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UGBA 103
Midterm Exam 02
The answers on this midterm are entirely my own
work.
I neither gave nor received any aid while
taking this midterm.
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Any midterm that is turned in without a signature indicating
that you have taken this oath or the names below filled out
accurately will be assigned a grade of zero.
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Please remember to write your name
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on every page
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This exam will be graded out
of 105 points.
There is an extra credit question so the total attainable number of points is
110.
The number in parentheses after each question is the amount of points each question
counts. The exam consists of 12 questions and 9 pages.
You may use a calculator on this exam.
You may NOT use any other calculation device
including a computer.
You cannot bring any written material into this exam.
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Part II SubTotal
Total
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Part 1: Valuation
1)
Next period’s earnings of Wachovia are expected to be negative, but the current price is
$8. What can you say about the present value of growth opportunities relative to the
current price? [5 Points]
2)
a) Please determine the stock price of Apple using the Comparable method and the
information about Microsoft. You should base your calculation on the PEG measure. This
measure is widely used in the industry and is defined as the P/E ratio over the growth
rate:
/
PE
PEG
g
=
The applied growth rate g is usually a 5 year compound average growth rate (CAGR), i.e.
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 Spring '09
 ODEAN
 Net Present Value, market capitalization rate

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