Chapter 10, Problem 6
Using the data in the following table, calculate the return for investing in Boeing stock (BA) from January 2, 2008, to January 2, 2009, and also from January 3, 2011, to January 3, 2012, assuming all dividends are reinvested in the stock immediately.
Historical Stock and Dividend Data for Boeing
Date
Price
Dividend
Date
Price
Dividend
1/2/2008
86.62
1/3/2011
66.40
2/6/2008
79.91
0.40
2/9/2011
72.63
0.42
5/7/2008
84.55
0.40
5/11/2011
79.08
0.42
8/6/2008
65.40
0.40
8/10/2011
57.41
0.42
11/5/2008
49.55
0.40
11/8/2011
66.65
0.42
1/2/2009
45.25
1/3/2012
74.22
Chapter 11, Problem 5
Using the data in the following table, estimate
The average return and volatility for each stock
The covariance between the stocks
The correlation between these two stocks.
2007 2008 2009 2010 2011 2012 Stock A
-10% 20% 5% -5% 2% 9% Stock B
21% 7% 30% -3% -8% 25%
Chapter 10, Problem 6
Using the data in the following table, calculate the return for investing in Boeing stock (BA) from January 2, 2008, to January 2, 2009, and also from January 3, 2011, to January 3, 2012, assuming all dividends are reinvested in the stock immediately.
| Historical Stock and Dividend Data for Boeing | |||||
| Date | Price | Dividend | Date | Price | Dividend |
| 1/2/2008 | 86.62 | 1/3/2011 | 66.40 | ||
| 2/6/2008 | 79.91 | 0.40 | 2/9/2011 | 72.63 | 0.42 |
| 5/7/2008 | 84.55 | 0.40 | 5/11/2011 | 79.08 | 0.42 |
| 8/6/2008 | 65.40 | 0.40 | 8/10/2011 | 57.41 | 0.42 |
| 11/5/2008 | 49.55 | 0.40 | 11/8/2011 | 66.65 | 0.42 |
| 1/2/2009 | 45.25 | 1/3/2012 | 74.22 | ||
Chapter 11, Problem 5
Using the data in the following table, estimate
The average return and volatility for each stock
The covariance between the stocks
The correlation between these two stocks.
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Stock A | -10% | 20% | 5% | -5% | 2% | 9% |
| Stock B | 21% | 7% | 30% | -3% | -8% | 25% |
Related questions
Using the data in the followingâ table below calculate the return for investing in Boeing stockâ (BA) from Januaryâ 2, 2008, to Januaryâ 2, 2009, and also from Januaryâ 3, 2011, to Januaryâ 3, 2012, assuming all dividends are reinvested in the stock immediately.
a) Return from Januaryâ 2, 2008, to Januaryâ 2, 2009 is â%. (Round to two decimalâ places.)
b) Januaryâ 3, 2011, to Januaryâ 3, 2012, is ------% (Round to two decimalâ places.)
| Historical Stock and Dividend Data for Boeing | ||||||
| Date | Price | Dividend | Date | Price | Dividend | |
| 1/2/2008 | 86.62 | 1/3/2011 | 66.4 | |||
| 2/6/2008 | 79.91 | 0.4 | 2/9/2011 | 72.63 | 0.42 | |
| 5/7/2008 | 84.55 | 0.4 | 5/11/2011 | 79.08 | 0.42 | |
| 8/6/2008 | 65.4 | 0.4 | 8/10/2011 | 57.41 | 0.42 | |
| 11/5/2008 | 49.55 | 0.4 | 11/8/2011 | 66.65 | 0.42 | |
| 1/2/2009 | 45.25 | 1/3/2012 | 74.22 | |||
Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,300 per year for 15 years. The cost of purchasing this investment is $9,200. You have an alternative investment opportunity, of equal risk, that will yield 9% per year. What is the NPV that makes you indifferent between the two options?
___________________________________________________________________
10. The Claustrophobic Solution, Inc., a residential window and door manufacturer, has the following historical record of earnings per share (EPS) from 2011 to 2007:
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| EPS | $1.10 | $1.05 | $1.00 | $0.95 | $0.90 |
The companyâs payout ratio has been 60% over the last five years and the last quoted price of the firmâs share of stock was $12. Flotation costs for new equity will be 6%. The company has 32,000,000 of common shares of stock outstanding and a debt-equity ratio of 0.5.
If dividends are expected to grow at the same arithmetic average growth rate of the last five years, what is the dividend payment in 2012?
_________________________________________________________________________-
11. The following are the company sales from 2000-2009
| Year | Xylophone |
| 1 | $230 |
| 2 | $573 |
| 3 | $994 |
| 4 | $1,683 |
| 5 | $3,192 |
| 6 | $6,140 |
| 7 | $10,624 |
| 8 | $16,549 |
| 9 | $21,975 |
Fit an exponential trend curve to the data and
Calculate the projected sales in 2010,
2011,
2012.
________________________________________________________________________________________
12. THE FINAL PROBLEM IS A CALCULATION PROBLEM with multiple parts
Frozen Turkeys Scenario
Cost of Land $ 210,000
Cost of Buildings & Equipment $ 325,000
MACRS Class 20
Life of Project (Years) 5
Terminal Value of Land $ 315,000
Terminal Value of Buildings & Equipment $ 170,000
First year sales (pounds) 250,000
Price per Pound $3.40
Unit Sales Growth Rate 7.5%
Variable Costs as % of Sales 65%
Fixed Costs 72,000
Tax Rate 33%
WACC 10.5%
a. Prepare a statement of annual cash flows for years 0 through 5. Cash flows in year 0 are your expenses for building and land.
Sales growth is based on the annual growth rate in units.
Assume no changes in fixed or variable costs.
Depreciate the project cost for 5 years, with the cash flow in year 5 to include the terminal cash flow of ending the investment.
b. Calculate the NPV,
c. profitability index,
d. IRR,
e. MIRR,
f. payback and
g. discounted payback of the cash flows
h Using scenario manager find best case, worst case, base case of NPV based on sales in pounds, price per pound, and variable cost percent. Make sure to include scenario summary.
