Financial management assignment (mba) | Business & Finance homework help

Select three publicly traded, dividend paying companies, each representing different industry. I would suggest choosing large, known firms, as it will be easier to obtain all necessary data. Also ensure that each firm you select has five years of financial statements data and at least a year of daily stock prices data available. You can obtain this data via most of the financial news websites (,, – to name just a few). Collect balance sheet and income statement data for years 2008-2012 and daily stock prices for 2012.

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Part One

A. Complete ratio analysis for each firm and prepare a single table showing all ratios [TABLE 1a]. (take a look for the outlay/format of ratios we did for Kellogg {I will provide you with this example}). In [TABLE 1b] show abbreviated balance sheet and income statement information for each of the 3 companies.

B. Prepare Summary Statistics [TABLE 2] for all companies’ returns (based on one year of daily returns for 2012). Report the following: average daily returns (arithmetic and geometric means); standard deviation of returns.


Part Two

A. Using historical multiples (PE and MB ratios) estimate the stock prices for each firm.

B. Using S&P500 returns and T-bill rates (both will be provided) estimate betas for three stocks.

C. Using betas from the previous section, estimate expected returns for these stocks using CAPM.

D. Using CDG model estimate the stock prices.  

E. Report results from A-D in [TABLE 3].


Part Three

A. Construct an equally weighted portfolio of selected companies. Prepare a [TABLE 4] showing the arithmetic mean return, geometric mean return, and standard deviation of returns, expected return and beta for the portfolio.

B. Re-weight your portfolio in a way to minimize standard deviation of a portfolio. Do re-weighting assuming no short sales are allowed and no leverage is used (i.e., all individual weights have to be between 0% to 100%; all five weights should add to 100%). This can be done with a Solver in Excel. Report the same statistics as in section A above in [TABLE 5].


Part Four

In the written report address the following questions:

       Results of the ratio analysis: based on the ratios alone which company(-ies) were good or poor picks and why;

       How accurate your stock price estimation using ratios, CDG model are? Why do you think forecasts were inaccurate (or quite precise instead)?

       For the portfolio: how risk and expected return of a portfolio compare to the same parameters of individual securities? Does diversification work even in combining into a portfolio as few as 3 stocks only? Why?

Sample analysis will be provided 




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