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FIN - Investment Home work




Question;Investment Home workSelect two companies in two different industries and do the following.(Please Mention Two Companies name).? List and describe the major competitors to the selected company. Evaluate each firm using potter?s 5 determinants of competition.1. Compute and interpret the financial ratios described below for a five year period. Look at the trend in the ratios to determine if they are deteriorating or improving and compare them against peers or the industry.? Current and quick ratios and net working capital? Inventory turnover, fixed assets turnover and total assets turnover? Debt ratio and TIE? Gross profit margin and net profit margin and operating margin? ROE and ROA? Price/ Earnings and Market /Book2. Find beta, R squared, alpha and residual standard deviation for each firm using Excel. Interpret the results and recommend which firm should be added to a well-diversified portfolio. Use 60 months of return data for the calculations. Get data using S&P Insight.3. Find the correlation between the two stocks and interpret. USE EXCEL4. Estimate the required return for each stock (SML).5. Estimate the sustainable growth rate (g) for each stock. Find it for 3 years and take an average.6. Estimate the 5 and 10 years historic growth rate in earnings (USE EXCEL). Compare to sustainable growth method.7. Estimate the intrinsic value (Price) of the two stocks using the 1) dividend discount model (DDM) approach.8. Evaluate stock using value criteria of dividend yield and price to book.9. Determine key macro economics factors impacting each firm10. Make a buy or sell recommendation.11. Use the Black-Scholes model to find the value of a call option and the value of a put option for each stock.


Paper#48042 | Written in 18-Jul-2015

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