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BUS 401 AU Management of The Bulk of Equity Securities Analysis
In this assignment, you will recalculate the value of the company’s stock based on your company’s specific required ra ...
BUS 401 AU Management of The Bulk of Equity Securities Analysis
In this assignment, you will recalculate the value of the company’s stock based on your company’s specific required rate of return. To do this, you will calculate the required rate of return for your chosen publicly traded company using the capital asset pricing model (CAPM).
Last week, you determined a preliminary estimate of the company’s stock price using the constant growth formula. To simplify the calculation, you were required to use general market required rates of return, based on size. However, this is an assumption that does not account for the specific risk of an investment in a specific company. This week, you will calculate the required rate of return for your chosen publicly traded company using the CAPM. The CAPM is a more precise tool to estimate a firm’s required rate of return. This tool is “tremendously valuable because required returns are used as the discount rates in the valuation formulas when doing time value of money problems and security valuation” (Hickman et al., 2013, Section 9.3, para. 1). You will then use this CAPM required rate of return to revise your stock price value based on the constant growth formula. This will allow you to determine your final recommendation of buy, hold, or sell.
Prepare:
Prior to beginning work on this assignment,
Complete both of the Week 4 learning activities
Review Chapters 7 and 9 of Essentials of finance.
Review the Week 5 - Final Project.
Review the Week 4 Model Assignment (Links to an external site.).
Watch the following video:
BUS401 - Valuation Conclusion (Links to an external site.)
Write:
In your paper, address the following five parts in a Word document:
Part 1: (two paragraphs)
Explain the three types of risk and beta, and how these concepts relate to a company’s required rate of return.
Part 2: (two paragraphs)
Find your company’s beta from a credible source.
You can get this information from the Mergent database or by looking it up on a financial website like Yahoo! Finance (Links to an external site.).
Compare your company’s beta to the market beta of 1.0.
Calculate the company-specific required rate of return using the CAPM formula.
Show all calculations.
Use the beta you determined for your chosen company
Use a risk-free rate of 2.0%.
For the market risk premium, use the following assumptions:
For a large capitalization company (greater than $10.0 billion in market capitalization) use 6.0% as the market risk premium.
For a mid-cap company (between $2.0 billion and $10.0 billion in market capitalization) use 8.0% as the market risk premium.
For a small-cap company (less than $2.0 billion in market capitalization) use 11.0% as the market risk premium.
Compare the company-specific required rate of return you calculated to the required return based on size you used in Section 3: Dividend Analysis and Preliminary Valuation in Week 3 for the constant growth formula.
Determine whether the company-specific required rate of return higher or lower than the rate of return based on size that you used in Section 3 in Week 3 for the constant growth formula?
Explain the difference in required rate of returns.
Part 3: (two to four paragraphs)
Recalculate both estimates (the low-end and the high-end) of the stock price using the constant growth formula.
Use the company’s specific required rate of return you determined using the CAPM.
Review your selected high-end and low-end growth rates from Week 3.
If either growth rate is higher than the new CAPM discount rate, you must reduce your selected growth rate(s).
Your growth rates cannot be higher than the discount rate, because the calculations will result in a negative stock price, which is not meaningful.
Include a short, written explanation to explain the revised growth rates.
Show your revised high-end and low-end stock price calculations
Compare each of the two recalculated stock prices to the current stock price per share of the company.
State whether each recalculated stock price (low-end and high-end) is above or below the current market price.
State whether each recalculated stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
(See Section 9.3: Required Returns in your course text.)
State your recommendation for your concluded stock price for the company.
Use either the high-end stock price or the low-end stock price from the constant growth formula using the CAPM required rate of return.
Justify the conclusion of value for your stock based on the most important financial facts from the prior weeks’ analysis.
BUS 130 Delaware County Community College Mod 2 Achieving Academic Goals Paper
read Chapters 4, 5, and 6, reviewed the video lecture, and the assigned articles) in Module Two. Students will have 45 min ...
BUS 130 Delaware County Community College Mod 2 Achieving Academic Goals Paper
read Chapters 4, 5, and 6, reviewed the video lecture, and the assigned articles) in Module Two. Students will have 45 minutes to complete the quiz
11 pages
Core Module 7
How could pairwise ranking and the ratio method be used in the context of vulnerability Answer: The pairwise ranking metho ...
