CORPORATE FIN.(LL)-W/ACCESS >CUSTOM<
11th Edition
ISBN: 9781260269901
Author: Ross
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 10, Problem 2CQ
Investment Selection Given that Transocean was down by about63 percent for 2014, why did some investors hold the stock? Why didn’t they sell out before the price declined so sharply?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Horse and Buggy Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 5% per year.
a. If r = 10% and DIV1 = $6, what is the value of a share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If r = 10% and DIV1 = $6, What price do you forecast for the stock next year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. If r = 10% and DIV1 = $6, What rate of return should you expect if you buy the stock today and sell it in one year? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.).
The common stock of Manchester & Moore is expected to earn 14 percent in a recession, 7 percent in a normal economy, and lose 4 percent in a booming economy. The probability of a boom is 15 percent while the probability of a recession is 5 percent. What is the expected rate of return on this stock?
I need the step by step calculation not using excel sheet pls. Thank you.
Last year's return on equilty was 30%. This yeaar the ROE has decreased by 25% even though the firm's earnongs equaled last year's earnings. The firm has no preferred stock. What equity percentage cause the decrease?
Chapter 10 Solutions
CORPORATE FIN.(LL)-W/ACCESS >CUSTOM<
Ch. 10 - Investment Selection Given that RadNet was up by...Ch. 10 - Investment Selection Given that Transocean was...Ch. 10 - Risk and Return We have seen that over long...Ch. 10 - Prob. 4CQCh. 10 - Effects of inflation Look at Table 10.1 and Figure...Ch. 10 - Risk Premiums Is it possible for the risk premium...Ch. 10 - Prob. 7CQCh. 10 - Returns Two years ago, the Lake Minerals and Small...Ch. 10 - Prob. 9CQCh. 10 - Historical Returns The historical asset class...
Ch. 10 - Calculating Returns Suppose a stock had an initial...Ch. 10 - Calculating Yields In Problem 1, what was the...Ch. 10 - Calculating Returns Rework Problems 1 and 2...Ch. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Bond Returns What is the historical real return on...Ch. 10 - Calculating Returns and Variability Using the...Ch. 10 - Risk Premiums Refer to Table 10.1 in the text and...Ch. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Calculating Real Rates Given the information in...Ch. 10 - Holding Period Return A stock has had returns of...Ch. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Calculating Returns You bought a stock three...Ch. 10 - Calculating Real Returns Refer to Table 10.1. What...Ch. 10 - Return Distributions Refer back to Table 10.2....Ch. 10 - Prob. 18QPCh. 10 - Calculating Returns and Variability You find a...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Arithmetic and Geometric Returns A stock has had...Ch. 10 - Calculating Returns Refer to Table 10.1 in the...Ch. 10 - Prob. 23QPCh. 10 - Using Return Distributions Suppose the returns on...Ch. 10 - Using Return Distributions Assuming that the...Ch. 10 - Prob. 26QPCh. 10 - Using Probability Distributions Suppose the...Ch. 10 - Prob. 28QPCh. 10 - Prob. 1MCCh. 10 - Prob. 2MCCh. 10 - Assume you decide you should invest at least part...Ch. 10 - Prob. 4MCCh. 10 - A measure of risk-adjusted performance that is...Ch. 10 - What portfolio allocation would you choose? Why?...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- A company's stock price rose 2.8% in 2011, and in 2012, it increased 79.7%.a. Compute the geometric mean rate of return for the two-year period 2011-2012. (Hint: Denote an increase of 79.7% by .797.)b. If someone purchased $1,000 of the company's stock at the start of 2011, what was its value at the end of 2012?c. Over the same period, another company had a geometric mean rate of return of 10.7%. If someone purchased $1,000 of the other company's stock, how would its value compare to the value found in part (b)?arrow_forwardPlease, 1. Calculate the average stock return from 2005–2007, the standard deviation and coefficient of variation over this period. The market price of the stock was $31 at year-end 2004, $35 at year-end 2005, $42 at year-end 2006, and $55 at year-end 2007. For valuation purposes, industry experts use the dividend valuation model to value the common equity interest of industry firms. Potential investors’ required rate of return for this firm is 14 percent; growth rate is 13 percent for 2010 and 2011, and then declines to 12 percent for all later years. Market Returns: The stock returns for the market as a whole were as follows: 15.7 percent in 2005, 8.2 percent in 2006, and 12.1 percent in 2007arrow_forwardThe Dow Jones Industrial Average (DJIA) and the Standard Poors 500 (SP 500) indexes are used as measures