. You have collected the following NH-NL indicator data: If you are an technician following a momentum-based strategy, are you buying or selling today? A momentum-based trader would be selling because the NH-NL indicator indicates that new lows are now outpacing new lows, with a continuing strong upward trend. (Select from the drop-down menus.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Day NH-NL Indicator 1 (yesterday) 104 2 99 134567890 61 42 -18 -43 -80 -84 -91 10 -69 - ✗

. You have collected the following NH-NL indicator data: If you are an technician following a momentum-based strategy, are you buying or selling today? A momentum-based trader would be selling because the NH-NL indicator indicates that new lows are now outpacing new lows, with a continuing strong upward trend. (Select from the drop-down menus.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Day NH-NL Indicator 1 (yesterday) 104 2 99 134567890 61 42 -18 -43 -80 -84 -91 10 -69 - ✗

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter25: Portfolio Theory And Asset Pricing Models

Section: Chapter Questions

Problem 1MC

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Investment advisors estimated the stock market returns for four market segments: computers, financial, manufacturing, and pharmaceuticals. Annual return projections vary depending on whether the general economic conditions are improving, stable, or declining. The anticipated annual return percentages for each market segment under each economic condition are as follows: Assume that an individual investor wants to select one market segment for a new investment. A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3). What is the preferred market segment for the investor, and what is the expected return percentage? At a later date, a revised forecast shows a potential for an improvement in economic conditions. New probabilities are as follows: improving (0.4), stable (0.4), and declining (0.2). What is the preferred market segment for the investor based on these new probabilities? What is the expected return percentage?
The president of Poleski would like to know the effect that each of the following suggestions for improving performance would have on contribution margin per unit, sales needed to break even, and projected net income for next year. Each change should be considered independently. Reset the Data Section to its original values after each suggestion is analyzed. Fill in the table following the suggestions with the results of your analysis. a. The president suggests cutting the products price. Since the market is relatively sensitive to price, . . . a 10% cut in price ought to generate a 30% increase in sales (to 156,000 units). How can you lose? b. The sales manager feels that putting all sales personnel on straight commission would help. This would eliminate 77,000 in fixed sales salaries expense. Variable sales commissions would increase to 2.00 per unit. This move would also increase sales volume by 30%. c. Poleskis head of product engineering wants to redesign the package for the product. This will cut 1.00 per unit from direct materials and 0.50 per unit from direct labor, but will increase fixed factory overhead by 100,000 for additional depreciation on the new packaging machine. The package redesign would not affect sales volume. d. The firms consumer marketing manager suggests undertaking a new advertising campaign on Facebook. This would cost 30,000 more than is currently planned for advertising but would be expected to increase sales volume by 30%. e. The production superintendent suggests raising quality and raising price. This will increase direct materials by 1.00 per unit, direct labor by 0.50 per unit, and fixed factory overhead by 110,000. With improved quality, . . . raise the price to 18.50 and advertise the heck out of it. If you double your current planned advertising, Ill bet you can increase your sales volume by 30%.
Suppose that sending an analyst to an executive education program will raise the precision of the analyst’s forecasts as measured by R-square by .01. How might you put a dollar value on this improvement? Provide a numerical example.
You are running an active strategy and you are told by your boss to use a universe of 100 market drivers in order to create a statistical model that beats a certain index. You are told that one way to do this is to use multivariate regression models. Explain carefully the main steps you would take to do that.
Consider a company faced with a competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability (p) of 0.8, which means the other outcome would have only a 20 percent chance of occurring (1-p=0.2). These outcomes are shown in the table below:
