Finance Course work 1

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COURSE: MBA-680-50-SUII12 Corporate Financial Theory SEMESTER: Summer Session II Aug 2014 Coursework 1 Chapters 4,5,7,8,9 PART 1 SELF-TEST QUESTIONS 1. Casino Inc. is expected to pay a dividend of $3 per share at the end of year-1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is current value of the stock today? a. $25 b. $50 c. $100 d. $54 2. MJ Co. pays out 60% of its earnings as dividends. Its return on equity is 15%. What is the stable dividend growth rate for the firm? a. 9% b. 5% c. 6% d. 15% 3. If the discount rate is stated in real terms, then in order to calculate the NPV in a consistent manner…show more content…
Alcan BP Deutsche Bank Fiat Heineken LVMH Nestle Std Deviation Alcan 1,00 0,34 0,53 0,30 0,20 0,53 0,08 29,7% BP 1,00 0,44 0,26 0,20 0,27 0,29 18,4% Deutsche Bank 1,00 0,52 0,22 0,56 0,24 30,1% Fiat 1,00 0,17 0,42 0,26 35,9% Heineken 1,00 0,33 0,50 17,2% LVMH 1,00 0,31 31,0% Nestle 1,00 13,8% a. Calculate the variance of a portfolio with equal investments in each stock. Equal investment in each stock (x1=x2=......) N=7, N=7 (1/N)^2 = 0.020408163 Alcan PB Deutsche Bank Fiat Heineken LVMH Nestle Alcan 0.0018001837 0.0003791902 0.0009669471 0.0006527939 0.0002085061 0.0009958592 0.0000669159 PB 0.0003791902 0.0006909388 0.0004973257 0.0003505012 0.0001291755 0.0003143020 0.0001502792 Deutsche Bank 0.0009669471 0.0004973257 0.0018490000 0.0011467486 0.0002324457 0.0010664000 0.0002034514 Fiat 0.000652794 0.0003505012 0.0011467486 0.0026302245 0.0002142278 0.0009539143 0.0002628759 Heineken 0.000208506 0.0001291755 0.0002324457 0.0002142278 0.0006037551 0.0003590939 0.0002422041 LVMH 0.000995859 0.0003143020 0.0010664000 0.0009539143 0.0003590939 0.0019612245 0.0002706490 Nestle 0.000066916 0.0001502792 0.0002034514 0.0002628759 0.0002422041 0.0002706490 0.0003886531 Portfolio Variance =
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