we have selected Microsoft and Oracle as companies for analysis
- Calculate/estimate and critically interpret: 1- The most common ratios used by investors to measure a company's level of risk (leverage financial ratios), profitability, liquidity, and market value. 2- Log returns/simple monthly returns of the stocks and the market portfolio 3- The arithmetic average returns of the individual stocks and the market portfolio 4- The risk (std. deviations) of the individual stocks 5- The correlation between the two stocks 6- Systematic risk (betas- the slope of the regression) of each of the stocks using regression. Regress stock returns over market returns. What is the intercept of the regression (alpha)? What does it tell you about the performance of this company's stock during the period of the regression? What does r-squared tell you? 7- Cost of Equity (required rate of return). How does market risk affect the cost of capital? 8- Portfolio return 9- Portfolio beta 10- Portfolio risk 11- Capital Structure choices and firm Valuation: What are the different types of financing that this company has used to raise funds? How large, in qualitative or quantitative terms, are the advantages to this company from using debt? From the qualitative trade off, does this firm look like it has too much or too little debt? Does this company have high free cash flows? How high are the current cash flows of the firm (to service the debt) and how stable are these cash flows? (Look - Calculate/estimate and critically interpret: 1- The most common ratios used by investors to measure a company's level of risk (leverage financial ratios), profitability, liquidity, and market value. 2- Log returns/simple monthly returns of the stocks and the market portfolio 3- The arithmetic average returns of the individual stocks and the market portfolio 4- The risk (std. deviations) of the individual stocks 5- The correlation between the two stocks 6- Systematic risk (betas- the slope of the regression) of each of the stocks using regression. Regress stock returns over market returns. What is the intercept of the regression (alpha)? What does it tell you about the performance of this company's stock during the period of the regression? What does r-squared tell you? 7- Cost of Equity (required rate of return). How does market risk affect the cost of capital? 8- Portfolio return 9- Portfolio beta 10- Portfolio risk 11- Capital Structure choices and firm Valuation: What are the different types of financing that this company has used to raise funds? How large, in qualitative or quantitative terms, are the advantages to this company from using debt? From the qualitative trade off, does this firm look like it has too much or too little debt? Does this company have high free cash flows? How high are the current cash flows of the firm (to service the debt) and how stable are these cash flows? (Look
