Assignment 2: The Gig Economy Uber is largely hailed as the advent of the gig economy, which is the idea that people will not work for any one employer, but instead will work on projects for any variety of companies desiring their services. While creating a new type of entrepreneurship for individuals, it raises a host of new legal questions for companies around the law of agency.An investment firm has asked you to evaluate Uber’s legal exposure for the conduct of its drivers.Write an interoffice memo in which you:Summarize the main principles of agency.Analyze the circumstances under which Uber might be liable for the conduct of its drivers.Identify the steps Uber can take, if any, to limit its legal exposure for the conduct of its drivers.Use at least three (3) quality resources in this assignment. Note: Wikipedia is not an acceptable reference and proprietary Websites do not qualify as academic resources.Your assignment must follow these formatting requirements:Your news brief or memo should include a heading, summary statement, background and recommendations.The specific course learning outcomes associated with this assignment are:Analyze and apply the concepts of ethical decision making, corporate governance and corporate social responsibility.Analyze and evaluate the employment-at-will doctrine and the statutory protections afforded employees.Analyze and evaluate laws and regulations relative to product safety, liability and representations.Write clearly and concisely about law, ethics, and corporate governance using proper writing mechanics.

Problem Set #3Attached Files: Question 1 - Building a Model - Goodman & Landry Data.xlsx (18.865 KB)Question 1The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average returns over the five-year period. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2015 because you do not have 2014 data.)Calculate the standard deviation of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.) On a stand-alone basis which corporation is the least risky?Construct a scatter diagram graph that shows Goodman’s and Landry’ returns on the vertical axis and the Market Index’s returns on the horizontal axis. Estimate Goodman’s and Landry’s betas as the slopes of regression lines with stock returns on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: use Excel’s SLOPE function.) Are these betas consistent with your graph?The risk-free rate on long-term Treasury bonds is 8.04%. Assume that the market risk premium is 6%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.If you formed a portfolio that consisted of 60% Goodman stock and 40% Landry stock, what would be its beta and its required return?Suppose an investor wants to include Goodman Industries’ stock in his or her portfolio. Stocks A, B, and C are currently in the portfolio, and their betas are 0.769, 0.985, and 1.423, respectively. Calculate the new portfolio’s required return if it consists of 30% of Goodman, 20% of Stock A, 30% of Stock B, and 20% of Stock C.Question 2Quest Financial services balance sheets report $200 million in total debt, $100 million in short-term investments, and $30 million in preferred stock. Quest has 10 million shares of common stock outstanding. A financial analyst estimated that Quest’s value of operations is $1000 million. What is the analyst’s estimate of the intrinsic stock price per share?Question 3Lincoln Incorporated is expected to pay a $4.5 per share dividend at the end of this year (i.e., D1 = $4.50). The dividend is expected to grow at a constant rate of 5% a year. The required rate of return on the stock is, rs, is 12%. What is the estimated value per share of Boehm stock?Question 4Assume that the average firm in Masters Corporation’s industry is expected to grow at a constant rate of 3% and that its dividend yield is 5%. Masters is about as risky as the average firm in the industry and just paid a dividend (D0) of $2.5. Analysts expect that the growth rate of dividends will be 25% during the first year (g0,1 = 25%) and 10% during the second year (g1,2 = 10%). After Year 2, dividend growth will be constant at 5%. What is the required rate of return on Masters’s stock? What is the estimated intrinsic per share?Question 5Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually.a. What is the estimated value of Macro’s preferred stock? b. Suppose interest rate levels have risen to the point where the preferred stock now yields 14%. What would be the new estimated value of Macro’s preferred stock?Question 61. Define each of the following terms:Call optionPut optionStrike price or exercise priceExpiration dateExercise valueOption priceTime valueWriting an optionCovered optionNaked optionIn-the-money callOut-of-the-money callLEAPS2. The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)3. The exercise price on one of Chrisardan Company’s call options is $20, its exercise value is $27, and its time value is $8. What are the option’s market value and the price of the stock?Submit your answers in a Word document.