Core Module 7
How could pairwise ranking and the ratio method be used in the context of vulnerability Answer: The pairwise ranking method could be used to compare ...
HRIS Case Study, Part III
Read the SHRM case study Integrating a Human Resource
Information System ( https://www.shrm.org/academicinitiatives/ ...
HRIS Case Study, Part III
Read the SHRM case study Integrating a Human Resource
Information System ( https://www.shrm.org/academicinitiatives/universit...)and answer the questions below based on
the case study and information provided for context. You may use
information from the lectures and readings to supplement your answers if
necessary.1.What cultural issues are interwoven
in this project that affected HR?2.Who should be involved in future
global integration projects?3.What skills should team members have
and how should they be selected?https://www.shrm.org/academicinitiatives/universities/teachingresources/documents/08-0882_integrating_hr_info_sys.pdf
Central State University Assume that Dial up Cable Satellite Essay
You are a telecommunications guru and love to help individuals and businesses. Assume that dial-up, cable, DSL, T3 line, a ...
Central State University Assume that Dial up Cable Satellite Essay
You are a telecommunications guru and love to help individuals and businesses. Assume that dial-up, cable, DSL, T3 line, and satellite links to the Internet are available everywhere unless the particular scenario indicates otherwise. Consider the following scenarios and suggest the best overall type of link (consider communication speed, cost, and any other factor you believe is relevant). Each scenario is independent of the others. For each scenario, explain why you selected the option.An author works at home writing articles for a magazine. Once per week she must transmit an article to her editor. She rarely uses the link for any other purpose.A large company maintains its own website for online catalogs and purchase transactions by its customers. Hundreds of customers visit the sites daily and make purchases.A small business uses the Internet for daily research. Owners have heard that some links are shared by other subscribers in the same area, which might slow down the connection or even pose security threats. Thus, they would like to avoid such a service. They do need a speed of at least 200 Kbps.A farm in New Mexico needs a link of at least 200 Kbps. People on the farm can receive television signals only through antennas. The closest telephone central office is 12 miles away.An Internet service provider specializes in hosting websites of small businesses.A cruise ship wants to provide Internet service to vacationers on the third deck. The ship cruises in the Caribbean. The link’s speed must be at least 250 Kbps.
PGU Proficiency Diagnostic Personal Budget & Employment Tax Discussion
ALL WORK MUST BE ORIGINAL. NO PLAIGIARISM AND USE RELIABLE RESOURCES AND REFERENCES. QUESTION 1 In a minimum of 175 word ...
PGU Proficiency Diagnostic Personal Budget & Employment Tax Discussion
ALL WORK MUST BE ORIGINAL. NO PLAIGIARISM AND USE RELIABLE RESOURCES AND REFERENCES. QUESTION 1 In a minimum of 175 words, respond to question 1 and at least two additional questions from this list: Identify one concept from the Build Your Proficiency diagnostic from Chapters 3 and 4 that you scored lowest in. How might this concept be important to your personal finances? Why would you want to know more about this? In the Wk 2 Learning Path, watch “Peer to Peer Video: Budgeting in Excel” in WileyPLUS. What is your experience with creating and using a personal budget? If you have been able to stick with one, what has worked for you? If you have not been able to, what would help you create a budget you could use? Have you tracked your expenses to identify variances? If so, what method did you use? If not, what would be the benefit of doing so? In the Wk 2 Learning Path, watch Peer to Peer Videos: “Filling Out Employment Tax Paperwork: Pay Attention and Review Your Paycheck Withholdings Regularly” in WileyPLUS. How can your tax withholding affect your budget or financial goals? In the Wk 2 Learning Path in WileyPLUS, use the Personal Financial Planning Worksheet 3.4: Evaluating Financial Service Providers to compare two financial institutions. What did you find? What is most important to you in this evaluation? QUESTION 2 After having received your 360 Feedback, both written feedback and graphs, as well as watching the 360 Feedback PP Video, answer the following questions in a 200 word assignment. What have you learned? What can you now do differently? What will you change when interacting with others moving forward? How will you implement feedback into your routine moving forward?
