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Using the two stocks , identify the Beta for each one. In your own words, what conclusion can you draw from the stocks’ current and historical beta? If the stock market went up 10% today, what would be the impact on each of your stocks?

Using the 2016 financial statements from your stocks above and the equations from your textbook, prepare the Historical Average and Standard Deviation for each stock

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Here is the answer. Thanks

APPLE INC (AAPL)
INCOME STATEMENT
Fiscal year ends in September. USD in millions except per share data.
2012-09
Revenue
Cost of revenue
Gross profit
Operating expenses
Research and development
Sales, General and administrative
Total operating expenses
Operating income
Interest Expense
Other income (expense)
Income before taxes
Provision for income taxes
Net income from continuing operations
Net income

2013-09

156508
87846
68662

170910
106606
64304

3381
10040
13421
55241

4475
10830
15305
48999
136
1292
50155
13118
37037
37037

522
55763
14030
41733
41733

PL)
MENT

182795
112258
70537

233715
140089
93626

215639
131376
84263

191913,40
115635,00
76278,40

Standard
Deviation
31969,16
20681,71
12237,77

6041
11993
18034
52503
384
1364
53483
13973
39510
39510

8067
14329
22396
71230
733
2018
72515
19121
53394
53394

10045
14194
24239
60024
1456
2804
61372
15685
45687
45687

6401,80
12277,20
18679,00
57599,40
677,25
1600,00
58657,60
15185,40
43472,20
43472,20

2693,22
1940,63
4587,38
8619,37
574,02
856,88
8758,49
2388,39
6393,03
6393,03

2014-09

2015-09

2016-09

Average

APPLE INC (AAPL)
BALANCE SHEET
Fiscal year ends in September. USD in millions except per share data.
2012-09
Assets
Current assets
Cash
Cash and cash equivalents
Short-term investments
Total cash
Receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Gross property, plant and equipment
Accumulated Depreciation
Net property, plant and equipment
Equity and other investments
Goodwill
Intangible assets
Other long-term assets
Total non-current assets
Total assets
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt
Accounts payable
Taxes payable
Accrued liabilities
Deferred revenues
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt
Deferred taxes liabilities
Deferred revenues
Other long-term liabilities
Total non-current liabilities
Total liabilities
Stockholders' equity
Common stock

2013-09

10746
18383
29129
10930
791
2583
14220
57653

14259
26287
40546
13102
1764
3453
14421
73286

21887
-6435
15452
92122
1135
4224
5478
118411
176064

28519
-11922
16597
106215
1577
4179
5146
133714
207000

21175
1535
8387
5953
1492
38542

22367
1200
5217
7435
7439
43658

2648
16664
19312
57854

16960
16489
2625
3719
39793
83451

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders' equity

16422
101289
499
118210
176064

19764
104256
-471
123549
207000

APL)
EET
2014-09

2015-09

13844
11233
25077
17460
2111
4318
19565
68531

21120
20481
41601
16849
2349
5546
23033
89378

39015
-18391
20624
130162
4616
4142
3764
163308
231839

2016-09

20484
46671
67155
15754
2132

Average

Standard
Deviation

21828
106869

16090,60
24611,00
40701,60
14819,00
1829,40
3975,00
18613,40
79143,40

4515,63
13456,12
16421,55
2740,55
617,13
1264,36
4112,49
19249,84

49257
-26786
22471
164065
5116
3893
5556
201101
290479

61245
-34235
27010
170430
5414
3206
8757
214817
321686

39984,60
-19553,80
20430,80
132598,80
3571,60
3928,80
5740,20
166270,20
245413,60

