Adjusted Beta Formula Essay

The terminal growth rate is the average growth rates from 2007 to 2011. Combining with previous cash flows of 5 years, the whole future cash flows are:

Here, in the given pro forma in Exhibit 8, the cost of salt and other in 1984 was 1836 while that in 1983 is 1956. Thus, the growth rate is (1956-1836)/1836=6.6%.

The table below shows the equity betas for the firms presented in the case (using Jan-92 to Dec-96 equal weight NYSE/AMEX/NASDAQ as market portfolio):

For the purposes of risk premium consistency, the arithmetic average was most applicable to the historic US government bonds of 4.58% for the longest period because of its accurate estimate.

A Greek would say, "When we go to battle and win, we say it is Nike." According to Greek Mythology, The Nike was the winged goddess of victory. Daughter of the titan Pallas and the river Styx, Nike sat at the side of the omnipotent Zeus for the duration of his plight with the titans. The goddess Nike came to be an everlasting symbol of victory and dominance on the battlefields of ancient Greece. In light of her conquests, a popular footwear company of the 20th century designed products in her name to push new levels of achievement in athletes worldwide. The Swoosh logo at the side of each shoe is intended to represent the wing of the Greek Goddess Nike. The vibrant spirit of this ancient goddess has bridged the gap between

Here we choose VW NYSE, AMEX, and NASDAQ data as market returns, because it’s value weighted and more reliable. The results show CSC’s equity beta = 2.27, QRG’s equity beta = 1.79.

The historical beta comes from historical data. This kind of beta would slope coefficient in a regression, and associated with company's stock returns and market returns. This approach is conceptually straightforward, and complications quickly arise in practice.

* Stock Beta: Exhibit 5 shows a detailed measurement of the company’s stock returns in relation to the rest of the market through 5-year historical price and index data. The analysis includes monthly returns of both the NYSE and the S&P 500 index in order to capture a comprehensive view of the market return. In each comparison, the monthly returns of the Target stock and market are plotted on Y-axis and X-axis respectively to get the regression line’s slope or beta. The analysis arrives at an average beta of 0.988 which indicates a similar movement of Target stock’s returns in comparison to the whole market over time.

The approx. growth rate g is 0.30 (1+g)31 = 1.40 g ≈ 0.0509 ≈ 5.09%

A common practice to determine the firm’s beta is to draw from historical data from published sources or compare numbers to competitors. In this case, Heinz can compare to Kraft, Campbell Soup and Del Monte and use professional judgement in determining the stock’s sensitivity to the market. A stock’s beta can be determined using a formula as well.

13. According to these three scatterplots, three-year data and three-month data both show the beta of holding Under Armour shares should be around 1.22~1.23. However,

The beta of a stock is used as a measure of systematic risk or volatility of a stock. Through our calculations we found that Ethan Allen’s beta was 1.21681 while the market average is 1. Thus, Ethan

The risk premium is equal to the difference between the risk-free rate and the expected market return. The case study provides two historical equity risk premiums; the geometric and arithmetic mean. The conventional wisdom is that the geometric mean is considered a better estimate for valuation over long periods, while the arithmetic mean a better estimate for valuation over shorter periods. To coincide with the choice of the 20yr yield on U.S. Treasuries, the geometric mean was therefore chosen for this analysis i.e. (Rm-Rf) = 5.9%

Clorox has a beta of 0.37. Its business is very stable and both its revenue and net income have not varied much in the past several years. The company has a dominant position in its industry and can expect to maintain that position and the stable cash flows for the foreseeable future. In addition, the lack of growth in the business means that any need

In financial investing, beta is essential to measuring the risk of a particular stock or bond. All funds are based off of a universal beta of exactly one, meaning that the fund will move in unison with the market. A beta falling below one can insinuate that the asset at hand has a rate of variation lower than the market. Conversely, a fund with a beta above one will show a rate of volatility higher than that of the overall market. The Invesco account has a beta of 1.10. This value indicates that the fund has a tendency to fluctuate 10 percent more than the market. If the market falls, the fund will fall by 10 percent more, but if it rises the fund will increase by an additional 10 percent.