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Estimate annual expected rate of return

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Reference no: EM132138623

Consider two companies: United States Steel (X) and Facebook (FB).

Look at the profiles (financial statements for 2016) of each on yahoo finance and discuss the followings (you need to calculate these values yourself and show details of your calculations):

1. How many outstanding shares does the company have?

2. What is the market value of the company?

3. What is the book value of the company?

4. Does the company pay dividends?

5. What is the beta for the company? Compare it with the beta of market.

6. Retrieve their annual closing prices for the last 6 years.

7. Calculate annual rate of return of each stock for the last 5 years.

8. Estimate annual expected rate of return and standard deviation of annual rate of return of each stock.

9. How do you find the risk free rate? (consider the market risk premium to be 8%)

10. Using CAPM calculate the expected return on the equity for the company.

11. What is the Weighted average cost of capital (WACC) for the company?

12. What is the leverage (total debt/equity ratio) for the company?

Calculate and analyze your result, conclude your opinions.

(To get the required rate of return on debt, divide the interest expense by total debt)

(To get the total debt, add the short term debt to long term debt)

Reference no: EM132138623

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