15794,82
11175,22
4662,94
34502,67
2048,53
423,95
1834,54
41620,79
59828,11

6308
30196
1209
7689
9548
8498
63448

10999
35490

11605
37294

25181
8940

22027
8080

80610

79006

9637,33
29304,40
1314,67
13700,20
7991,20
5809,67
61052,80

2899,16
7367,24
190,87
9185,23
1396,01
3776,51
19492,65

28987
20259
3031
4567
56844
120292

53463
24062
3624
9365
90514
171124

75427
26019
2930
10055
114431
193437

43709,25
21707,25
2971,60
8874,00
64178,80
125231,60

26034,71
4221,52
404,89
5182,77
38341,63
57157,34

23313

27416

31251

27326,67

3969,75

87152
1082
111547
231839

92284
-345
119355
290479

96364
634
128249
321686

18093,00
96269,00
279,80
120182,00
245413,60

2363,15
6855,68
665,41
6235,97
59828,11

APPLE INC (AAPL)
CASH FLOW STATEMENT
Fiscal year ends in September. USD in millions except per share data.
2012-09
Cash Flows From Operating Activities
Net income
Depreciation & amortization
Deferred income taxes
Stock based compensation
Accounts receivable
Inventory
Accounts payable
Other working capital
Other non-cash items
Net cash provided by operating activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment
Acquisitions, net
Purchases of investments
Sales/Maturities of investments
Purchases of intangibles
Other investing activities
Net cash used for investing activities
Cash Flows From Financing Activities
Debt issued
Debt repayment
Common stock issued
Common stock repurchased
Dividend paid
Other financing activities
Net cash provided by (used for) financing activities
Net change in cash
Cash at beginning of period
Cash at end of period

2013-09

41733
3277
4405
1740
-5551
-15
4467
800

37037
6757
1141
2253
-2172
-973
2340
7283

50856

53666

-8295
-350
-151232
112805
-1107
-48
-48227

-8165
-496
-148489
124447
-911
-160
-33774
16896

665
-2488
125
-1698
931
9815
10746

530
-22860
-10564
-381
-16379
3513
10746
14259

APL)
TEMENT
2014-09

2015-09

2016-09

Average

Standard
Deviation

39510
7946
2347
2863
-4232
-76
5938
5417

53394
11257
1382
3586
611
-238
5400
5874

45687
10505
4938
4210
1095
217
1791
-2619

43472,20
7948,40
2842,60
2930,40
-2049,80
-217,00
3987,20
3351,00

6393,03
3190,79
1739,70
993,44
2915,69
453,05
1841,77
4130,47

59713

81266

65824

62265,00

12086,41

-9571
-3765
-217128
208111
-242
16
-22579

-11247
-343
-166402
121985
-241
-26
-56274

-12734
-297
-143816
111794
-814
-110
-45977

-10002,40
-1050,20
-165413,40
135828,40
-663,00
-65,60
-41366,20

1967,74
1519,46
30122,14
40785,05
398,99
69,68
13239,84
968,74

-2500
495
-29722
-12150
23394
-20483
-636
21120
20484

17581,00
-2500,00
592,60
-33208,75
-9577,80
10254,80
-18765,00
2133,80
13956,80
16090,60

18266
730
-45000
-11126
-419
-37549
-415
14259
13844

543
-35253
-11561
28555
-17716
7276
13844
21120

100,03
9353,55
4005,75
14467,20
12785,40
3315,09
4440,70
4515,63


PART: ONE
Estimation of the Beta of Apple Incorporation and Cisco Systems Incorporation
Beta of Apple Incorporation
Apple Incorporation is enlisted in the NASDAQ market. Thus, market return of the NASDAQ
composite can be used as the proxy of the market return. The beta of the Apple can estimated by diving
the covariance of the NASDAQ Composite’s return and Apple’s return by the variance of the NASDAQ
Composite’s return. Here, the return of the NASDAQ composite can be undertaken as the market return.
Data of the Apple price, and NASDAQ composite return has been undertaken for the last two years (From
01 May 2015 to 01 May 2017) to estimate the beta of the Apple (Appendix 01).
Covariance of NASDAQ Composite Return, and Apple’s Return, COV (Ri, Rm) = 0.00010199
Variance of the NASDAQ Composite Return, VAR (Rm) = 0.00009933
Beta Coefficient of Apple = COV (Ri, Rm) / VAR (Rm) = (0.00010199 / 0.00009933) = 1.03
Beta of Cisco Systems Incorporation
Cisco System Incorporation is enlisted in the NASDAQ market. Thus, market return of the
NASDAQ composite can be used as the proxy of the market return. The beta of the Cisco System can
estimated by diving the covariance of the NASDAQ Composite’s return and Cisco System’s return by the
variance of the NASDAQ Composite’s return. Here, the return of the NASDAQ composite can be
undertaken as the market return. Data of the Cisco System, and NASDAQ composite return has been
undertaken for the last two years (From 01 May 2015 to 01 May 2017) to estimate the beta of the Cisco
System (Appendix 02).
Covariance of NASDAQ Composite Return, and Cisco’s Return, COV (Ri, Rm) = 0.00008625
Variance of the NASDAQ Composite Return, VAR (Rm) = 0.00009933
Beta Coefficient of Cisco = COV (Ri, Rm) / VAR (Rm) = (0.00008625 / 0.00009933) = 0.87
Historical Beta and Current Beta of the Apple Incorporation and Cisco Systems Incorporation
The historical beta of the Apple Incorporation and Cisco Systems Incorporation are estimated
based on the historical stock data of the last two years are 1.03 and 0.87 respectively. Based on the Yahoo

