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##### Please compute an intercept and beta estimate for Canadian Natural Resources Ltd.

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Question

1. Please compute an intercept and beta estimate for Canadian Natural Resources Ltd. by running;a regression using the Data Analysis tool in MS Excel for the period 2009-2013 (if you are a;Mac user, you can download StatPlus in order to find the regression tool). Are your intercept and;beta estimates statistically significant (note that standard levels of statistical significance are 1%;5%, or 10%)? What does the intercept value tell you about Canadian Natural Resource Ltd.s;stock over the sample period? Please submit your data and regression output.;Below are some instructions to help you get started;- Go the business library online (http://library.ucalgary.ca/business);- Under Search Collections go to Databases by Subject Name and search for the TSX (Toronto;Stock Exchange). Use your UCID to log in.;- Go to the 2014 edition (data ending Dec. 2013) and to the Monthly Stock Tables;- Search for the company ticker symbol (common shares) under Search CFMRC/TSX and add;the code to the query.;- Download the monthly stock returns, the monthly CFMRC Value Weighted Index returns, and;the 30-day return on T-Bills for the period 2009-2013.;- Use the excess returns market model when you are estimating your regression parameters, i.e.;Ri,t Rf = + (RM,t Rf) + i,t;2. Assume a firms debt is risk-free, so that the cost of debt equals the risk-free rate, Rf. Define;A as the firms asset beta (i.e. the systematic risk of the firms assets), and define E as the beta;of the firms equity. Use the CAPM along with M&M Proposition II to show that E = E;(1+D/E), where D/E is the debt-equity ratio. Assume the tax rate is zero.;3. In 1985, General Motors was evaluating the acquisition of Hughes Aircraft Corporation, and;assumed that Hughes was of approximately the same risk as Lockheed and Northrop. Given the;following information in the table, and also assuming that cash flows are perpetual, compute the;value of Hughes using the WACC approach

Paper#25841 | Written in 18-Jul-2015

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