15 Jun Question Week 5 – Questions 1. Compare and contrast the goals
Question
Week 5 – Questions
1. Compare and contrast the goals of a public company from those of a private company.
2. Explain why it is important for a company to grow.
3. List six strategies (organic or external) for increasing growth:
4. Define and give the formula for each of the following terms:
Earnings per Share –
Stock Multiple or P/E Ratio –
Beta Coefficient –
PEG Ratio –
EBITDA Valuation Ratio –
5. Explain some of the benefits for going public.
Week 5: Stock Valuation
6. Compute the likely range for the indicated data after the IPO of this company:
Company EBITDA: $5,00,00,000
Net Earnings: $2,50,00,000
Number of Shares: 87,00,000
Low High
Total Market Value Range:
Low High
Estimated Share Price:
Earnings per Share:
Low High
Estimated P/E Ratio Range:
7. Compute the total market value, enterprise value and EV/EBITDA ratio of this company:
Market price of common stock: $38.00
Number of common shares: 85,00,000
Total market value of the company:
Total cash of the company: $1,62,50,000
Total debt of the company: $12,34,00,000
Enterprise Value of the company:
Company EBITDA: $3,82,50,000
Enterprise Value/EBITDA ratio:
Week 5: Dow-Jones Industrial Average and Other Stock Indices
All of the following information can be easily found by doing a Google search.
8. List the names of the 30 major companies (and their stock symbols) which currently comprise the Dow-Jones Industrial Average:
9. List a website which lists all of the stocks contained in the Standard & Poors 500 Index:
10. List a website which lists all of the stocks contained in the NASDAQ 100 Index:
Week 5: Capital Asset Pricing Model
11. State the Capital Asset Pricing Model formula
12. Compute the Maket Risk Premium for the following five 15 year periods of the stock market
Average Annual Returns for 15yr Period
S&P 500 Return Treasury Bills Market Risk Premium
1940-1954 13.88% 0.74%
1955-1969 10.14% 3.36%
1970-1984 8.75% 7.85%
1985-1999 18.94% 5.55%
2000-2014 4.24% 1.85%
13. Use the CAPM formula to compute the Expected Return for the following stocks, using the data from the appropriate time period shown in Problem 12 (above).
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