suppose Zenos Manufacturing is contemplating investing in a new business. An existing company in the target industry has an equity beta of 0.90 but is very conservatively financed with a market value, equity-to-value ratio 95%. Zenos intends to use an equity-to-value ratio of 30%. What beta should Zeno use in estimating a cost of capital in the new business?
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suppose Zenos Manufacturing is contemplating investing in a new business. An existing company in the target industry has an equity beta of 0.90 but is very conservatively financed with a market value, equity-to-value ratio 95%. Zenos intends to use an equity-to-value ratio of 30%. What beta should Zeno use in estimating a cost of capital in the new business?
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Can you tell me the reason why the cost of external equity is greater than the cost of internal equity?
- A research analyst is trying to determine whether a firm’s price-earnings (P/E) and price-sales (P/S) ratios can explain the firm’s stock performance over the past year. A P/E ratio is calculated as a firm’s share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The P/S ratio is calculated by dividing a firm’s share price by the firm’s revenue per share for the trailing 12 months. In short, investors can use the P/S ratio to determine how much they are paying for a dollar of the firm’s sales rather than a dollar of its earnings (P/E ratio). In general, the lower the P/S ratio, the more attractive the investment. The accompanying table shows the year-to-date (YTD) returns and the P/E and P/S ratios for a portion of the 30 firms included in the Dow Jones Industrial Average.…The ABC Company is involved in the production and selling of consumer goods, particularly beauty products such as bath soap and shampoo and had registered a positive profit growth for the last 10 years. However, the current year seems to be different from those years as the company is expecting a decline in profit; which is estimated to be about 70% below the target. The manager now is in a dilemma … asking himself/herself “What happened, why this decline in profit?” The Manager then asked the company Accountant to give him/her the data on sales and advertising cost for the last 10 years – he/she wants these data to determine whether the company can live without advertising, as advertising cost happens to be substantial. Justify your answer by doing as step-by-step procedure in Correlation Analysis using a 0.05 level of significance. The data are as follows –A well known brokerage firm executive claimed that 90% of investors are currently confident of meeting their investment goals.
- Aztec Industries has developed a forecasting model that was used to forecast during a 10-month period. The forecasts and actual demand were as follows: Measure the accuracy of the forecast by using MAD, MAPD, and cumulative error. Does the forecast method appear to be accurate?A survey of 131 investment managers in Barron’s Big Money poll revealed the following:● 43% of managers classified themselves as bullish or very bullish on the stockmarket.● The average expected return over the next 12 months for equities was 11.2%.● 21% selected health care as the sector most likely to lead the market in thenext 12 months.● When asked to estimate how long it would take for technology and telecom stocksto resume sustainable growth, the managers’ average response was 2.5 years.a. Cite two descriptive statistics.b. Make an inference about the population of all investment managers concerning theaverage return expected on equities over the next 12 months.c. Make an inference about the length of time it will take for technology and telecomstocks to resume sustainable growth.A survey of 131 investment managers in Barron’s Big Money poll revealed the following:● 43% of managers classified themselves as bullish or very bullish on the stockmarket.● The average expected return over the next 12 months for equities was 11.2%.● 21% selected health care as the sector most likely to lead the market in thenext 12 months.● When asked to estimate how long it would take for technology and telecom stocksto resume sustainable growth, the managers’ average response was 2.5 years.a. Cite two descriptive statistics.
- A survey of 131 investment managers in Barron’s Big Money poll revealed the following:● 43% of managers classified themselves as bullish or very bullish on the stockmarket.● The average expected return over the next 12 months for equities was 11.2%.● 21% selected health care as the sector most likely to lead the market in thenext 12 months.● When asked to estimate how long it would take for technology and telecom stocksto resume sustainable growth, the managers’ average response was 2.5 years.a. Cite two descriptive statistics.b. Make an inference about the population of all investment managers concerning theaverage return expected on equities over the next 12 monthsTotal DVD and Blu-ray disc sales in 2009 were $8.72 billion. For the purposes of this problem, you will combine DVD and Blue-ray disk sales into one category of DVD sales. A study by In-Stat predicted that "physical disc sales will decline by $4.7 billion by 2014," and that "streaming, on the other hand, should grow from its current $2.2 billion to $6.3 billion over the same time period (2009–2014) a. What is the slope, including units, of the model for DVD sales? Write a statement interpreting the meaning of the slope in the context of the problem. b. Write an equation that represents the linear model for DVD sales. Let D = the sales of DVDs in billions of dollars, and t = the number of years after 2009. c. What is the slope, including units, of the model for streaming videos?Total DVD and Blu-ray disc sales in 2009 were $8.72 billion. For the purposes of this problem, you will combine DVD and Blue-ray disk sales into one category of DVD sales. A study by In-Stat predicted that "physical disc sales will decline by $4.7 billion by 2014," and that "streaming, on the other hand, should grow from its current $2.2 billion to $6.3 billion over the same time period (2009–2014). d. Write an equation that represents the linear model for streaming videos. Let S = the total sales of streaming videos in billions of dollars, and t = the number of years after 2009. e. In what year do the models predict streaming video sales to exceed DVD sales?
- In the competition equation of population growth, why do we need to include competition coefficients?A survey of 137 investment managers in a poll revealed the following. • 46% of managers classified themselves as bullish or very bullish on the stock market. • The average expected returm over the next 12 months for egquities was 11.5%. - 21% selected health care as the sector most likely to lead the market in the next 12 months. • When asked to estimate how long it would take for technology and telecom stocks to resume sustainable growth, the managers' average response was 2.8 years (a) Cite two descriptive statistics. (Select all that apply.) O of those investment managers surveyed, 46% were bulish or very bullish on the stock market. O of those investment managers surveyed, 21% selected health care as the sector most likely to lead the market in the next 12 months. D of those investment managers surveyed, 46% were bulish or very bullish on health care stocks over the next 2.8 years. D of those linvestment managers surveyed, 11.5% expect it would take 12 months for equities to resume…1. Approximating the beta of a stock. Choose a well-known compeny such as Google or Coco-Cola. Go to a website such os Yahoo! Finance (http://finance.yahoo.com/) and find the weekly closing price of the company's stock for the past year. Then find the closing price of the Standord & Poor's 500 (S&P600) for the same time period.To get the historical prices in Yahoo! Finonce, select Historical Prices from the left menu. Choose the oppropriate time period. Select Weekly and Get Prices. Finally, select Download to Spreadsheet. Repeat this for the S&P500, and copy the dato into the same spreadsheet. Finally, rearrange the data in chronological order. Be sure to expend the selection to sort all the dato. Now, using the adjusted close price, compute the percentege change in price for each week, using the formule % change = P.- P.„For P. example, if week 1 price is in cell D1 and week 2 price is in cell D2, then % change D2 - D1Repeat this for the S&P600 data. D1 2. Using Excel to draw a…