Behavioral Corporate Finance Concepts And Cases For Teaching Behavioral Finance 2nd Edition Hersh Shefrin - Solutions

Analyst Safa Rashtchy developed his 2010 forecast for eBay’s revenue by assuming that its annual growth would be about a 30 percent compounded annual growth rate between 2002 and 2010. In the previous year, eBay’s revenue had grown at the rate of 62 percent, and the firm forecast that its
The column “Ahead of the Tape” that appeared in the February 13, 2004, issue of The Wall Street Journal states that prudent investors prefer to value firms using free cash flow instead of EBITDA. The article explains that the typical definition of free cash flow is cash flow from operations
In the spring of 2003, analysts at Prudential established a target price for eBay, justifying the P/E values in their analysis by appeal to PEG. Their report stated that their assump- tions of a P/E of 75 to multiply 2003 earnings, and a P/E of 50 to multiply 2004 earnings....equates to P/E/G
In its April 2003 report, the Morgan Stanley team computed EBITDA as “Adjusted Operating Income plus Depreciation Addback.” The adjustment in question is to “Re- ported Operating Income.” The report explained the adjustment as follows: “eBay in- cludes unusual items such as amortization
What insights from the discussion of the Morgan Stanley 2003 report on eBay apply to the 2013 report on Aetna
On November 2, 2004, The Wall Street Journal published an article describing the manner in which Merck’s executives made decisions about Vioxx. The Wall Street Journal article pointed out that the November 2000 issue of The New England Journal of Medicine included an article describing the
Merck’s VIGOR study used 8,000 subjects. Notably, Merck chose to include only subjects whose risk of experiencing a heart attack was low. Half the subjects in the study received Vioxx, and the other half received naproxen. Of those receiving Vioxx, 20 had heart attacks. Of those receiving
At the beginning of 2001, Merck’s CFO Judy Lewent predicted that Vioxx sales for the year would be between $3 and $3.5 billion. In June she qualified her prediction to say that although Vioxx sales would be closer to the lower end of the prediction range, four of their top five drugs would
Did Merck’s managers exhibit confirmation bias in their assessment of Vioxx? Discuss this question.
Discuss the comment Scott McNealy made in his interview about not having hired a chief operating officer.
Discuss Scott McNealy’s comments about sentiment in his interview with Fortune magazine. In your answer, describe any valuation metric Scott McNealy mentions. Do McNealy’s comments suggest that Sun engaged either in catering behavior or market timing during the technology bubble?
During its most profitable years in the late 1990s, Sun did not carry any debt. In 1999, Sun paid $138.6 million in taxes. Compare the situation at Sun with the situation at Merck in respect to their debt policies.
1. Identify the psychological phenomena in the minicase. Prioritize the phenomena from most important to least important. Begin your answer by defining the phenomena, and then describing their role in the minicase. As part of your answer, discuss the implications of avoiding probabilistic safety
Does the chapter present any information that would lead you to conclude that managers at Sun Micro systems were averse to a sure loss? Discuss.
Imagine a decision task in which you are to choose between two alternatives that involve blindly drawing a single chip from one of two urns, labeled A and B respectively. Both urns contain colored balls. The proportion of the different colors is described below. Also described below are the payoffs
Suppose that a university is attempting to predict the grade point average (GPA) of some graduating students based upon their high school GPA levels. GPA scores lie between 0 and 4. Below are some data for undergraduates at a university located in California. Historically, the mean high school GPA
1. Of the 10 psychological phenomena introduced in Chapter 1, identify which ones apply to the minicase, and give reasons to support your answer.2. The Times article notes that three days after the ACP awarded a $158 million contract to the Spanish firm that manufactures the tugboats, the son of
Imagine yourself at a conference center, where there are two groups meeting in adjoining rooms, one a group of lawyers and the other a group of engineers. In fact, the room with lawyers contains 30 lawyers and the room with engineers contains 70 engineers. Someone named Jack is attending a meeting
Imagine a decision task in which you are to choose between two alternatives that involve blindly drawing a single chip from one of two urns, labeled A and B respectively. Both urns contain colored balls. The proportion of the different colors is described below. Also described below are the payoffs

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