1) A company's stock sells at a P/E ratio of 21 times earnings. It is expected to pay dividends of $2 per share in each of the next five years and to generate an EPS of $5 in year 5. Using the "dividends-and-earnings model" and a 12% discount rate, compute the stock's justified price.
2) A particular company currently has sales of $250 million; sales are expected to grow by 20%, next year (year 1). For the year after next (year 2), the growth rate in sales is expected to equal 10%. Over each of the next two years, the company is expected to to have a net profit margin of 8% and a payout ratio of 50% and to maintain the common stock outstanding at 15 million shares. The stock always trades at a P/E of 15 times earnings, and the investor has a required rate of return of 20%. Given this information:
a) Find the stock's intrinsic value (justified price).
b) Use the IRR approach to determine the stock's expected return, given that it is
currently trading at $15 per share.
c) Find the holding period returns for this stock for year 1 and for year 2
The solution computes stock price using DDM, calculates stock intrinsic value and also uses the IRR approach to determine the stock's expected return.
Risk Management - 9 questions
During my study on my Master Degree Risk Management course, I am facing below key questions from my Risk Management professor, can you please provide in-depth answers to below? (like around 200 words answers for each question)
1) Why banks are critical institutions especially from Risk Management perspective
2) What are the profitability landscape for banks after Lehman crisis, from Risk Management perspective
3) What are the key differences between Forwards (OTC derivatives) and Futures (Exchanged Traded Derivatives), again.... from Risk Management perspective
4) What are the key objectives of new regulations for derivatives
5) What are the Key functions in Global Market Value Chain, from Market Risk perspective
6) What are the Evolution in metrics for Market Risk?
7) What are the Risk mitigations for Counterparty Credit risk.
8) Differences between Market liquidity Risk versus Funding Liquidity Risk.
9) What are the root causes for liquidity problems in financial institutions during the financial crisis.
Thanks a lotView Full Posting Details