of overall movement in the stock market The DJIA is based on the price movements of 30 large companies: the SP 500 is an index composed of 500 stocks. Some say the SP 500 is a better measure of stock market performance because it is broader based. The closing price for the DJIA and the SP 500 for 15 weeks, beginning with January 6, 2012, follow (Barrons web site, April 17, 2012). a. Develop a scatter chart for these data with DJIA as the independent variable. What does the scatter chart indicate about the relationship between DJIA and SP 500? b. Develop an estimated regression equation showing how SP 500 is related to DJIA. What is the estimated regression model? c. What is the 95% confidence interval for the regression parameter 1? Based on this interval, what conclusion can you make about the hypotheses that the regression parameter 1 is equal to zero? d. What is the 95% confidence interval for the regression parameter 0? Based on this interval, what conclusion can you make about the hypotheses that the regression parameter 0 is equal to zero? e. How much of the variation in the sample values of SP 500 does the model estimated in part (b) explain? f. Suppose that the closing price for the DJIA is 13,500. Estimate the closing price for the SP 500. g. Should we be concerned that the DJIA value of 13,500 used to predict the SP 500 value in part (f) is beyond the range of the DJIA used to develop the estimated regression equation?arrow_forward
- 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?arrow_forwardWhat is the ROI on a stock purchased for $87.24 per share a few years ago, that now has a price of $62.56 per share?arrow_forwardIn the year 2016, Al-Jazeerah and Company's shares traded at $ 30 per share; this is a 25%the decline from its peak. Forecasted earning per share for 2016 & 2017 were $3.05 & $3.2 . Adividend of $ 0.5 per share was indicated for the fiscal year 2017.(a) Calculate AAA's normal forward P/E and the forward P/E it traded in 2016.Use a required rate of return of 10%. (b) Calculate the intrinsic P/E implied by the analyst' forecasts with the assumption thatthere will be no abnormal earning growth after 2018.(c) Explain why an analyst prefers a leading P/E ratio over a trailing P/E ratio? (d) Explain why a normal forward P/E ratio and a normal trailing P/E ratio always differ by 1.(e) Explain why Interest payment should not be part of cash flow from operations. (f) Explain why might a firm trade at a price to book ratio greater than 1?arrow_forward
- Arrington stock is currently valued at $28.40 per share. The firm had eamings per share of $1.86 last year and projects earnings of $2.09 per share for next year. What is the trailing twelve month price-earnings ratio?arrow_forwardWhen the price of oil fell in 2014 and 2015, ExxonMobil’s stock price dropped in expectation that earnings would also eventually fall. The P/E ratio was below 10 for some time. Go to finance.yahoo.com and type “XOM” into the “Quote Lookup” box. Scroll down and click on “ExxonMobil Corporation.” Click on “Profile” and write a one-paragraph description of the company’s activities. Return to the summary page and write down the company’s P/E ratio. Is it still relatively low (under 15)? Compare ExxonMobil to others in the industry (Chevron, BP, etc.) based on the P/E ratio and the PEG ratio (the P/E ratio divided by annual growth). Go back to the summary page. Is the stock up or down from the prior day? (See the number in parentheses next to the share price.) Click on the “Analysts” heading. What are the Average Earnings Estimate, Low Earnings Estimate, and High Earnings Estimate? How many analysts follow earnings?arrow_forwardThe common stock of Manchester & Moore is expected to earn 14.8 percent in a recession, 8 percent in a normal economy, and lose 5.8 percent in a booming economy. The probability of a boom is 12 percent while the probability of a recession is 6 percent. What is the expected rate of return on this stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forward
- Last year, Rec Room Sports reported earnings per share of $8.50 when its stock price was $212.50.This year, its earnings increased by 20 percent. If the P/E ratio remains constant, what is likely tobe the price of the stock? Explainarrow_forwardThe common stock of Manchester & Moore is expected to earn 16.2 percent in a recession, 8 percent in a normal economy, and lose 3.5 percent in a booming economy. The probability of a boom is 18 percent while the probability of a recession is 7 percent. What is the expected rate of return on this stock?arrow_forwardGiven the dramatic decrease in a company's stock price last year, what would be the impact on the firm's asset beta, equity beta, and their WACC? Explain your responses!arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningEssentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY