Question: Using the stocks in your initial portfolio, assemble a valuation of each stock and the initial portfolio using zero, constant or variable growth models with
Using the stocks in your initial portfolio, assemble a valuation of each stock and the initial portfolio using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.]
Is the stock of each of these companies over or undervalued?
What is the expected return using the CAPM model?
Assemble a time series ratio analysis (liquidity, activity, debt, and profitability). Identify any events during the period that may have caused the stocks' prices to increase or decrease, explaining how these events affect the stocks' prices.
Information (text below). Please see attachment for question with proper format:
# of Shares Purchased for Each Stock
Closing Prices as of 09/07/2017
Last Dividend Paid Date and Amount
Expected Next Ex-dividend and Paid Dates
Total Investment
Beta
Closing Prices as of 11/03/2017
Value of Investment
Apple Inc. (AAPL)
2750
161.26
05/18/17 $0.63
08/10/17 $0.63
2750 * 161.26 = 443465
1.155
172.5
2750 * 172.5 = 474375
Honda Motor Co., Ltd. (HMC)
1550
28.22
03/07/17 $0.187
03/28/17 $0.189
1550 * 28.22 = 43741
0.9975
32.87
1550 * 32.87 = 50948.5
NIKE, Inc. (NKE)
2550
52.39
07/05/17 $0.18
08/31/17 $0.18
2550 * 52.39 = 133594.5
1.0325
55.71
2550 * 55.71 = 142060.5
Verizon Communications Inc. (VZ)
1675
46.2
08/01/17 $0.577
10/06/16 $0.59
1675 * 46.2 = 77385
0.94
47.42
1675 * 47.42 = 79428.5
Wal-Mart Stores, Inc. (WMT)
2550
80.12
09/05/17 0.51
12/07/17 $0.51
2550 * 80.12 = 204306
0.85
89.68
2550 * 89.68 = 228684
Total Investment:
(2750*161.26)+(1550*28.22)+(2550*52.39)+(1675*46.2)+(2550*80.12)= 902491.5
Amount Held in Cash:
1000000-(2750*161.26)-(1550*28.22)-(2550*52.39)-(1675*46.2)-(2550*80.12)= 97508.5
Total Investment
Beta
Investment * Beta
Apple Inc. (AAPL)
443465
1.155
512202.075
Honda Motor Co., Ltd. (HMC)
43741
0.9975
43631.6475
NIKE, Inc. (NKE)
133594.5
1.0325
137936.3212
Verizon Communications Inc. (VZ)
77385
0.94
72741.9
Wal-Mart Stores, Inc. (WMT)
204306
0.85
173660.1
Total
902491.5
940172.0437
940172.0437 / 902491.5 = Portfolio Beta 1.04175
1a. Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial portfolio using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.] 1b. Is the stock of each of these companies over or undervalued? 1c. What is the expected return using the CAPM model? 1d. Prepare a time series ratio analysis (liquidity, activity, debt, and profitability). Identify any events during the period that may have caused the stocks' prices to increase or decrease, explaining how these events affect the stocks' prices. # of Shares Purchased for Each Stock Apple Inc. (AAPL) Honda Motor Co., Ltd. (HMC) NIKE, Inc. (NKE) Verizon Communications Inc. (VZ) Wal-Mart Stores, Inc. (WMT) Total Investment: Closing Prices as of 09/07/20 17 Last Dividend Paid Date and Amount Expected Next Exdividend Total and Paid Investme Dates nt Beta 2750 2750 * 05/18/17 08/10/17 161.26 = 161.26 $0.63 $0.63 443465 1550 1550 * 03/07/17 03/28/17 28.22 = 28.22 $0.187 $0.189 43741 2550 2550 * 07/05/17 08/31/17 52.39 = 52.39 $0.18 $0.18 133594.5 1675 1675 * 08/01/17 10/06/16 46.2 = 46.2 $0.577 $0.59 77385 2550 2550 * 09/05/17 12/07/17 80.12 = 80.12 0.51 $0.51 204306 (2750*16 1.26)+(1 550*28.2 2)+(2550 *52.39)+( 1675*46. 2)+(2550 1.155 0.9975 1.0325 0.94 0.85 Closing Prices as of Value of 11/03/20 Investme 17 nt 172.5 2750 * 172.5 = 474375 32.87 1550 * 32.87 = 50948.5 55.71 2550 * 55.71 = 142060.5 47.42 1675 * 47.42 = 79428.5 89.68 2550 * 89.68 = 228684 *80.12)= 902491.5 Amount Held in Cash: 1000000(2750*161. 26)(1550*28.2 2)(2550*52.3 9)(1675*46.2 )(2550*80.1 2)= 97508.5 Total Investment Beta Investment * Beta Apple Inc. (AAPL) 443465 1.155 512202.075 Honda Motor Co., Ltd. (HMC) 43741 0.9975 43631.6475 NIKE, Inc. (NKE) 133594.5 1.0325 137936.3212 Verizon Communications Inc. (VZ) 77385 0.94 72741.9 Wal-Mart Stores, Inc. (WMT) 204306 0.85 173660.1 Total 902491.5 940172.0437 / 902491.5 = Portfolio Beta 1.04175 940172.0437
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