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Regression Analysis on Real Estate Company Case Study

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An agent for a residential real estate company in a large city has the business objective of developing more accurate estimates of the monthly rental cost for apartments. Toward that goal, the agent would like to use the size of an apartment, as defined by square footage to predict the monthly rental cost. The agent selects a sample of 25 apartments in a particular residential neighborhood and collects the following data (stored in Rent):
a. Construct a scatter plot.
b. Use the least-squares method to determine the regression coefficients b0 and b1.
c. Interpret the meaning of b0 and b1 in this problem.
d. Predict the monthly rent for an apartment that has 1,000 square feet.
e. Why would it not be appropriate to use the model to predict the monthly rent for apartments that have 500 square feet?
f. Your friends Jim and Jennifer are considering signing a lease for an apartment in this residential neighborhood. They are trying to decide between two apartments, one with 1,000 square feet for a monthly rent of $2,275 and the other with 1,200 square feet for a monthly rent of $2,425. Based on (a) through (d), which apartment do you think is a better deal?

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The solution provides step by step method for the calculation of regression analysis. Formula for the calculation and Interpretations of the results are also included.

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Financial Case Study

For the following assignment, I am tasked to analyze the company, Genworth Fin
ancial. I would like some assistance with understanding key elements of the assignment so that I can successfully write this lengthy paper. I have provided the website of the company which includes key financial data.

http://investor.genworth.com/phoenix.zhtml?c=175970&p=irol-reportsAnnual

Please be as detailed as possible.

Here is the assignment:

Using the publicly traded company (Genworth Financial) identified and approved during Week One, submit one report with three 1,050-1,400-word sections regarding that company's long-term financing policies and capital structure (section 1), risk management policies (section 2), and an acquisition analysis for that same company (section 3). Please note the last requirement of the acquisition analysis and its association with the risk portion of the report.

Section 1: Report on the company's long-term financing policy & capital structure.

a. Identify the firm's most recent long-term financing decision (e.g., debt, IPO, seasoned equity offering, secondary offering). Analyze the economic, business, and competitive background in which the financing occurred, and identify cost and risk trade-offs.

b. Identify your firm's book value, market value, and levered value according to the M&M model. For a 20 percent increase in assets, perform a quantitative analysis and recommend the optimal capital structure mix for your company. Your analysis should include an estimation of that company's cost of capital, price per share, and market value of the firm.

c. Discuss what changes you think would occur to your finance policy and capital structure if your firm was forced to consider re-organization and bankruptcy strategies.

d. Assume that your firm will be investing in the global market. What international investment and financing opportunities would you consider - and why? Also, discuss foreign exchange risk and give an example that analyzes how foreign exchange rates could cause a loss to the firm.

Section 2: Use the following list of risk management tools and describe the circumstances under which they would be applied to the risk categories of corporate (including risk associated with acquisition analysis and capital budgeting), economic, foreign currency, political, and other relevant global business risks.

e. Black-Scholes options pricing model

f. Simulation analysis

g. Hedging

h. Feel free to add other tools that you find that are relevant to your chosen company.

Section 3: This will be a report to the board of directors that identifies a synergistic acquisition candidate for your company.

i. This report should clearly identify the following:

1) Your proposed acquisition terms

2) Price

3) Financing

4) Potential negotiation strategies

j. Supporting financial data should include the following:

1) Price/earnings ratios

2) Book value

3) Current market value

4) Liquidation

5) Diluted price per share

6) Capital Budgeting tools learned from FIN 544 (NPV, IRR, Profitablility index, payback - optional: Discounted Payback and Modified Internal Rate of Return)

k. Discuss the general risks inherent in an acquisition strategy.

l. Discuss the specific risks that should be included in the quantitative analysis. For example, what risk factors should be included in the discount rate (sometimes known as the hurdle rate, or required rate of return).

Note: Use MS Excel® spreadsheets as support showing your computations where applicable.

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