This study is based on how the portfolio turnover ratio affects the returns of the mutual funds. Portfolio turnover is a valuable tool to analyze the investment strategies of a Fund Manager, fund cost structure and tax exposure. It helps in measuring how actively the Fund manager manages the portfolio investment. The rate of trading activity in a fund’s portfolio is the lesser of purchases or sales of the portfolio securities for a financial year divided by the average value of portfolio securities during the year. If a fund has 100 percent turnover rate that means the fund manager, in theory has sold every single stock position once.
(2) What would be your estimate of intrinsic value if you believed that the stock was riskier, with a beta of 1.7? [40%] (b) CBD stock has an expected ROE of 15% per year, expected earnings per share of $6, and expected dividend of $4 per share. The beta of CBD stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. What are its expected growth rate, its price, and its P/E ratio? [40%] (c) Discuss why P/E multiples are in general negatively correlated with risk and positively correlated with growth.
The repayment of the coupon bond will be the par value plus the last coupon payment times the number of bonds issued. So: Coupon bonds repayment = 30,000($1,000+40)) = $31,200,000 The repayment of the zero coupon bond will be the par value times the number of bonds issued, so:Zeroes: repayment = 315,589($1,000+0) = $315,588,822 3. Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have five years to maturity.
Ratio | Formula | Amaon 2013 | eBay 2013 | Debt Ratio | TL/TA | | | In leverage ratio, I choose debt ratio, eBay is 24.6% while Amazon is 54.8%. In this ratio, eBay is lower than Amazon which means eBay has less debt should to pay than Amazon. EBay’s assets are financed more through equity than debt compare to Amazon, illustrated that eBay has a lower risk in operation. In addition, eBay may have more borrowing capacity and financial flexible to enlarge its business than Amazon. Let’s see some profitability ratio to have some in-depth discussion.
Leveraged Buyout (“LBO”): Assuming an IRR (usually 20 percent to 30 percent), what would a financial buyer be willing to pay? Usually provides a floor valuation. 3. Of the valuation methodologies, which ones are likely to result in higher/lower value? Precedents usually yield higher valuations than trading comps because a buyer must pay shareholders more than the current trading price to acquire a company.
Required 1.Provide a brief written description of the proper accounting treatment, including how the extra $10 paid per share is recorded. Target Inc. buying back their common stock, but they pay more $10 than the market value. Hence, their purchase cost is taken into account instead of market value. Also the extra share will not be recognized as profit or loss but instead capitalized as treasury shares. 2.
Dixita Patel Chapter 6 homework Managerial Finance July 31, 2012 Critical Thinking 6.6. Coupon rate: how does bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required return on a bond price? Coupon rate is the annual coupon divided by the face value of a bond. In this case Bond Issuers look at outstanding bonds of comparable maturity and risk.
If the interest rate is 12% per year, what is the present value of this annuity? a. $1,229.97 b. $496.76 c. $556.38 d. Other 7. Given the following cash flow stream at the end of each year: Year 1: $4,000 Year 2: $2,000 Year 3: 0 Year 4: -$1,000 Using a 10% discount rate, the present value of this cash flow stream is: a.
ALTERNATIVE PROBLEMS AND SOLUTIONS ALTERNATIVE PROBLEMS 11- 1A. (Individual or Component Costs of Capital) Compute the cost for the following sources of Financing: a. A bond that has a $1,000 par value (face value) and a contract or coupon interior rate of 12%. A new issue would have a flotation cost of 6% of the $1,125 market value. The bonds mature in 10 years.
Also, Inditex has less operation expenses than H&M’s. All of these imply that Inditex is able to operate with high net profit margins. When the capital efficiency is considered, Inditex is less efficient in terms of capital than H&M due to some indicators. First is that working capital of H&M is higher than Inditex’s which can calculated by extracting other non-current assets from total assets and found as 2129 for H&M and 2082 for Inditex. Other indicator is ROA which can be calculated by dividing net income to total assets.