Question
In: Finance
- Problem 5-16 Value-Weighted Indexes (LO4, CFA2) The following three defense stocks are to be combined...
- Problem 5-16 Value-Weighted Indexes (LO4, CFA2)
The following three defense stocks are to be combined into a stock index in January 2019 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance). Assume the index is scaled by a factor of 10 million; that is, if the total value of all firms in the market is $5 billion, the index would be quoted as 500.
| Price | ||||||||||
| Shares (millions) |
1/1/19 | 1/1/20 | 1/1/21 | |||||||
| Douglas McDonnell | 420 | $ | 63 | $ | 67 | $ | 84 | |||
| Dynamics General | 450 | 53 | 47 | 61 | ||||||
| International Rockwell | 250 | 82 | 71 | 87 | ||||||
a. Calculate the initial value of the index if a value-weighting scheme is used. (Round your answer to 2 decimal places.)
Index Value = _______
b. What is the rate of return on this index for the year ending December 31, 2019? For the year ending December 31, 2020? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
2019 Return = ______%
2020 Return = ______%
- Problem 6-3 Free Cash Flow Model (LO3, CFA2)
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of .7, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn’s? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Lauryn's Asset Beta = __________
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Problem 4-16 Comprehensive Problem-Weighted-Average Method [LO4-2, LO4-3, LO4-4, LO4-5] Builder Products, Inc., uses the weighted-average method...
Problem 4-16 Comprehensive Problem-Weighted-Average Method
[LO4-2, LO4-3, LO4-4, LO4-5]
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
79,000
Pounds started into production during May
440,000
Pounds completed and transferred out
?
Pounds in process, May 31;...
Problem 4-16 (Algo) Comprehensive Problem-Weighted-Average Method [LO4-2, LO4-3, LO4-4, LO4-5] Builder Products, Inc., uses the weighted-average...
Problem 4-16 (Algo) Comprehensive Problem-Weighted-Average
Method [LO4-2, LO4-3, LO4-4, LO4-5]
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production
data:
Pounds in
process, May 1; materials 100% complete;
conversion 90% complete
85,000
Pounds started
into production during May
500,000
Pounds completed
and transferred out
?
Pounds in
process, May...
The following three defense stocks are to be combined into a stock index in January 2019...
The following three defense stocks are to be combined into a
stock index in January 2019 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500.
PRICE
Shares
(millions)
1/1/19
1/1/20
1/1/21
Douglas McDonnell
425
$
72
$
75
$
92...
The following three defense stocks are to be combined into a stock index in January 2019...
The following three defense stocks are to be combined into a
stock index in January 2019 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance):
Price Shares (millions) 1/1/19 1/1/20 1/1/21
Douglas McDonnell 210 $94 $ 97 $ 111
Dynamics General 450 $36 $31 $45
International Rockwell 350 $65 $54 $68
a. Calculate the initial value of the index if a price-weighting
scheme is used.
b. What is the rate of return on...
The following three defense stocks are to be combined into a stock index in January 2016...
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500.
Price
Shares
(millions)
1/1/16
1/1/17
1/1/18
Douglas McDonnell
350
$
65
$
69
$
81...
The following three defense stocks are to be combined into a stock index in January 2016...
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500.
Price
Shares
(millions)
1/1/16
1/1/17
1/1/18
Douglas McDonnell
200
$
70
$
73
$
87...
The following three defense stocks are to be combined into a stock index in January 2016...
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500.
Price
Shares
(millions)
1/1/16
1/1/17
1/1/18
Douglas McDonnell
350
$
65
$
69
$
81...
The following three defense stocks are to be combined into a stock index in January 2016...
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500. Price Shares (millions)
1/1/16 1/1/17 1/1/18 Douglas McDonnell 215 $ 64 $ 68 $ 82...
The following three defense stocks are to be combined into a stock index in January 2019...
The following three defense stocks are to be combined into a
stock index in January 2019 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance). Assume the index is scaled by a factor of 10 million;
that is, if the total value of all firms in the market is $5
billion, the index would be quoted as 500.
Price
Shares
(millions)
1/1/19
1/1/20
1/1/21
Douglas McDonnell
545
$
80
$
83
$
98...
The following three defense stocks are to be combined into a stock index in January 2016...
The following three defense stocks are to be combined into a
stock index in January 2016 (perhaps a portfolio manager believes
these stocks are an appropriate benchmark for his or her
performance):
Price
Shares
(millions)
1/1/16
1/1/17
1/1/18
Douglas McDonnell
345
$
94
$
97
$
109
Dynamics General
450
66
61
75
International Rockwell
310
95
84
101
a. Calculate the initial value of the
index if a price-weighting scheme is used.
b. What is the rate of return...
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