Investment Analysis, business and finance homework help

Anonymous
timer Asked: May 11th, 2017
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Question Description

Given that Dr. Bueller wants to make stocks a major part of his investment portfolio, you decide to focus on how to analyze stocks. You decide to use a large U.S. industrial company, to demonstrate how to analyze stocks.

The research department has provided you with the following information regarding this company.

  • This year (2009), free cash flow is expected to reach $325 million.
  • In 2010, it is expected to reach $350 million.
  • 2011, $400 million.
  • 2012, $425 million
  • And 2013, $450 million.

The analyst has projected an intrinsic value for this stock of $65.00.

Dr. Bueller is busy this week, so he asks you to send him an e-mail. Compose an e-mail that in addition to explaining the following information for the industrial company, which is a publicly traded company that trades on the NYSE, addresses the efficient market hypothesis, and how the analyst responsible for monitoring this stock has projected this intrinsic value for the company's stock.

  • 52-week range: Hi 75 Lo 35
  • Current stock price: 50
  • Dividend Yield: 2.75%
  • Dividend per share: 1.375
  • P/E ratio: 20
  • Earnings per share: $2.50
  • Shares outstanding: 100 million
  • Market capitalization: $5 billion
  • Cost of capital: 9%
  • Growth rate of free-cash-flows beyond 2013: 3%

Assignment Guidelines

  • Using the textbook, course materials, and Web resources, find the definitions for the ten values listed above in the Assignment Description.
  • In your own words, rewrite the definition for each of the ten values.
  • Demonstrate how to calculate the values using the information from the company's stock as an example.
  • Next, answer the following questions:
    • What is the efficient market hypothesis, and what is its relationship to stock valuation?
    • What is the free-cash-flow approach to valuing stocks?
    • Using the free-cash-flow approach, how did the analyst arrive at an intrinsic stock value of $65 for the company?
  • Compile your definitions, calculations, and your answers to the three questions above into a single Word document.

Your submitted assignment must include the following:

  • A 3 page Word document (body of paper) that contains your 10 definitions of the values listed in the Assignment Description, your calculations of the 10 values using the industrial company's stock information as an example, and your answers to the 3 questions listed in the Assignment Guidelines

Tutor Answer

Robert__F
School: Purdue University

Good luck in your study and if you need any further help in your assignments, please let me know Can you please confirm if you have received the work? Once again, thanks for allowing me to help you R MESSAGE TO STUDYPOOL NO OUTLINE IS NEEDED

Running Head: INVESTMENT ANALYSIS

Investment Analysis
Name
Institution
Instructor
Course
Date

INVESTMENT ANALYSIS

Definitions
1. 52-week range: indicates the two most extreme prices at which a stock has traded in the
past period lasting 52 weeks. These two prices are the highest and the lowest.
2. Current stock price: the price at which stocks are being traded at the moment.
3. Dividend yield: the expression of a dividend as a percentage of the current price of
shares.
4. Dividend per share: all dividends paid out by a company divided by the shares that are in
issue.
5. P/E ratio: price to earnings ratio is an indication of the current demand of a company’s
share by investors, where a high p/e ratio is a reflection of the increased demand for the
shares of this company due to future.
6. Earnings per share: an indicator of the profitability of a company since it is the portion of
the profit that a company allocates to every share.
7. Shares outstanding: is the collection of all shares that are presently being held by all the
shareholders of a company.
8. Market capitalization: the market value of the firm’s shares outstanding, and is the
product of stock price and the number of shares.
9. The cost of capital: the opportunity cost incurred by a business when it chooses to put its
money in an investment over another.
10. Growth rate: indicates the periodic change in the value of stocks, often indicated in
percentage.
Efficient Market Hypothesis

INVESTMENT ANALYSIS

There are numerous theories applied when dealing with issues pertaining to the market.
One of these theories is the Efficient Market Hypothesis. This investment theory states that it is
not possible for an investor to act in a manner as if to beat the market. The theory is based on the
notion that stock prices are influenced by the stock market efficiency so that they entail and
reflect all the relevant information at all times. Also, the theory holds that the price at which
stocks sell at stock exchanges will always be the fair value of these stocks. These measures are in
place to ensure that investors do not buy or sell stocks at prices that are undervalued, or inflated
respectively. With these measures in place, the Efficient Market Hypothesis then holds true for
the premis...

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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