Beta using regression
Not what you're looking for?
Using available information from the financial statement (attached) of Company L and public market data for the S & P 500 index, Please calculate the beta of company L according to the following instructions:
Recommended discount rate for this sample exercise: 12%
Steps
1. Estimate Company L's market value each year for which data is available
by dividing free cash flow (depreciation + net earnings) by 12%
2. Calculate Company L's share price for each year by dividng L's market value by the number of shares outstanding that year
3. Calculate the percent change in share price from year to year
4. Gather S&P 500 closing index price data for the same years
5. Calculate the change in the S&P 500 index each year
6. Create a set of coordinate data where:
X = change in S&P 500 index each year, and
Y = the change in L's share price for each matching year
7. Calculate the regression line (y' = 0 + 1x) determined by the coordinate data
8. The slope of the regression line (1) is Lester's Beta
Please, let me know (step by step) how you arrived at the solution, I think I'll be able to figure out similar solutions on my own. Any help provided is greatly appreciated! Thank you.
Purchase this Solution
Solution Summary
The solution explains how to calculate the beta of a company using regression analysis
Purchase this Solution
Free BrainMass Quizzes
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Learning Lean
This quiz will help you understand the basic concepts of Lean.