The CFO has requested from you, a risk assessment of Strident Marks. Think about the risks inherent in Strident Marks and how to quantify these risks. Calculate the measure of risk for this company (defined as Beta in the Capital Asset Pricing Model - CAPM) and explain why this calculation is a measure of risk. Discuss when this type of calculation is appropriate, and when the coefficient of variation is an appropriate measure of risk. Your work must analyze the specific calculations completed in the task.© BrainMass Inc. brainmass.com October 16, 2018, 7:35 pm ad1c9bdddf
RISK AND BETA
Risk is the uncertainty that you may not earn your expected return on your investments. For example, you may expect to earn 20% on your stock mutual fund every year. But your actual rate of return may be much lower.
For example, the S&P 500 index averaged yearly gains of about 20% for the five years that ended in 1999. In 2000, however, the index declined more than 9%. Bonds, meanwhile, performed better than stocks for the first since 1994.
Explanation of beta
Beta measures a stock's volatility, the degree to which its price fluctuates in relation to the overall market. In other words, it gives a sense of the stock's market risk compared to the greater market. The Beta factor measures how volatile a stock is when compared with an index. The higher the beta, the more volatile the stock is. (A negative beta means that the stock moves inversely to the market so when the index rises the stock goes down and vice versa).
Stock portfolios are measured for risk using Beta. Stocks customarily will move up and down with indexes such as the NYSE, NASDAC and the S & P 500. Stocks can be just as risky as market averages. The measure of stocks, the beta, is used to predict the measure of risk in the market. A Beta of 1.0 or higher indicates the stock would have more risk than the market average. If the Beta score is under 1.0 then would be less risk than the market average.
A beta of 1 indicates that the security's price tends to move with the market. A beta greater than 1 indicates that the security's price tends to be more volatile than the market, ...
The solution analyzes and computes a risk assessment of Strident Marks. The measure of risk for this company is calculated and explained.
Risk assessment analysis
You are a financial analyst in the finance division of Strident Marks, a manufacturing company that has recently gone through the initial public offering (IPO) process and has become a public company. Strident Marks has annual sales revenue of approximately $50 million and makes seven unique and distinct products (which serve seven different markets). Each product is represented by its own division within the company and has its own group of sales, marketing, and manufacturing personnel. Some departments, including human resources and the finance division, support the entire organization. Operations consist of a single headquarters and production (manufacturing) center.
In your role as financial analyst you are responsible for compiling and reporting on budget / forecast data, for assisting your investor relations department, and for assessing and valuing new business opportunities (which will ultimately be presented to upper management). You report directly to the Chief Financial Officer (CFO) and have the use of the accounting department's staff accountants to assist you with your budget / forecast responsibilities.
You have been informed by the CFO that Strident Marks will be aggressively pursuing new business opportunities, which may include expansion through acquisition and the development and implementation of new products. As a publicly traded company, Strident Marks is scrutinized by bankers and investors as never before. In fulfilling your responsibilities you must keep this in mind, and you must instill a new sense of financial discipline in the organization.
P3.T1.) Deliverable Length: 1 page, including spreadsheet (excel), Times New Roman, font size 12 / I need enough info to write a page and I need to know how to work the problem
The CFO has requested from you, a risk assessment of Strident Marks. Think about the risks inherent in Strident Marks and how to quantify these risks. Download the data provided FIN310 p3 ips1 and calculate the measure of risk for this company (defined as Beta in the Capital Asset Pricing Model - CAPM) and explain why this calculation is a measure of risk. Discuss when this type of calculation is appropriate, and when the coefficient of variation is an appropriate measure of risk.
The following website might be helpful: Revisiting the Capital Asset Pricing Model http://www.stanford.edu/~wfsharpe/art/djam/djam.htm
P3.T2 Deliverable Length: 3 paragraphs, Times New Roman, font size 12/ I need enough info to write 3 paragraphs and I need to know how to work the problem
What does a company's cost of capital represent and how is it calculated? How do market rates and the company's perceived market risk impact its cost of capital, and how does the company's debt to equity mix impact this cost of capital? You are leading the review of these elements in a meeting with managers and accountants.
PS- I AM NOT TRYING TO GET ANYONE TO DO MY WORK! I USE BRAINMASS ALL OF THE TIME AND I ALWAYS LIST THE OTA AS A REFERENCE!!!!View Full Posting Details