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FIN 501 Lecture Notes - Lecture 10: Dividend Yield, Divisor, Treynor Ratio

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graypug587
21 Oct 2015
School
Ryerson University
Department
Finance
Course
FIN 501
Professor
Ayse Yuce

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Document Summary

Geometric average return= (1+r1) x (1+r2) x (1+r n) . 2 +2 xa x b a bcorr (ra rb) 2 +2x a xb a bcorr(r a rb)+2x a xc a c corr(r a rc)+2x b xc b ccorr (rb rc) x a. 2 2 a b corr(r a rb) + d(2) (1+k )2 + + d(t ) (1+k)t. Discount rate=t billrate+(stock beta xstock market risk premium) Ratio x currenteps x (1+projected eps growth rate) Ratio x current sps x (1+projected sps growth rate) Current pri ce=face value x ( 360 x discount yield ) E(ri)=r f +[ e(r m) r f] x i , 1+[second factor premium] x i ,2+ +[ n factor premium] x i , n. P=r p {rf +[ e(rm) rf ] x p} Prob( rp,t e(rp) x t 2. 326x p t )=1. Prob( rp,t e(rp) x t 1. 96x p t )=2. 5. Prob( rp,t e(rp) x t 1. 645x p t )=5.

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Related Questions

Columbia Paper has the following stockholders’ equity account. The firm’s common stock has a current market price of $30 per share. Preferred stock $100,000 Common stock (10,000 shares at $2 par) 20,000 Paid-in capital in excess of par 280,000 Retained earnings 100,000 Total stockholders’ equity $500,000

a.) Show the effects on Columbia of a 5% stock dividend.

b.) Show the effects of (1) a 10% and (2) a 20% stock dividend.

c.) In light of your answers to parts a and b, discuss the effects of stock dividends on stockholders’ equity.

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Sector

Portfolio

Weighting

(2) S&P Weighting

(3) Differences in Weighting

(4) Portfolio Return

(5) S&P Return

(6) Sector Over- or Under Performance

(7) = (3) x (6) Sector AllocationContributions

Telecommunications Services

3.10%

5.90%

A. (2.80%)

2.50%

3.10%

K. (-0.60%)

U. (-1.68%)

Utilities

7.50%

3.80%

B. 3.70%

3.10%

1.90%

L. 1.20%

V. 4.44%

Information Technology

14.30%

17.90%

C. (-3.60%)

4.90%

3.20%

M. 1.70%

W. (6.12%)

Materials

6.30%

3.70%

D. 2.60%

4.80%

5.10%

N. (-0.50%)

X. (1.30%)

Financials

13.40%

17.10%

E. (-3.70%)

6.20%

4.80%

O. 1.40%

Y. (5.18%)

Consumer Discretionary

12.70%

13.50%

F. (-0.80%)

2.10%

4.00%

P. (-1.90%)

Z. 1.52%

Industrials

14.10%

11.90%

G. 2.20%

4.90%

3.10%

Q. 1.80%

AA. 3.96%

Energy

8.40%

8.00%

H. 0.40%

3.70%

8.60%

R. (-4.90%)

BB. (-1.96%)

Healthcare

15.30%

11.70%

I. 3.60%

9.80%

5.70%

S. 4.10%

CC. 14.76%

Consumer Staples

4.90%

6.50%

J. (-1.60%)

1.50%

13.20%

T. (-11.70%)

DD. 18.72%

4. Which sector made the greatest negative contributionto the portfolio’s performance? Explain why this investment madethe greatest negative contribution based on the differences inweighting and the sector over- or under- performance.

Just need the last two questions answered A and B at the bottom of the document

You’re the chief financial officer (CFO) of Worldwide
Widget Manufacturing, Inc. The company manufactures and
sells widgets at factories in the United States and internationally.
Listed below are partial financial statements for Worldwide
Widget Manufacturing, Inc. Fill in the missing information in
each of the following financial statements. Answer spaces are
given below.