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Most Popular Content
BUS 401 AU Management of The Bulk of Equity Securities Analysis
In this assignment, you will recalculate the value of the company’s stock based on your company’s specific required ra ...
BUS 401 AU Management of The Bulk of Equity Securities Analysis
In this assignment, you will recalculate the value of the company’s stock based on your company’s specific required rate of return. To do this, you will calculate the required rate of return for your chosen publicly traded company using the capital asset pricing model (CAPM).
Last week, you determined a preliminary estimate of the company’s stock price using the constant growth formula. To simplify the calculation, you were required to use general market required rates of return, based on size. However, this is an assumption that does not account for the specific risk of an investment in a specific company. This week, you will calculate the required rate of return for your chosen publicly traded company using the CAPM. The CAPM is a more precise tool to estimate a firm’s required rate of return. This tool is “tremendously valuable because required returns are used as the discount rates in the valuation formulas when doing time value of money problems and security valuation” (Hickman et al., 2013, Section 9.3, para. 1). You will then use this CAPM required rate of return to revise your stock price value based on the constant growth formula. This will allow you to determine your final recommendation of buy, hold, or sell.
Prepare:
Prior to beginning work on this assignment,
Complete both of the Week 4 learning activities
Review Chapters 7 and 9 of Essentials of finance.
Review the Week 5 - Final Project.
Review the Week 4 Model Assignment (Links to an external site.).
Watch the following video:
BUS401 - Valuation Conclusion (Links to an external site.)
Write:
In your paper, address the following five parts in a Word document:
Part 1: (two paragraphs)
Explain the three types of risk and beta, and how these concepts relate to a company’s required rate of return.
Part 2: (two paragraphs)
Find your company’s beta from a credible source.
You can get this information from the Mergent database or by looking it up on a financial website like Yahoo! Finance (Links to an external site.).
Compare your company’s beta to the market beta of 1.0.
Calculate the company-specific required rate of return using the CAPM formula.
Show all calculations.
Use the beta you determined for your chosen company
Use a risk-free rate of 2.0%.
For the market risk premium, use the following assumptions:
For a large capitalization company (greater than $10.0 billion in market capitalization) use 6.0% as the market risk premium.
For a mid-cap company (between $2.0 billion and $10.0 billion in market capitalization) use 8.0% as the market risk premium.
For a small-cap company (less than $2.0 billion in market capitalization) use 11.0% as the market risk premium.
Compare the company-specific required rate of return you calculated to the required return based on size you used in Section 3: Dividend Analysis and Preliminary Valuation in Week 3 for the constant growth formula.
Determine whether the company-specific required rate of return higher or lower than the rate of return based on size that you used in Section 3 in Week 3 for the constant growth formula?
Explain the difference in required rate of returns.
Part 3: (two to four paragraphs)
Recalculate both estimates (the low-end and the high-end) of the stock price using the constant growth formula.
Use the company’s specific required rate of return you determined using the CAPM.
Review your selected high-end and low-end growth rates from Week 3.
If either growth rate is higher than the new CAPM discount rate, you must reduce your selected growth rate(s).
Your growth rates cannot be higher than the discount rate, because the calculations will result in a negative stock price, which is not meaningful.
Include a short, written explanation to explain the revised growth rates.
Show your revised high-end and low-end stock price calculations
Compare each of the two recalculated stock prices to the current stock price per share of the company.
State whether each recalculated stock price (low-end and high-end) is above or below the current market price.
State whether each recalculated stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
(See Section 9.3: Required Returns in your course text.)
State your recommendation for your concluded stock price for the company.
Use either the high-end stock price or the low-end stock price from the constant growth formula using the CAPM required rate of return.
Justify the conclusion of value for your stock based on the most important financial facts from the prior weeks’ analysis.
BUS 130 Delaware County Community College Mod 2 Achieving Academic Goals Paper
read Chapters 4, 5, and 6, reviewed the video lecture, and the assigned articles) in Module Two. Students will have 45 min ...
BUS 130 Delaware County Community College Mod 2 Achieving Academic Goals Paper
read Chapters 4, 5, and 6, reviewed the video lecture, and the assigned articles) in Module Two. Students will have 45 minutes to complete the quiz
11 pages
Core Module 7
How could pairwise ranking and the ratio method be used in the context of vulnerability Answer: The pairwise ranking metho ...
