# economic genious needed

*label*Business Finance

*timer*Asked: Sep 30th, 2018

*account_balance_wallet*$10

**Question description**

Solve 2 questions in the attach file in Word and Excel form

1- The table below presents the expected returns and betas for five investment funds.

- Determine the intrinsic value of Boeing using a three-stage growth model based on the following expectations (consider using an Excel spreadsheet to do your calculations):

Funds | Expected Returns | Beta |

Index Fund | 10.0% | 1.00 |

Value Fund | 14.0% | 1.50 |

Growth Fund | 12.5% | 1.25 |

Small Cap | 15.0% | 1.75 |

Large Cap | 8.0% | 0.75 |

- Using
the Large Cap fund and the Small Cap fund, solve for the allocations
needed to create a zero-market risk portfolio. What isthe rate of return
for that portfolio
*?(Hint: β**p = w**1β**1 + w**2β**2, where w**2 = (1-w**1)).* - Using
the Large Cap fund and the Small Cap fund, solve for the allocations
needed to create portfolio with a beta of one. What is the rate of
return for that portfolio?
*?(Hint: β**p = w**1β**1 + w**2β**2, where w**2 = (1-w**1))* - 2- Determine whether the Index, Value, and Growth funds have return and beta combinations above or below the line you generated. Explain the arbitrage strategy you would form with each of these funds. What conclusions do you draw

- Three growth-rate stages: growth, transition, and mature.
- The stock’s discount rate is 9%.
- Current EPS is $6.41.
- Dividend payout ratio is equal to 30% until the transition period.
- Dividend payout ratio is equal to 50% in the maturity stage.
- Dividend payout ratio decreases by equal annual increment from 30% to 50% during the transition stage.
- Boeing will experience a growth stage for the next 10 years in which its EPS will grow at 10%.
- The length of Boeing’s transitional stage is five years.
- The mature growth period starts in year 16 with an assumed dividend payout ratio of 50% and with a growth rate of 6%.
- The transition period starts in year 11 with the growth rate decreasing by equal annual increments from 10% to 6%.
- The value of Boeing at the beginning of the Maturity stage (Year 16) is determined by the constant growth model (Vt =Dt+1/(k − g)).

## Tutor Answer

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors