4. The table below presents the historical P/E ratio for Apple Inc. The P/E ratio increased from 2002 to 2003, and then decreased for a few years. a. Please explain how the increase and decrease of P/E ratio reflect investor view about Apple. (2 points) b. The current P/E ratio of Apple is 33.7. If we use the past 10 years average P/E ratio (from 2010-2019) as a benchmark, is Apple currently underpriced, fairly priced or overpriced? Please explain. (3 points)

Year P/E ratio

2002 80.6

2003 109.1

2004 52.4

2005 32.5

2006 32.6

2007 38.0

2008 20.7

2009 20.1

2010 18.4

2011 13.6

2012 14.9

2013 11.9

2014 15.5

2015 11.9

2016 13.5

2017 16.6

2018 18.8

2019 18.2

Click here for the Excel Data File

(a) Use Excel, MegaStat, or MINITAB to fit three trends (linear, quadratic, exponential) to the time series. (A negative value should be indicated by a minus sign. Do not round the intermediate calculations. Round your final answers to 2 decimal places.)

(b) Use each of the three fitted trend equations to make numerical forecasts for the next 3 years. (Round the intermediate calculations to 2 decimal places and round your final answers to 1 decimal place.)

Historical average returns for Large Company Common Stocks, Long Term Government Bonds, and US Treasury Bills for the period 10-year period of 1999 through 2008 are shown in the following table. Use these data to solve the next several problems.

1. Calculate the average return for Large Company Common Stocks for the 10-year period.

2. Calculate the average return for Long Term Corporate Bonds for the 10-year period.

3. Calculate the average return for US T-bills for the 10-year period.

4. Calculate the holding period return for Large Company Common Stocks for the 10-year period.

5. Calculate the holding period return for Long Term Corporate Bonds for the 10-year period.

6. Calculate the holding period return for US T-bills for the 10-year period.

Trans Corp, a large conlomerate is evaluating the possible acquisition of the chip company. Transcorp analysts project the following post merger incremental cash flows.

Years                         CF

2003 12

2004 19

2005 23

2006 29

2007 and beyond       Constant growth rate at 10%

Chip currently has a market value capital structure debt of 10%, but transcorp would increase it to 50% if the acquisition were made. Chip, if independent pays30% taxes, but its income would be taxed at 40% if consolidated. Chips current market determined beta is 1.80 and its estimated post merger beta would increase to 2.67.The risk free rate stands at 10% and the return on the market is 15%.

What would be the appropriate discount rate for Valuing the acquisition? Ans:23.35%

What would be the total value of Chip company to Transcorp?$Ans:150.21

Chip has $5 million shares outstanding. Chip’s current market price is $32.50. What is the maximum price per share that Transcorp should offer for chip?Ans: $30.04

Travelers Insurance is a publicly traded entity which assumes the risk of its policyholders. It can fairly easily raise capital for operating expenditures and is governed by a board of directors. Travelers is a
A) mutual insurance company.
B) a Name at Lloyds of London.
C) stock insurance company.
D) a fraternal insurance company

The general fund budget (in billions of dollars) for a U.S. state for 1988 (period 1) to 2011 (period 24) follows.

Develop a linear trend equation for this time series to forecast the budget (in billions of dollars). (Round your numerical values to three decimal places.)

T_t =

(c)What is the forecast (in billions of dollars) for period 25? (Round your answer to two decimal places.)

$    billion

A certain company produces and sells frozen pizzas to public schools throughout the eastern United States. Using a very aggressive marketing strategy, they have been able to increase their annual revenue by approximately $10 million over the past 10 years. But increased competition has slowed their growth rate in the past few years. The annual revenue, in millions of dollars, for the previous 10 years is shown.

(b) Using Minitab or Excel, develop a quadratic trend equation that can be used to forecast revenue (in millions of dollars). (Round your numerical values to three decimal places.)

T_t =

(c) Using the trend equation developed in part (b), forecast revenue (in millions of dollars) in year 11. (Round your answer to two decimal places.)

$  million

The general fund budget (in billions of dollars) for a U.S. state for 1988 (period 1) to 2011 (period 24) follows.

Develop a linear trend equation for this time series to forecast the budget (in billions of dollars). (Round your numerical values to three decimal places.)

T_t =

(c) What is the forecast (in billions of dollars) for period 25? (Round your answer to two decimal places.)

$  billion

A certain company produces and sells frozen pizzas to public schools throughout the eastern United States. Using a very aggressive marketing strategy, they have been able to increase their annual revenue by approximately $10 million over the past 10 years. But increased competition has slowed their growth rate in the past few years. The annual revenue, in millions of dollars, for the previous 10 years is shown.

Using Minitab or Excel, develop a quadratic trend equation that can be used to forecast revenue (in millions of dollars). (Round your numerical values to three decimal places.)

T_t =

(c) Using the trend equation developed in part (b), forecast revenue (in millions of dollars) in year 11. (Round your answer to two decimal places.)

$  million

The worksheet "grocery" of "Assignment #4-2 (DATA)" gives the median store size (in square feet) by year for grocery stores. Note that this file is the same as the one given in Question 1.

Step 1: Run the simple linear regression and find the slope of the sample regression equation. Give your answer to 4 decimal places.

Answer- .6783

Step 2- According to the sample regression line, a point estimate for the median grocery store size in 2012 is: (Give your answer to 1 decimal place.)

Answer- 49.9

Step 3- The standard error of fit is approximately?? (Give your answer to 3 decimal places.)

Distinguish and explain the differences between business and financial risk and provide an example from a publicly traded company. Use specific examples and citations to support your assertion for business or financial risk. Be sure to cite your source(s).