Worldwide Widget Manufacturing, Inc.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)

2015 2016 2015 2016

Assets

Current Assets:

Liabilities and Equity

Current Liabilities:
Cash and markatable securities $427 $322 Accured wages and taxes $309 $257
Accounts Receivable a.? 259 Accounts payable 381 b.?
Inventory 815 797 Notes Payable $492 $421
Total $1,542 $1,378 Total $1,182 $997
Fixed Assets: Long-term debt: $1,934 c.?
Gross plant and equipment d.? $2,817 Total 3,116 2,956
Less:depreciation 368 254 Stockholder's equity:
Net plant and equipment $2,872 $2,563

Preferred stock

( 30 million shares)

 $30 $30
Other long term assets 521 487 Common stock and paid in surplus (250 million shares) 300 e.?
Retained earnings 1,489 1,142
Total FA f.? $3,050 Total Equity $1,819 $1,472
Total Assets $4,935 $4,428 Total liabilities and equity $4,935 $4,428

A. Accounts receivable for 2015_______300

B. Accounts payable for 2014_______319

C. Gross plant and equipment for 2015_______1959

D. Long-term debt for 2014_______3240

E. Common stock and paid-in surplus (250 million shares) for 2014_______300

F. Total FA for 2015_______3393

Worldwide Widget Manufacturing, Inc. Income Statement for Years Ending December 31, 2015 and 2014(in millions of dollars)

2015 2014
Net Sales g. $2018
Less: Cost of Goods Sold 753 h.?
Gross Profits $1,623 $1,189
Less: Other Operating Expense 423 167
Earnings before interest, taxes, depreciation, and amortization (EBITDA) $1,200 $1,022
Less: Depreciation 114 114
Earning before interest and taxes (EBIT) $1,086 $908

Less: Interest

 i.? 128
Earnings:before Taxes (EBT) $949 $780
Less:Taxes j.? 23
Net Income $664 $546

Less:Preferred stock dividends

 98 98
Net income available to common stock holders $566 $448
Less:Common stock dividends 219 199

Addition to retained earnings

Per common share data:

 $347 $249
Earnings per share (EPS) k.? $1.79
Dividends per share (DPS) $0.88 l. ?
Book Value per share (BVPS) m.? $5.77
Market Value per share (MVPS) $23.97 $22.47

g. Net sales for 2015_______2376
h. Less: Cost of goods sold for 2014_______829
i. Less: Interest for 2015_______137
j. Less: Taxes for 2015_______285
k. Earnings per share (EPS) for 2015_______1.88
l. Dividends per share (DPS) for 2014_______.73
m. Book value per share (BVPS) for 2015_______7.16

Worldwide Widget Manufacturing, Inc.
Statement of Cash Flows for Year Ending December 31, 2015
(in millions of dollars)​

Section A: Cash Flows from operating activities
Net Income n.?

Additions (source of cash):

Depreciation

 114
Increase in accrued wages and taxes o.?
Increase in accounts payable 62

Subtractions (use of cash):

Increase in accounts receivable

 -41
Increase in inventory p.?
Net Cash flow from operating activities q.?

Section B: Cash Flows from investing activities

subtractions:

Increase in fixed assets

-$343
Increase in other long-term assests r.?
Net Cash flow from investing activities s.?

Section C. Cash flows from financing activities

Additions:

Increase in notes payable

t.?
Increase in common and preferred stock 0

Subtractions:

Decrease in long-term debt

 -25

Pay dividends

u.?

Net Cash flow from financing activities

Section D. Net Change in cash and marketable securities

v.?

$105

n. Net income_______664
o. Increase in accrued wages and taxes_______52
p. Increase in inventory_______18
q. Net cash flow from operating activities_______833
r. Increase in other long-term assets_______34
s. Net cash flow from investing activities_______-377
t. Increase in notes payable_______71
u. Pay dividends_______317
v. Net cash flow from financing activities_______-271

Worldwide Widget Manufacturing, Inc.
Statement of Retained Earnings as of December 31, 2015
(in millions of dollars)

Balance of retained earnings, December 31,2014 $1,142
Plus: Net income for 2015 w.?
Less: Cash dividends paid 0 0
Preferred stock x.?
Common Stock 219
Total cash dividends paid 317
Balance of retained earnings, December 31,2015 $1,489

w. Plus: Net income for 2015 _______664
x. Preferred stock _______98

2. You’ll need to compare your company’s ratios with the industry’s standards.

Worldwide Widget Manufacturing, Inc.

Company Industy Comparison
Current Ratio 2.2 times
Quick Ratio 1.1 times
Cash Ratio 0.35 times
Inventory turnover 2 times or 1 time
Days' sales in inventory 135 days or 335 days
Average payment period 110 days
Sales to working capital 3 times
Total asset turnover 0.6 times
Debt-to equity 1.1 times
Profit margin 16.5%
Gross profit margin 48.13%
ROA 8.78%
ROE 19.45%
Divident payout 32%

A. Use the information found in Worldwide Widget Manufacturing’s financial statements
to calculate all of the listed financial ratios in the above table for your
company. Then, for each ratio, provide a comparison of the company’s result
with the industry standards, indicating if your company’s results are lower than,
higher than, slower than, or faster than the industry standards.
B. Calculate your company’s internal and sustainable growth rates.