FINANCE ASSIGNMENT

Finance Assignment

Finance Assignment

Task - 1

Current Assets

15000000

Fixed Assets

65000000

Total Assets

80000000

Current Liabilities

10000000

Long Term Debt

50000000

Total Liabilities

60000000

Stockholder's Equity

20000000

Total liabilities and Equity

80000000

Market price of stock

28.5

No. of shares outstanding

1000000

PE

Dividend/share

0.75

Stock's beta

0.96

Risk free rate

4.50%

Market return

10%

Net Asset Value (B)

20000000

CAPM (required rate of return)

0.0978

Market Value per Share

$ 28.5

Earnings per Share (EPS)

1.425

Price Earning

20

Net Income

1425000

ROE

0.07125

Intrinsic Value of Stock

Future Value

2.7873

$ 39.12

ROI

0.07125

The intrinsic value of the stock is calculated by future value divided by ROI. Intrinsic value of the stock is $ 39.12 on the basis of required return of 9.78% and return on equity of 7.125%.

Task - 2: Correlation between Stock A and Stock B

Stock A

Stock B

Market

Beta

1.07

0.75

1

Yield

12.05%

9.85%

11.35%

Std. Dev

15.64%

12.63%

14.11%

Correlation Between Stocks

0.99999041

Both the stocks are highly positively correlated on the basis of their Beta(s), Dividend Yield and Standard Deviation. The correlation value of 0.9999 indicates that both stocks move in same direction in the industry. International financial markets are particularly dynamic development in the past two decades in response to significant changes in the global economy and economic policy. An increase in international trade, the emergence of transnational corporations and banks, liberalization and deregulation wave of national markets in developed countries, the global economic integration has increased the intensity of the mass movement of capital. What is happening interweaving of national and international assets leads to the formation of a single universal capital market that is available to anyone regardless of their state and national origin. All of these events and factors associated with increased interest in the choice of methodology of quantitative assessment of financial risks. One of these methodologies to assess market risks, developing in parallel with the growth and development of financial markets, has become the methodology of Value-at-Risk.

Portfolio income is focused on obtaining high current income - interest and dividend payments. There are also several types of portfolios:

Portfolio of regular income - is formed of highly Securities and brings ...