Gloria the Investor Gloria is a seasoned sales manager with a very large interna

Question

Gloria the Investor

Gloria is a seasoned sales manager with a very large international company. Although she has a great deal of experience with sales, she has little experience with investing. Gloria has been investing in her company’s 401K plan. However she has decided to invest some extra money on her own. Gloria has $75,000 she would like to invest.

Since she has recently signed up for internet access to a broker, she is allowed a small number of phone calls to a broker at no additional charge to her.

She calls ABC investments and talks with a Mr. Bill. She tells Mr. Bill she would like to invest in undervalued stocks and can he recommend about ten stocks for her to research. Mr. Bill tells Gloria his company has about 15 stocks they believe are undervalued and will outperform the marker over time. Mr. Bill gave her the company web site where she can down load that list of stocks.

Below is a list of those stocks

So far I have completed the following, I need assistance with the questions:

Compare the values you calculated in questions 1 & 2. Do the values closely approximate the stocks market price? If not why not?

What do your results mean for Gloria?

How does your result affect the “market efficiency” theory.

B A rating Stock Price Total 2003 5 year total dividend growth Beta CAPM = Rf+ Beta (ER(M)-Rf) Value = D0(1+g)/(r-g) Comparsion (A-B) Dividends 1 $12.05 0.95 0.0065 0.65 9.24 11.13 -2.81 2 $28.02 0 -1 2.3 21.78 0 -6.24 3 $17.75 0 - 1.89 18.664 0 0.91 4 $92.43 1.3 0.0623 1.2 13.42 19.21 -79.01 5 $63.79 0.75 0.0095 1.35 14.56 5.56 -49.23 6 71.11 6 0.05 0.67 9.392 0.67 -61.72 7 $10.00 0 - 1.78 17.828 0 7.83 8 $49.51 0.68 0.0075 0.95 11.52 0.06 -37.99 9 $101.00 5 0.0038 0.92 11.292 0.44 -89.71 10 $39.78 0 -0.9 1.5 15.7 0 -24.08 11 $29.75 2 0.0225 0.85 10.76 0.19 -18.99 12 $73.09 0 -0.01 0.38 7.188 0 -65.90 13 $20.39 6 0.0525 0.71 9.696 -0.01 -10.69 14 $18.25 1 0.08 1 11.9 0.09 -6.35 15 $7.00 1.35 0.0885 0.73 9.848 0.15 2.85 Treasury Bond Rate 4.3 Return on the Bond Market 11.9

Explanation / Answer

Answer: The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization of a publicly-traded company, and is obtained by multiplying the number of its outstanding shares by the current share price. Market value is easiest to determine for exchange-traded instruments such as stocks and futures, since their market prices are widely disseminated and easily available, but is a little more challenging to ascertain for over-the-counter instruments like fixed income securities. However, the greatest difficulty in determining market value lies in estimating the value of illiquid assets like real estate and businesses, which may necessitate the use of real estate appraisers and business valuation experts respectively.

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