Question

Using the stocks in your initial portfolio, prepare a valuation of each stock and the initial portfolio using zero, constant or variable growth models with a market return at 8% and at 12%. [Note that the growth rate must be less than the required rate of return.] Make sure you list the date of the valuation and the closing share price of your firm’s stock. Each firm’s required rate of return will depend on its beta.

Is the stock of each of these companies over or undervalued?  

What is the expected return using the CAPM model?

Prepare a time series ratio analysis (liquidity, activity, debt, and profitability).  Identify any events during the period that may have caused the stocks’ prices to increase or decrease, explaining how these events affect the stocks’ prices.

Stock	Initial Investment - 01/11/17	3/12/18	Number of shares	Beta	Total Investment	Portfolio Allocation	Return	Dividend
AAPL	$       175.28	$ 181.72	2,000	1.31	$     350,560.00	35%	3.67%	17.53
COST	$       189.38	$ 189.37	1500	1.05	$      284,070.00	28%	-0.01%	18.94
KO	$         46.04	$  44.53	900	0.56	$       41,436.00	4%	-3.28%	4.60
JPM	$       110.84	$ 117.66	2000	1.33	$     221,680.00	22%	6.15%	11.08
BAC	$         30.66	$  32.84	1000	1.77	$        30,660.00	3%	7.11%	3.07
Total Investment					$     928,406.00	93%
Cash Position					$       71,594.00	7%
Total Amount					$  1,000,000.00

Answer 1

An answer to part a

To justify whether a stock of each of these companies over or undervalued, current market will be compared against an intrinsic value of a stock of these companies, for that more information is needed to a claculate intrinsic value of a stock.

An answer to part b

An answer to part d

Events that may have caused the stocks’ prices to increase or decrease:

1. Earnings,

2. Company Specific events

3. Dividend

4. Stock Split and buybacks

5. Business regulations,

6. Federal Policy Reviews

7. Any litigation positive or negative outcome.