Options Pricing Theory (Black & Scholes, 1973, Myers, 1977) • Agency Theory (Jensen, Meckling, 1976) • Efficient Markets II (Fama, 1991) • Behavioural Finance (Kahneman & Tversky, 1979, Shiller, 1981, 2000) Portfolio Selection • Investors are rationals and risk averse • Diversification lowers specific risk • Any portfolio is a combination of the market portfolio and the riskless asset The CAPM Capital Asset Pricing Model • Systematic risk of an asset is measured by its beta coefficient • The model calibrates
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P. James, Contemporary Finance Digest, Vol. 1, Number 1, Autumn, 1997). “With the respect to the oldest and most established model, the capital asset pricing model (CAPM), the academic consensus, to the extent that there is one, is that it does not work. Furthermore, there is no widely accepted alternative that does. (Cornell, p. 7) The Department’s capitalization rate model uses comparables, and: 1.) It provides development of “pure plays*”. 2.) It uses comparables to reduce measurement error, however
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two major topics on the central debate of asset pricing theory: the returns to value and momentum strategies and also, the comparison of volatility models. Our analysis is divided in two parts: in the first, we provide a monthly view on 115 stocks from the S&P 500 index for the past twenty four years and the respective return premia resulting from value and momentum strategies. In the latter part, the main goal is to test different volatility models by analyzing historical data from Microsoft stocks
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o Normal distribution o Portfolio o Diversification o Coefficient of variation (CV) o Covariance o Diversifiable and nondiversifiable risk o Market portfolio o Market risk o Beta (β) o Capital asset pricing model (CAPM) o Security market line (SML) • Ch. 8 o Coupon payments o Face value or par value o Coupon rate o Opportunity cost o Par value bonds o Discount bonds o Premium bonds o Yield to maturity
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the book value instead of market values for the weights of debt and equity. When calculating the long term debt, Joanna should have discounted the debt that appears on the balance sheet. When calculating the risk free rate in her capital asset pricing model, Joanna used the 20 year U.S. treasury yield of 5.74% and a geometric mean of 5.90%. We chose to use the one-year U.S. treasury yield 3.59% and the arithmetic mean of 7.50%. As discussed in class, you should always try to use the current yield
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opportunity. * Choose ONE (1) theory/model from each of the FOUR (4) concepts that you want to apply to the case study. In your answers you should: * Provide a list of specific management issues drawn from the scenario (5 marks). * Provide discussion on the impact of these issues to the broader organisational opportunity (5 marks). * Identify four key areas of focus and outline a theory from each area (4x2.5 = 10 marks). * Use these theories/models/concepts to provide strategies to
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whether the stock is overvalued or undervalued. II. Alternative Solutions • Dividend Growth Model (DGM) see appendix for calculations • Capital Asset Pricing Model (CAPM) see appendix for calculations • Weighted Average Cost of Capital (WACC) see appendix for calculations III. Analysis of the Alternatives • Dividend Growth Model (DGM) The Dividend growth model is a simple and easy to understand model used to estimate a company’s cost of capital. The method works because RE the return that the
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customer. Course: ISM 13 Module 3 Pricing Authors: Blume, Anna 900711 Collu, Giulia 850511 Tutor & Examiner: Hand in date: 1 Caesar, Peter 15-01-15 Primozone Abstract This paper is aimed at providing a comparison of the total cost of owner ship (TCO) of two comparable products through the tool of a lifecycle cost analysis (LCCA). The compared products are ozone generators from Primozone and Ozonia. Firstly the importance of pricing is presented followed by the discussion
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promotion - personal selling Introduction Personal selling can be defined as follows: Personal selling is oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale" Personal selling is one of the oldest forms of promotion. It involves the use of a sales force to support a push strategy (encouraging intermediaries
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this is not a forward looking estimation and using the materials provided a better estimation of cost of debt can be made by calculating the yield-to-maturity on Nike’s outstanding bonds. To calculate cost of equity Cohen uses the Capital Asset Pricing Model (CAPM), however incorrectly inputs an average beta instead of the most current beta. The most current beta should be used because it is most representative of the future beta of Nike. The other inputs used in
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