Knowledge check what are the possible weaknesses of this peer approach to valuation?

Business

1 answer:

kolbaska11 [484]3 years ago

7 0

Answer:

The growth which is estimated is wrong.

Explanation:

The Prospective price to earning ratio P/E multiples are calculated using future earnings. In that way, they can be dramatically wrong. Relative valuation is quick and easy. It compares industry peer.

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A hedge fund returns on average 26% per year with a standard deviation of 12%. Using the empirical rule, approximate the probabi

Irina-Kira [14]

Answer: 0.125

Explanation:

The information given in the question can be depicted below as:

z(50%) = (50% - 26%) / 12% = 2

z (50/100) = (50/100 - 26/100)/12/100 = 2

z(0.5) = (0.5 - 0.26) / 0.12 = 2

z(0.5) = (0.24)/0.12 = 2

P(p > 0.5) = P(z > 2)

Based on the analysis done, we can note that 75% of the data will be found in 2 std of mean and this will bring about (25%/2) = 12.5% in each tail and we will then use Chebyshev's emperical rule which will give:

= (1.00 - 0.75)/2

= 0.25 / 2

= 0.125

7 0

3 years ago

If a well-diversified portfolio of stocks has an expected return of 15% when the expected return on the market portfolio is 10%,

goblinko [34]

Answer:

Explanation:

According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)

Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors

Market beta is represented by 1. If a portfolio has a beta that is higher than 1, it means that it is more risky than the market portfolio and investors would demand a higher return than the market portfolio

7 0

3 years ago

Toxemia Salsa Corporation manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The

Rudiy27

Answer:

We should discontinue Wimpy and we will be saving $2,000 as addition to the Net Margin.

Fixed Expenses will be incurred whether we produce or not, thus the deciding factor is a segment being able to generate a positive Contribution Margin.

By discontinuing Wimpy the allocated Fixed Expense will go up to $12,500 Per active unit from $10,000. Although Wimpy will yet retain its Fixed Expense.

Explanation:

Toxemia Salsa Corporation

<u>Segment Review</u>

Wimpy

Contribution Margin = -$2,000

Less Fixed Expense = -$14,000

Segment Margin = -$16,000