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Fin 534 Homework Set 3

FIN 534 – Financial ManagementHomework Set #3: Chapters 6, 7, & 8Due Week 6 and worth 100 pointsDirections: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculationis needed, or both. Submit your assignment using the assignment link above.A. Using the two stocks you selected from Homework #1, identify the Beta for each stock. In your own words, what conclusion can you draw from the stocks’ current and historical beta? If the stock market went up 10% today, what would be the impact on each of your stocks?The two stocks I selected in Assignment 1 were Adobe Systems Inc.,(ADBE) and Alaska Air Group, Inc. (ALK) The beta for ADBE is currently 1.03 and the beta for ALK is currently 0.69. From the beta, which tell me the volatility of the stock in relation to the market, I learn that ALK stock is a lot less volatile

Cawonnas Benson-Oliver Week 6. FIN 534 Homework Set # 3 Friday, August 07, 2015 FIN-534 // Dr. Y Week 6 Assignment 3 Homework Data as given in the problem are shown below: Goodman Industries Landry Incorporated Market Index Year Stock Price Dividend Stock Price Dividend Includes Divs. 2013 25.88 1.73 73.13 4.5 17495.97 2012 22.13 1.59 78.45 4.35 13178.55 2011 24.75 1.5 73.13 4.13 13019.97 2010 16.13 1.43 85.88 3.75 9651.05 2009 17.06 1.35 90 3.38 8403.42 2008 11.44 1.28 83.63 3 7058.96 We now calculate the rates of return for the two companies and the index: Goodman Landry Index 2013 24.76%-1.05% 32.76% 2012-4.16% 13.22% 1.22% 2011 62.74%-10.04% 34.91% 2010 2.93%-0.41% 14.85% 2009 60.93% 11.66% 19.05% Average 29.4% 2.7% 20.6% Standard deviaTon of returns: Goodman Landry Index 31.4% 9.7% 13.8% On a stand-alone basis, it would appear that Goodman is the most risky, Landry the least risky. Growth Rate D0 D1 D2 D3 5% $1.50 $1.58 $1.65 $1.74 R-F-R M-R-P Required Return on Market 6.04% 5.00% 11.04% Growth Rate D1 D2 D3 13.00% $1.58 $1.65 $1.74 Discounted Dividends P. Value $1.40 $1.29 $1.21 $3.90 A±er 3 years you should sell the stock at $27.05. 1. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average returns over the ²ve-year period.