Use a regression to estimate Industry P/E ratios while controlling for risk, growth and payout. Do you recommend manipulating this data in any way prior to your estimation?
Not what you're looking for?
A. Use a regression to estimate Industry P/E ratios while controlling for risk, growth and payout. Choose and justify your choice of which P/E ratio you estimate.
Do you recommend manipulating this data in any way prior to your estimation?
b. Your boss, the research director, wants his analysts to concentrate on companies in the Coal Industry, which he feels is undervalued. Using your calculations, can you confirm his opinion on the Coal Industry?
c. What are the drawbacks or hesitations you have about the ability of your analysis to find undervalued industries?
d. There are a vastly different number of firms within each industry, which you have essentially ignored to this point. Should you be concerned about this? Why or why not?
** See ATTACHED file(s) for more information **
Purchase this Solution
Solution Summary
The expert uses regression to estimate industry P/E ratios while controlling for risk, growth and payout.
Solution Preview
** See ATTACHED file(s) for more information **
a. Use a regression to estimate Industry P/E ratios while controlling for risk, growth and payout. Choose and justify your choice of which P/E ratio you estimate.
Do you recommend manipulating this data in any way prior to your estimation?
I would use the current PE ratio. The growth, Payout and Beta are related to the current P/E ratio.
The trailing earnings may have had growth that is already captured in the current earnings, using this PE with the growth expected from here forward would not capture the growth that has occurred between the trialing period and the current period. Similarly, you wouldn't use a trailing price to see if the industry was overvalued, because you would only find how the industry is valued relative to its old valuation, not what it is currently worth.
The forward earnings are estimates that likely reflected the ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations