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Investment and Portfolio Analysis AssignmentsQuestion 1: Portfolio Construction for Mr. HellersYour boss has sent you another client of A.P. Investments, Mr. Hellers, who needs your help on making an investment decision. Mr. Hellers has identified two stocks, Port of Tauranga and A2 Milk Corporation, which he thinks will give him a good return on his investment. Both stocks are equally interesting to him, but he heard something about splitting eggs, or sharing risk or something like that. A.P. Investment's research department has provided you with some price information about the two specific stocks. Your boss has asked you to help Mr. Hellers in his investment decisions, by explaining to him the principle of "splitting eggs", and suggests that you do this by showing a risk-return graph for the two stocks and any portfolio that you can create from these two stocks (you can do this by constructing portfolios, by changing weights in 10% increments). Which portfolio would give Mr. Hellers the least amount of risk? Which portfolio has the highest reward-to-variability ratio? What would the optimal portfolio be? Your boss suggests you start by calculating the per annum returns and standard deviation and the correlation between the two companiesQuestion 2: Portfolio DiversificationStocks offer an expected rate of return of 10% with a standard deviation of 20%, whereas gold offers an expected return of 5% with a standard deviation of 25%.a) In light of the apparent inferiority of gold to stocks in terms of return and volatility, why would anyone want to hold gold? Illustrate it graphically. b) What would be your answer to (a) if the correlation coefficient between stocks and gold was +1? Please draw a diagram to explain.
Choose an existing company and discuss the use of derivatives as a means to manage risk and enhance returns.
Kirkland Motors expects to pay a $2 / share dividend on common stock at the end of the year. The stock currently sells for $20 per share. The required rate of return on corporation's stock is 12% [ks = .12].
Set up the fund of semi-annual payments to be compounded semi-annually to accumulate the some of $100,000 after 10 years at 8 percent annual rate (20 payments). Find out how much the semi-annual payment should be. (round to whole numbers.)
Heavy Metal Corporation is expected to generate the following free cash flows over the next 5 years:
I need to figure out the statement of retained earnings. I have earnings end of year, 12,979 revenues 25,329, net interest expense, 453 income taxes 853 other income net 137 dividends paid.
The Centennial Chemical Corporation declared that for the period ending March 31, 2008, it had earned income after taxes worth $5,330,275 on revenues of $13,144,680.
McDonnell Manufacturing is expected to pay a dividend of $1.50 per share at the end of the year. The stock sells for $34.50 per share, and its required rate of return is 11.5 percent.
One-period pricing. Recall that since stocks have really long lives, in the video we first imagined owning a stock for only one period. In this simple, yet powerful scenario, today's stock price is the PV of next year's dividend and next year's stock..
The firm has a tax rate of 30 percent, an opportunity cost of capital of 0 percent, and it expects net working capital to increase by $93,000.00 at the beginning of the project.
Computation stock price and return by Gordon growth model and The dividend is expected to grow at a constant rate of 6 percent a year
Suppose you purchased one of Great White Shark Repellant Co.'s 7 percent coupon bonds one year ago for $870. These bonds make annual payments and mature 11 years from now.
Compute earnings per share EPS under each of the three economic scenarios assuming that the firm goes through with the recapitalization
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