Question 1:
Stock ABC has a beta of 1.4 and the standard deviation of its returns is 30%. The market risk premium is 5% and the risk-free rate is 3%.
1. What is the expected return for the stock?
2. What are the expected return and standard deviation for a portfolio that is equally invested in the stock and the risk-free asset?
3. If you forecast that next year stock ABC will have return of 10%. Would you buy it? Why or why not?
Question 2: -Financial Statement Interpretation
Please take the company you have chosen in Case #1 and perform a Financial Analysis using the available data for the most recent fiscal year (i.e. 12/31/16) and compare that year to the previous fiscal year (i.e. 12/31/15). If 12 /31/16 is not available take the quarter ended 09/30/16.
Your analysis should include at least one analytical equation from each of the five sections of Financial Analysis given in Chapter 3 and detailed _on Page 112 of your text.
- Liquidity
- Asset Management
- Debt Management
- Profitability
- Market Value
In your analysis should include the following interpretations:
1. Has the firm improved its' performance from the previous year?
2. Is the firm managed efficiency?
3. As a potential investor would you consider this a stock you would purchase?
Prepare the following:
Question 3:
2016 Financial Forecasting Additional Funds Needed
The firm is planning on a 15% increase in sales for 2017. with the Profit Margin remaining the same percentage as 201 and the Dividend Payout Rate the same at 21.70% for 2016. th forecasting an AFN of $188,233 for 2017.
How can the firm reduce this need for external capital for 2017? What strategies can be used to reduce the need for external funds and the firm to be entirely internally financed for 2017?
Attachment:- Assignment.rar