Finance estimates the current beta of the Apple Incorporation and Cisco Systems Incorporation are 1.44,
and 1.42 respectively. Both current and historical beta of the Apple Incorporation and Cisco Systems
Incorporation are positive and more than one. Positive beta of these stocks implies that stock of the Apple
Incorporation and Cisco Systems Incorporation are cyclical stocks. The return of the stock of the Apple
Incorporation and Cisco Systems Incorporation moves in the same direction in the overall market return.
The more than one value of the stock of Apple Incorporation and Cisco Systems Incorporation implies
that stock of the Apple Incorporation and Cisco Systems Incorporation belong to the aggressive stock
category. For given change in the overall market, the change of the return if the Apple Incorporation and
Cisco Systems Incorporation are higher.
Prediction of the Change in Stock’s Returns
As the stocks of the Apple Incorporation and Cisco Systems Incorporation are aggressive stocks,
for given change in the overall market, the change of the return if the Apple Incorporation and Cisco
Systems Incorporation are higher. As the beta of the Apple Incorporation and Cisco Systems
Incorporation are 1.03 and 0.87 respectively, if the market moves by the 10% up, the stock of the Apple
Incorporation will move up by 10.3%, and the stock of the Cisco Systems Incorporation will move up by
8.7%.

PART: TWO
Mean and Standard Deviation of Apple Incorporation
APPLE INC (AAPL)
INCOME STATEMENT
Fiscal year ends in September. USD in millions except per share data.

Revenue
Cost of revenue
Gross profit
Operating expenses
Research and development
Sales, General and administrative
Total operating expenses
Operating income
Interest Expense
Other income (expense)
Income before taxes
Provision for income taxes
Net income from continuing operations
Net income

2012-09

2013-09

2014-09

2015-09

2016-09

156508
87846
68662

170910
106606
64304

182795
112258
70537

233715
140089
93626

215639
131376
84263

191913.40
115635.00
76278.40

Standard
Deviation
31969.16
20681.71
12237.77

3381
10040
13421
55241

4475
10830
15305
48999
136
1292
50155
13118
37037
37037

6041
11993
18034
52503
384
1364
53483
13973
39510
39510

8067
14329
22396
71230
733
2018
72515
19121
53394
53394

10045
14194
24239
60024
1456
2804
61372
15685
45687
45687

6401.80
12277.20
18679.00
57599.40
677.25
1600.00
58657.60
15185.40
43472.20
43472.20

2693.22
1940.63
4587.38
8619.37
574.02
856.88
8758.49
2388.39
6393.03
6393.03

522
55763
14030
41733
41733

Average

APPLE INC (AAPL)
BALANCE SHEET
Fiscal year ends in September. USD in millions except per share data.

