live session. 5. Please describe the main business of Berkshire Hathaway. (1 pt.) (up to 100 words) 6. Based on the data in the case, what do you think of the investment performance of Berkshire Hathaway? (2 pts.) (up to 200 words) Note: Your answer should discuss the performance over_ The long run (from exhibit 3 this would be from 1976 2015) The most recent five years, 2010-2015 The final year in the case - 2015. 7. From Yahoo Finance download the monthly adjusted close prices for Berkshire Hathaway Class A shares (Ticker BRK-A) and the S&P 500 Index (Ticker: ^GSPC - you may have to manually conv these) from July 1 2015 until August 1 2023 (note that in the vaboo outout the D G W W 100% 1 55F 10:07 AM 4/23/2024 > J w W Home = Menu Format Painter W FIN 500 Mod6 Assignment6 Ins X + Home Insert Page Layout References Review View Tools A Garamond 12 A+ A Aa Paste B I U A X2 A A A 1 Upgrade now WPS AI Share Hyperlink Title List Paragraph Find and Replace S Words: 739 Al Spell Check Type here to search Module 6 questions 1. The dividend yield on the S&P 500 index is currently 1.5% per year. That is, if you invest $100 in the portfolio of stocks underlying the index, during the next year you will receive dividends that total to $1.50. For simplicity, you can think of the index as being a stock with current price of Po and dividends of D = 0.015 Po. You are analyzing the link between the dividend payments of the S&P and the return on your investment. Based on historical information, you believe that your investment in the S&P 500 will yield annual returns of around 11.5%. a) How fast would dividends have to grow in perpetuity for the S&P 500 to give you 11.5% returns each year? (1pt) Hint. What model or formula relates Po, D, r, and g? = 2. The Shanghai Stock Exchange composite index on Jan 1, 2010 was at 3289.75, and had a dividend yield of approximately 0.9%. For simplicity, treat the index as a stock with Po 3289.75 and D = 29.60775. The market consensus was that dividends would grow at the rate of g = 0.106 or 10.6% per year, which is equal to the growth rate of nominal GDP in China in 2010. For simplicity, assume that Chinese GDP and dividends on the Shanghai Stock Exchange composite index both grow at this rate in perpetuity. a) Based on the date above, what is the implied return of an investment in the Shanghai Stock Exchange composite index? (0.5 pts) b) If the expected rate of return on Chinese stocks remained at the same level as you calculated in part a) but the market's estimate of the dividend growth rate decreased to 8% per year (the growth rate of GDP in 2012), the Shanghai Composite Index will decline. What would be the new value of the index? (0.5 pts) G L W W Page: 1/2 100% 1 55F 10:05 AM 4/23/2024 J > w