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fins5568 homework answers combined.docx - DORIS 大冰版...

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FINS55682016 semester 2 homework answerDORIS大冰版
Fins5568 homework combined –Doris大冰versionContentsWeek 6 homework................................................................................................................................1Question 1.1......................................................................................................................................1Question 1.2......................................................................................................................................2Question 1.3......................................................................................................................................2Question 2.........................................................................................................................................3Week 7...................................................................................................................................................4Question2........................................................................................................................................5Question 3.........................................................................................................................................5Week 11.................................................................................................................................................7Question 1.........................................................................................................................................7Question 2.........................................................................................................................................8Week 12.................................................................................................................................................9Question 1.........................................................................................................................................9Question 2.........................................................................................................................................9Question 3.......................................................................................................................................10Week 13...............................................................................................................................................13Question 1.......................................................................................................................................13Question 2:......................................................................................................................................14Question 3.......................................................................................................................................14
Fins5568 homework combined –Doris大冰versionWeek 6 homeworkQuestion 1.1BackgroundTheCompositeLeadingIndicator(CLI)isdesignedtoprovideearlysignalsofturningpointsinbusinesscyclesshowingfluctuationoftheeconomicactivityarounditslong-termpotentiallevel.Itusuallyreachespeaksortroughsbeforecorrespondingpeaksortroughsinaggregateeconomicactivity. (about6-9months)Answer:TheeconomicgrowthwilldecreasetothebottomQuestion 1.2Business Cycle Phases: Slowdown & RecessionQuestion 1.3Answer:No ,it is not the right time to raise exposure to the stock market.Moore and Cullity (1988) and Siegel (1991) show a strong relationship between stock pricesand the economy, and that stock prices turn before the economy does (with a median lead offour months (Reilly & Brown))CLIusuallyreachespeaksortroughsbeforecorrespondingpeaksortroughsinaggregateeconomicactivity. (about6-9months)Therighttimetotakeswiftactionisbetweenthebusinesscycle’sTROUGHpointandtheCLI’stroughpoint.
Fins5568 homework combined –Doris大冰versionQuestion 2
Fins5568 homework combined –Doris大冰versionWeek 7TheothercriteriaofusingDDMThe company is dividend payingi.Dividend is a conventional form of return,ratherthanthepredicteddata.ii. Dividends are morestablethan free cash flows, the other form of return considered by the othertwo DCF models.AnalyzingCCLwiththecriteriaThecompanyisadividenddistributingcompany:1.Illustratedinthe2015annulreportincomestatement2.CCLhasbeenpayingitsdividendconstantlyCriteria two: Understandable and consistent dividend policyFinancial statementDividend PolicyTargeting to return to mid single-digit EPS growth levelsContinue to target medium term dividend payout ratio of over 80%
Fins5568 homework combined –Doris大冰versionQuestionApart from the requirement that the company is distributing between 80% and 110% of its free cashflow to equity to its shareholders in the form of dividend, what are the other two criteria that thecompany needs to meet before we will consider applying DDM to value its stock?Question 3Does CCL meet the two criteria suggested in Q2? Show evidence to support your answer to each ofthe two criteria.2Two Criteria1. The company is dividend paying2. The company has an established dividend policy that is understandable AND bears aconsistent relationship to the company’s profitability.DPSt = EPSt × dividend payout ratio.CCL’s TargetCalculation Results
Fins5568 homework combined –Doris大冰versionSignificant Items: Transactions which are non-recurring and considered material to the financialstatements due to their size and/or nature are treated as significant items. Such transactions are

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