EXERCISE 10 Final Exam

Updated 13 Nov2016

To START:Open sample10.xls. Save it to a locally with a name of your choice. Note that there are multiple sheet tabs at the bottom of the worksheet. Clicking on these tabs takes you to subsidiary worksheets where you will do most of your work. The output cells in the subsidiary worksheets are automatically read onto the MAIN sheet. Do not modify the MAIN sheet in any way other than pasting a chart (as in step 4 below) and putting your name in A1.I encourage you to use forum10 for questions regarding this final.

1) Ratio Analysis: Open In the Yahoo Search box, find AAPL. Go to Financials. Find most recentincome statement and balance sheet dated 26 Sept 2016, and current market data(as of 14Nov 2016 or later). Save copies of those web pages as local files (your files).

Click on the "RATIO" tab at the bottom of your spreadsheet. Fill in cells B3 thru B10 with data from Yahoo. Create formulas in cells B13 thru B18 to yield the appropriate output. Use space at right of inputs and outputs to do any intermediate steps. Outputs that you calculate in the RATIO sheet will automatically be read into the MAIN sheet. Hint: Refer to exer1.doc and sample1.xls for review of ratio concepts.

2) Capital Budgeting: Given a cash flow and a discount rate, calculate NPV and IRR*. Use the "CAP BUD" worksheet to do the calculations for NPV and IRR*. Use the same discount rate for all years. That is, DO NOT increase the discount rate as with the “ascending discount rate” model. Use cells B4 and B5 (in CAP BUD tab) for your answers. And similar to step 1, cells in the MAIN tab have already been set to equal CAP BUD!B4 and B5.

3) Portfolio Management: Tab PORT includes some price per share data. For this exercise we will only use a few days worth of data. Calculate the market values for the three firms (pps X no of shares) to fill in tier 2. Calculate the market value of the portfolio by adding the market values of the three firms. Calculate the daily returns of the portfolio, the three firms, and the market (^GSPC) using the logic (day2-day1)/day1. Calculate the standard deviation (=STDEVP) of the daily returns for the portfolio, for the firms and for the market. Calculate the TOTAL return (from 30Jun06 to 10Jul06) for the portfolio, the firms, and the market.

4) Hyperbola: Continue working in the PORT tab to create a hyperbola using Clorox (CLX) and Nestlés (NSRGY.PK)stock. Their data can be found in columns M through V and rows 3 through 762. The data is laid out in the three tiers, similar to the previous problem 3 (above).

Note: Tiers 2 & 3 were pasted “values only”. You’ll need to replace the values with formulas in order to see updated values in the “portfolio” column.

Also note: The stock prices in col.O and col.P (for CLX and NSRGY.PK) were copied to Col.R and Col.S, and again to Col.U and Col.V, thus making three different portfolios. While all three portfolios have only two firms, the dollar weights of the firms within the portfolios will be different.

First, calculate the "normalized no of shares" (NNOS) for CLX and NSRGY.PK that would yield $10,000 worth of stock for each firm (=10000/Avg pps). There is a scratch box (G thru L in PORT tab) for you to work in. Then replace O3 & P3 with NNOS for CLX and ZERO shares for NSRGY.

In I6 & I7 write the formula to calculate the “STDEVP” of the daily returns (tier3) and “total K” of tier2 [(last day-first day) divided by first day] for this first portfolio.

Next, go to cell R3 & S3 and change the no of shares of CLX to one half of its NNOS and change the no of shares of NSRGY to one half of its NNOS. Put the “std devp” and “total K” for this second portfolio in J6 & J7.

Last, go to U3 and zero out the number of shares of CLX and put the NNOS for NSRGY.PK in V3. Put the resulting stddevp and total K in K6 &K7

“Insert" a "scatter" plot (X-axis =std dev, Y-axis =total K, with smooth lines) representing the hyperbola plotted from a set of portfolios going from 100% CLX to 100% NSRGY.PK (with a 50/50 mix about half way between.) Save the chart somewhere in tab PORT. Also, try to copy the chart into the MAIN tab in the upper right corner within rows 1-12 and columns G through N. Do not change the formatting of the MAIN sheet in exer10.xls – that will mess up my viewing of your other data.

5) Betas: Continue working in PORT tab, but return to the left side to calculate the betas for the portfolio, the three firms (YHOO, GE, MMM) and the market. A space for the answers is on the lower left and is linked to the MAIN tab. There is no chart required in this step.

6) Valuations: Open the VALUATION tab and make the calculations for 1) expected stock price; 2) Bond valuation; 3) Continuous Compounding; 4) Payments on a loan; and 5) the first few periods of a loan amortization schedule (do only three periods for this exam). Use the "inputs" as the "givens" for all your calculations.

7) Black-Scholes Option Pricing Model: Open the BSOPM tab. Use the inputs as shown. Create (or copy from previous exercises) the formulas to yield the intermediate variables and the final price of the call option. Your answers from tab BSOPM should copy into the MAIN tab automatically.

8) International Currency: 1) Open the tab CURRENCY to find the beginning of a cross rate table based on once-current data. Complete the table. Hint: The cells in the first row will be the reciprocals of the cells in the first column. 2) Calculate the forward premiums (or discounts) related to the UK pound on this out-of-date data.

9) Processing your final exam: Put your cursor on cell A1 on the main sheet prior to your final save. Save a copy of your final exam spreadsheet to one of your local folders and send a copy of the file via Moodle “assignments” as you have done in the previous exercises. Deadline for submitting is Friday, 18 Nov 2016 at midnight.

Reserve any ancillary comments about the course for the student course evaluations which are administered separately rather than putting them in your spreadsheet.

10) Final Note: Throughout this term you have received feedback on your exercises in order to point you in a direction in which you could understand where your errors lay. You may benefit from reviewing that feedback. On this final exam, however, you will be graded on the percentage of correct answers relative to the total evaluated cells and there will be no detailed feedback, both in the interest of time, and also in recognition that the learning portion of this course has passed. Once the dust has settled [i.e. the exams are graded and course grades calculated], if you feel a need to review the details of the evaluation of your work, I would be pleased to respond to questions that you may have.

Thank you for the opportunity to serve you. I wish you the best of luck on the final exam and best of good fortune in your future.

~Ned