Core Module 7
How could pairwise ranking and the ratio method be used in the context of vulnerability Answer: The pairwise ranking method could be used to compare ...
HRIS Case Study, Part III
Read the SHRM case study Integrating a Human Resource
Information System ( https://www.shrm.org/academicinitiatives/ ...
HRIS Case Study, Part III
Read the SHRM case study Integrating a Human Resource
Information System ( https://www.shrm.org/academicinitiatives/universit...)and answer the questions below based on
the case study and information provided for context. You may use
information from the lectures and readings to supplement your answers if
necessary.1.What cultural issues are interwoven
in this project that affected HR?2.Who should be involved in future
global integration projects?3.What skills should team members have
and how should they be selected?https://www.shrm.org/academicinitiatives/universities/teachingresources/documents/08-0882_integrating_hr_info_sys.pdf
Central State University Assume that Dial up Cable Satellite Essay
You are a telecommunications guru and love to help individuals and businesses. Assume that dial-up, cable, DSL, T3 line, a ...
Central State University Assume that Dial up Cable Satellite Essay
You are a telecommunications guru and love to help individuals and businesses. Assume that dial-up, cable, DSL, T3 line, and satellite links to the Internet are available everywhere unless the particular scenario indicates otherwise. Consider the following scenarios and suggest the best overall type of link (consider communication speed, cost, and any other factor you believe is relevant). Each scenario is independent of the others. For each scenario, explain why you selected the option.An author works at home writing articles for a magazine. Once per week she must transmit an article to her editor. She rarely uses the link for any other purpose.A large company maintains its own website for online catalogs and purchase transactions by its customers. Hundreds of customers visit the sites daily and make purchases.A small business uses the Internet for daily research. Owners have heard that some links are shared by other subscribers in the same area, which might slow down the connection or even pose security threats. Thus, they would like to avoid such a service. They do need a speed of at least 200 Kbps.A farm in New Mexico needs a link of at least 200 Kbps. People on the farm can receive television signals only through antennas. The closest telephone central office is 12 miles away.An Internet service provider specializes in hosting websites of small businesses.A cruise ship wants to provide Internet service to vacationers on the third deck. The ship cruises in the Caribbean. The link’s speed must be at least 250 Kbps.
PGU Proficiency Diagnostic Personal Budget & Employment Tax Discussion
ALL WORK MUST BE ORIGINAL. NO PLAIGIARISM AND USE RELIABLE RESOURCES AND REFERENCES. QUESTION 1 In a minimum of 175 word ...
PGU Proficiency Diagnostic Personal Budget & Employment Tax Discussion
ALL WORK MUST BE ORIGINAL. NO PLAIGIARISM AND USE RELIABLE RESOURCES AND REFERENCES. QUESTION 1 In a minimum of 175 words, respond to question 1 and at least two additional questions from this list: Identify one concept from the Build Your Proficiency diagnostic from Chapters 3 and 4 that you scored lowest in. How might this concept be important to your personal finances? Why would you want to know more about this? In the Wk 2 Learning Path, watch “Peer to Peer Video: Budgeting in Excel” in WileyPLUS. What is your experience with creating and using a personal budget? If you have been able to stick with one, what has worked for you? If you have not been able to, what would help you create a budget you could use? Have you tracked your expenses to identify variances? If so, what method did you use? If not, what would be the benefit of doing so? In the Wk 2 Learning Path, watch Peer to Peer Videos: “Filling Out Employment Tax Paperwork: Pay Attention and Review Your Paycheck Withholdings Regularly” in WileyPLUS. How can your tax withholding affect your budget or financial goals? In the Wk 2 Learning Path in WileyPLUS, use the Personal Financial Planning Worksheet 3.4: Evaluating Financial Service Providers to compare two financial institutions. What did you find? What is most important to you in this evaluation? QUESTION 2 After having received your 360 Feedback, both written feedback and graphs, as well as watching the 360 Feedback PP Video, answer the following questions in a 200 word assignment. What have you learned? What can you now do differently? What will you change when interacting with others moving forward? How will you implement feedback into your routine moving forward?
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