| Company | Year | Rating | Price |
| 3M (MMM) | 1976 | ** | 192.36 |
| American Express (AXP) | 1982 | *** | 79.25 |
| Apple (AAPL) | 2015 | *** | 139.99 |
| Boeing (BA) | 1987 | *** | 180.10 |
| Caterpillar (CAT) | 1991 | ** | 92.91 |
| Chevron Corp. (CVX) | 2008 | ** | 107.68 |
| Cisco Systems (CSCO) | 2009 | ** | 34.23 |
| Coca-Cola (KO) | 1987 | **** | 42.03 |
| Disney (DIS) | 1991 | **** | 111.76 |
| DuPont (DD) | 1935 | ** | 81.25 |
| ExxonMobil (XOM) | 1928 | *** | 82.00 |
| General Electric (GE) | 1907 | *** | 29.28 |
| Goldman Sachs (GS) | 2013 | ** | 243.94 |
| Home Depot (HD) | 1999 | ** | 149.60 |
| Intel (INTC) | 1999 | ** | 35.27 |
| IBM (IBM) | 1979 | *** | 175.65 |
| Johnson & Johnson (JNJ) | 1997 | ** | 128.06 |
| JPMorgan Chase (JPM) | 1991 | ** | 90.68 |
| McDonald's (MCD) | 1985 | *** | 128.64 |
| Merck (MRK) | 1979 | *** | 63.90 |
| Microsoft (MSFT) | 1999 | *** | 64.87 |
| Nike (NKE) | 2013 | *** | 57.80 |
| Pfizer (PFE) | 2004 | **** | 34.32 |
| Proctor & Gamble (PG) | 1932 | *** | 91.00 |
| Travelers (TRV) | 2009 | *** | 123.14 |
| United Technologies (UTX) | 1939 | *** | 113.45 |
| UnitedHealth (UNH) | 2012 | ** | 169.70 |
| Verizon Comm. (VZ) | 2004 | *** | 50.39 |
| Visa (V) | 2013 | **** | 90.24 |
| Wal-Mart (WMT) | 1991 | **** | 69.89 |
1 1. Use "DOW_Characteristics" data in Chapter1.xlsx to answer the following questions. For questions that require Excel, include the appropriate output (copy + paste) along with an explanation. Data description: The accompanying table shows a portion of the 30 companies that comprise the Dow Jones Industrial Average (DJIA). The second column shows the year that the company joined the DJIA (Year). The third column shows each company’s Morningstar rating (Rating). (Five stars is the best rating that a company can receive, indicating that the company’s stock price is undervalued and thus a very good buy. One star is the worst rating a company can be given, implying that the stock price is overvalued and a bad buy.) Finally, the fourth column shows each company’s stock price as of March 17, 2017 (Price in $).
Questions: a. Are data in the table from a sample or from a population? Explain.
b. Are data in the table time series data or not? Explain
c. What is the measurement scale of the Year data? What are the strengths of this type of data? What are the weaknesses?
d. What is the measurement scale of Morningstar’s star-based rating system? Summarize Morningstar’s star-based rating system for the companies in tabular form. Let 5 denote *****, 4 denote ****, and so on. What information can be extracted from these data?
e. What is the measurement scale of the Stock Price data? What are its strengths?
f. List the qualitative and quantitative variables in the data table.
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| Harley-Davidson Inc. produces motorcycles, motorcycle parts and related accessories and merchandise in the United States and internationally. It is headquartered in Milwaukee, Wisconsin. Use the following information on Harley-Davidson and five other similar companies to value Harley-Davidson as of December 31, 2004. | ||||||||||
| Harley-Davidson Inc. 2004 ($ millions) | ||||||||||
| Net income | $ 889.77 | |||||||||
| Number of common shares, millions | 294.31 | |||||||||
| Earnings before interest and tax | $ 1,506.16 | |||||||||
| Tax rate | 35.0% | |||||||||
| Book value of equity | $ 3,218.47 | |||||||||
| Book value interest-bearing debt | $ 1,295.44 | |||||||||
| Total Sales | $ 5,320.45 | |||||||||
| Total Assets | $ 5,483.29 | |||||||||
| Harley- | Arctic | Polaris | Marine | Winnebago | ||||||
| Davidson | Cat | Brunswick | Industries | Products | Industries | |||||
| Comparison of Timberland with Comparable Companies: | ||||||||||
| Growth Rates, Financial Risks, Size, Returns | ||||||||||
| 5-year growth rate in sales (%) | 15.5 | 6.2 | 4.1 | 6.1 | 15.5 | 10.8 | ||||
| 5-year growth rate in eps (%) | 28.1 | 11.1 | 47.1 | 15.9 | 25.1 | 17.2 | ||||
| Interest coverage ratio (x) | 60.9 | * | 8.9 | 85.1 | * | * | ||||
| Total liabilities to assets (%) | 0.4 | 0.3 | 0.6 | 0.5 | 0.2 | 0.5 | ||||
| Total assets ($ millions) | 5,483 | 286 | 4,346 | 793 | 110 | 395 | ||||
| Indicators of Value | ||||||||||
| Price/earnings (x) | 16.9 | 17.8 | 27.8 | 28.6 | 18.6 | |||||
| MV firm/EBIT(1-tax rate) (x) | 17.3 | 19.4 | 24.3 | 29.0 | 17.6 | |||||
| MV equity/BV equity (x) | 2.8 | 2.8 | 8.0 | 7.7 | 6.5 | |||||
| MV firm/BV firm (x) | 2.8 | 2.3 | 7.7 | 7.7 | 6.5 | |||||
| Price/sales (x) | 0.8 | 0.9 | 1.6 | 2.7 | 1.2 | |||||
| MV firm/sales (x) | 0.8 | 1.1 | 1.7 | 2.7 | 1.2 | |||||
| * These companies have little or no interest-bearing debt outstanding. | ||||||||||
| Tasks to complete: | ||||||||||
| Step 1 - Compute Mean and Median Values for peer-organizations. (Exclude H/D from the computations. | ||||||||||
| Step 2 - Present and JUSTIFY your estimates using EACH of the following:. | ||||||||||
| a- Price/earnings | ||||||||||
| b- MV firm/EBIT(1 - tax rate) | ||||||||||
| c - MV equity/BV equity | ||||||||||
| d - MV firm/BV firm | ||||||||||
| e - Price/sales (x) | ||||||||||
| f - MV firm/sales (x) | ||||||||||
| Step 3 - Present your "estimated indicators of value" in a matrix format. | ||||||||||
| Step 4 - Present the implied value of HOG common stock per share for each indicator of value in matrix format. | ||||||||||
| Step 5 - Add a Text Box and present an evaluation of your best analysis for a "fair price" for HD Shares. | ||||||||||
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