Assets
Current assets
Cash
Cash and cash equivalents
Short-term investments
Total cash
Receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Gross property, plant and equipment
Accumulated Depreciation
Net property, plant and equipment
Equity and other investments
Goodwill
Intangible assets
Other long-term assets
Total non-current assets
Total assets
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt

2012-09

2013-09

2014-09

2015-09

2016-09

10746
18383
29129
10930
791
2583
14220
57653

14259
26287
40546
13102
1764
3453
14421
73286

13844
11233
25077
17460
2111
4318
19565
68531

21120
20481
41601
16849
2349
5546
23033
89378

20484
46671
67155
15754
2132

21887
-6435
15452
92122
1135
4224
5478
118411
176064

28519
-11922
16597
106215
1577
4179
5146
133714
207000

39015
-18391
20624
130162
4616
4142
3764
163308
231839

6308

Average

Standard
Deviation

21828
106869

16090.60
24611.00
40701.60
14819.00
1829.40
3975.00
18613.40
79143.40

4515.63
13456.12
16421.55
2740.55
617.13
1264.36
4112.49
19249.84

49257
-26786
22471
164065
5116
3893
5556
201101
290479

61245
-34235
27010
170430
5414
3206
8757
214817
321686

39984.60
-19553.80
20430.80
132598.80
3571.60
3928.80
5740.20
166270.20
245413.60

15794.82
11175.22
4662.94
34502.67
2048.53
423.95
1834.54
41620.79
59828.11

10999

11605

9637.33

2899.16

Accounts payable
Taxes payable
Accrued liabilities
Deferred revenues
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt
Deferred taxes liabilities
Deferred revenues
Other long-term liabilities
Total non-current liabilities
Total liabilities
Stockholders' equity
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders' equity

21175
1535
8387
5953
1492
38542

22367
1200
5217
7435
7439
43658

30196
1209
7689
9548
8498
63448

35490

37294

25181
8940

22027
8080

80610

2648
16664
19312
57854

16960
16489
2625
3719
39793
83451

28987
20259
3031
4567
56844
120292

16422
101289
499
118210
176064

19764
104256
-471
123549
207000

79006

29304.40
1314.67
13700.20
7991.20
5809.67
61052.80

7367.24
190.87
9185.23
1396.01
3776.51
19492.65

53463
24062
3624
9365
90514
171124

75427
26019
2930
10055
114431
193437

43709.25
21707.25
2971.60
8874.00
64178.80
125231.60

26034.71
4221.52
404.89
5182.77
38341.63
57157.34

23313

27416

31251

87152
1082
111547
231839

92284
-345
119355
290479

96364
634
128249
321686

27326.67
18093.00
96269.00
279.80
120182.00
245413.60

3969.75
2363.15
6855.68
665.41
6235.97
59828.11

APPLE INC (AAPL)
CASH FLOW STATEMENT
Fiscal year ends in September. USD in millions except per share data.
2012-09 2013-09 2014-09
Cash Flows From Operating Activities
Net income
Depreciation & amortization
Deferred income taxes
Stock based compensation
Accounts receivable
Inventory
Accounts payable
Other working capital
Other non-cash items
Net cash provided by operating activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment
Acquisitions, net
Purchases of investments
Sales/Maturities of investments
Purchases of intangibles
Other investing activities
Net cash used for investing activities
Cash Flows From Financing Activities
Debt issued
Debt repayment
Common stock issued
Common stock repurchased
Dividend paid
Other financing activities

2015-09 2016-09

Average

Standard
Deviation

41733
3277
4405
1740
-5551
-15
4467
800

37037
6757
1141
2253
-2172
-973
2340
7283

39510
7946
2347
2863
-4232
-76
5938
5417

53394
11257
1382
3586
611
-238
5400
5874

45687
10505
4938
4210
1095
217
1791
-2619

43472.20
7948.40
2842.60
2930.40
-2049.80
-217.00
3987.20
3351.00

6393.03
3190.79
1739.70
993.44
2915.69
453.05
1841.77
4130.47

50856

53666

59713

81266

65824

62265.00

12086.41

-11247
-12734
-343
-297
-166402 -143816
121985 111794
-241
-814
-26
-110
-56274
-45977

-10002.40
-1050.20
-165413.40
135828.40
-663.00
-65.60
-41366.20

1967.74
1519.46
30122.14
40785.05
398.99
69.68
13239...


Anonymous
Excellent resource! Really helped me get the gist of things.

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