Consider a company faced with a competitor's price reduction. Should the company also reduce price in order to maintain market share or should the company maintain its current price? The company has conducted some preliminary research showing the financial outcomes of each decision under two competitor responses: the competition maintains its price or the competition lowers its price further. The company feels pretty confident that the competitor cannot lower its price further and assigns that outcome a probability (p) of 0.8, which means the other outcome would have only a 20 percent chance of occurring (1-p=0.2). These outcomes are shown in the table below:Competitive ResponseCompany action Maintain Price, p=0.8 Reduce Price, (1-p)=0.2Reduce Price $165,000 $125,000Maintain Price $175,000 $105,000The expected monetary value (EMV) of reducing the price is
GohwaT has a client who has inquired about the valuation method best suited for comparison of companies in an industry that has the following characteristics:• Principal competitors within the industry are located in the United States, France, Japan, and Brazil.• The industry is currently operating at a cyclical low, with many firms reporting losses.• The industry is subjected to rapid technological change.His advisor recommends that the client consider the following valuation ratios:1. Price to earnings2. Price to book value3. Price to salesDetermine which one of the three valuation ratios is most appropriate for comparing companies in this industry. Support your answer with two reasons that make that ratio superior to either of the other two ratios.
From the data below for the Dow Jones Industrial Average, calculate the three-day simple moving average. Fill in the “Buy/Sell Signal” column for this trading indicator. Then, calculate the three-day exponential moving average and fill in the “Buy/ Sell Signal” column for this trading indicator. Assume that the current closing price will receive 4/5 of the weight in the exponential moving average. Finally, fill in the “Signal Comparison” column. On which days do the signals disagree? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.) Date Adj Close 3-Day Simple Moving Average Buy/Sell Signal 3-Day Exponential Moving Average Buy/Sell Signal Signal Comparison 3/25/2019 25,516.99 3/26/2019 25,657.89 3/27/2019 25,625.75 3/28/2019 25,717.62 3/29/2019 25,928.84 4/1/2019 26,258.58 4/2/2019 26,179.29…
Project II is an inventory-control system, with an IRR of 10.60% & a beta of 0.90. Incredible Corp. has two divisions: Silver Group & Blue Group. Both groups are considering implementing Project II. Silver Group makes health products and has an asset beta of 1.20. Blue Group is a mining operation with an asset beta of 0.70. The risk-free rate is 3.00%; the expected return on the market is 11.00%. Explain clearly and concisely whether each division should accept or reject Project II, being sure to justify your reasoning.
The Miramar Company is going to introduce one of three new products: a widget, a hummer, or a nimnot. The market conditions (favorable, stable, or unfavorable) will determine the profit or loss the company realizes, as shown in the following payoff table: a. Compute the expected value for each decision and select the best one. b. Develop the opportunity loss table and compute the expected opportunity loss for each product. c. Determine how much the firm would be willing to pay to a market research firm to gain better information about future market conditions.
To increase Sales and Sales Growth, the top Marketing Manager suggested to price products slightly lower than the main competitor and at the same time increase product quality (competitor is not expected to react or make changes). This strategy would require an initial one time investment today of $1 million in advertising (and for some machines) and the Net Profit Margin (and Cash Flows) will be zero for years 1, 2, 3. However, sales are expected to grow 20% in years 1,2,3 (then sales will stabilize and sales growth will be 1% in year 4 and over). Also, in year 4 Net Profit Margin will return to 5% (due to economies of scale). (Some numbers have been pre-filled in the tables below). CURRENT BUSINESS SITUATION END OF YEAR 0 1 … Sales Growth 0% … Net Profit Margin 5% … Sales ($Millions) 80.00 … Profit or Cash Flow 4.00 … NPV(i=.15) 26.67 $Millions SUGGESTED SALES…
Using the graph, answer the following standard deviation questions: 1. As the standard deviation for Martin Products' distribution increases, the distribution for Martin Products: becomes steeper and more like the distribution for U.S. Water does not change becomes flatter and less like the distribution for U.S. Water might either become steeper or flatter 2. Use the slider to set the standard deviation for Martin Products to be 6.0. The probability of having a rate of return of at least 5% (move the cursor to 5.0) is greater for U.S. Water than for Martin Products is the same for both U.S. Water and the Martin Products distribution is greater for Martin Products than U.S. Water cannot be determined 3. Use the slider to set the standard deviation for the Martin Products distribution to 8.0. The probability of having a rate of return of at least 10% (move the vertical line to 10.0) is greater for U.S. Water than for Martin Products is the same for both U.S. Water and the Martin…