Financial Analyst Question 1

Day1234
Advances1023124524602509
Declines233420041178980
Volume Advancing(m)214349225066666012679332
Volume Declining(m)616678555010198058172311
Yield on Top Rated bond6.80%6.70%6.70%6.60%
Yield on Intermediate-grade bond7.40%7.40%7.50%7.60%

What is the trin ratio for day 1?(sample answer: 1.35)

What is the trin ratio for day 4? (sample answer: 1.35)

Does the change in the trin ratio from day 1 to day 4 show a bullish or bearish trend? (sample answer: bullish or bearish)

Question 2

As a financial analyst at Wells Fargo, you are analyzing how the change in yield impacts the bond price. A bond has a duration of 11 years, a yield of 10%, a convexity of 140, and a market price of $1,000. Suppose the market yield increases by 60 basis points.
What is the percentage change in the bond’s price by the duration only formula?  (sample answer: 2.25% or -2.25%)
What is the bond price after the yield change predicted by the duration only formula?   (sample answer: $1050.65)
What is the percentage change in the bond’s price predicted by the duration with convexity formula?   (sample answer: 2.25% or -2.25%) APA
What is the bond price after the yield change predicted by the duration with convexity formula?  (sample answer: $1050.65) 

Financial Analyst

Question 3

You have collected the following cash flow data of Herman Miller Office Furniture for the year ended December 31, 2019

Sale of a used Bus45450
Cash dividend90000
Purchase of land28280
Interest payment on debt26260
Cash Payment on Salary90900
Purchase of a New Drilling machine76760
Purchase of New Wood working machine60000
Repurchase of stock75000
Cash payments to Vendor161600
Cash collections from customers393900
Cash at the beginning of the year400000

Please answer the following questions:
a .   What is the net cash provided by or used in operating activities?(sample answer: -$135,000 or $135,000)
b .   What is the net cash provided by or used in investing activities?  (sample answer: -$135,000 or $135,000)
c .   What is the net cash provided by or used in financing activities?  (sample answer: -$135,000 or $135,000)
d .   What is the cash at the end of the year?  (sample answer: -$135,000 or $135,000)

 

Question 4

You are a financial analyst at Bank of America and you have collected following information for Lotus Tech Company. The company has beta of 1.5 and a ROE of 20%. The dividend payout ratio is 50%. Last twelve month earnings were $4 per share. The annual dividend was just paid. The consensus estimate of the coming year’s market return is 11%, and T-bills currently offer a 8% return.

(keep two decimal places please.)
a.   What is the required rate of return of the stock? (input format: 15.32%)
b.   What is the growth rate of the stock? (input format: 15.32%)
c.   What is the intrinsic value of the stock? (input format: $15.32)
d.   What is PVGO of the stock? (input format: $15.32)
e.   Suppose your research convinces you that company will announce momentarily that it will immediately change its dividend payout ratio to 75%. Find the intrinsic value of the stock. (input format: $15.32)

 

QUESTION 5

Suppose you are an analyst in pharmaceutical industry for Bank of America. You collect the following data to estimate the expected growth rate of dividends and use it as an input for valuing an oil company’s common stock.

Return on Assets10%
Profit Margin8%
Debt/Equity3
Payout Ratio50%
  1. The leverage ratio of this company is (sample answer: 3.50)
    b.  The company’s expected growth rate is (sample answer: 25.60%)

QUESTION 6

The following table lists the Income statement and Balance sheet for First American Furniture Company

Income Statement20202021
Revenue516630
Depreciation3035
Other operating costs400480
Income before taxes86115
Taxes3044
Net income5671
Dividends2026
Earnings per share0.560.71
Dividend per share0.20.26
Common shares outstanding (millions)100100

 

Balance Sheet   20202021
Current assets350420
Net property, plant, and equipment500520
Total assets850940
Current liabilities130150
Long-term debt5080
Total liabilities180230
Shareholders’ equity670710
Total liabilities and equity850940
Capital expenditures4550
Net Working Capital220270

You are a financial analyst at RBC. Using the data above, you want to determine the value of First American Bank’s stock using the Free Cash Flow to Equity (FCFE) model. You believe that the company’s FCFE will grow at 40% for three years and 10% thereafter. Capital expenditures, depreciation, working capital, and net debt are all expected to increase proportionately with FCFE. The required rate of return on equity is 16%.

  1. Calculate the amount of FCFE per share for the year 2021.(sample answer: $5.15)
    b. Calculate Projected 2024 terminal value per share based on constant growth of 10% (sample answer: $25.15)
    c. Calculate the current value of a share of the stock based on the two-stage FCFE model. (sample answer: $25.15)

 

 

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