You are given the three EPS estimates and the following estimates related to the market earnings multiple: Pessimistic Consensus $37.25 $44.52 0.70 0.60 0.12 0.11 0.06 0.05 0.09 0.11 One shoul✓ -Select- EPS D/E Nominal RFR Risk premium ROE a. Based on the three EPS and P/E estimates, compute the high, low, and consensus intrinsic market value for the S&P Industrials Index in 2018. Do not round intermediate calculations. Round your answers to the nearest cent. High intrinsic market value: $ Low intrinsic market value: $ Consensus intrinsic market value: $ b. Assuming that the S&P Industrials Index at the beginning of the year was priced at 2,050, compute your estimated rate of return under the three scenarios from Part a. Do not round intermediate calculations. Round your answers to one decimal place. Use a minus sign to enter negative rates of return, if any. Rate of return (optimistic scenario): Rate of return (pessimistic scenario): Rate of return (consensus scenario): Assuming your required rate of return is equal to the consensus, how would you weight the S&P Industrials Index in your global portfolio? he U.S. stocks in a global portfolio. underweight overweight % % Optimistic $60.53 0.50 0.10 0.04 0.13 %
You are given the three EPS estimates and the following estimates related to the market earnings multiple: Pessimistic Consensus $37.25 $44.52 0.70 0.60 0.12 0.11 0.06 0.05 0.09 0.11 One shoul✓ -Select- EPS D/E Nominal RFR Risk premium ROE a. Based on the three EPS and P/E estimates, compute the high, low, and consensus intrinsic market value for the S&P Industrials Index in 2018. Do not round intermediate calculations. Round your answers to the nearest cent. High intrinsic market value: $ Low intrinsic market value: $ Consensus intrinsic market value: $ b. Assuming that the S&P Industrials Index at the beginning of the year was priced at 2,050, compute your estimated rate of return under the three scenarios from Part a. Do not round intermediate calculations. Round your answers to one decimal place. Use a minus sign to enter negative rates of return, if any. Rate of return (optimistic scenario): Rate of return (pessimistic scenario): Rate of return (consensus scenario): Assuming your required rate of return is equal to the consensus, how would you weight the S&P Industrials Index in your global portfolio? he U.S. stocks in a global portfolio. underweight overweight % % Optimistic $60.53 0.50 0.10 0.04 0.13 %
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 2MAD
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Question
Transcribed Image Text:You are given the three EPS estimates and the following estimates related to the market earnings multiple:
EPS
D/E
Nominal RFR
Risk premium
ROE
One shoul✓ -Select-
a. Based on the three EPS and P/E estimates, compute the high, low, and consensus intrinsic market value for the S&P Industrials Index in 2018. Do not
round intermediate calculations. Round your answers to the nearest cent.
High intrinsic market value: $
Low intrinsic market value: $
underweight
overweight
Consensus intrinsic market value: $
b. Assuming that the S&P Industrials Index at the beginning of the year was priced at 2,050, compute your estimated rate of return under the three
scenarios from Part a. Do not round intermediate calculations. Round your answers to one decimal place. Use a minus sign to enter negative rates of
return, if any.
Rate of return (optimistic scenario):
Rate of return (pessimistic scenario):
Rate of return (consensus scenario):
Assuming your required rate of return is equal to the consensus, how would you weight the S&P Industrials Index in your global portfolio?
he U.S. stocks in a global portfolio.
%
Pessimistic Consensus
$44.52
$37.25
0.70
0.60
0.12
0.11
0.06
0.05
0.09
0.11
%
Optimistic
$60.53
0.50
0.10
0.04
0.13
%
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