What are GMOs main arguments in favor of value investing GMOs main arguments in

What are gmos main arguments in favor of value

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2. What are GMO’s main arguments in favor of value investing? 3. Estimate the Real risk-adjusted long-term expected return for CVS, RR Donnelley, and Manor Care. (Show the step-by-step calculations for each of them.) And Compare with that of Cisco. CVS: Step 1: Earning in year 10 = Earning now x (1 + growth rate)^10 Earning in year 10 = 1414 x (1 + 0.17)^10 = $6,796.85 Step 2: Market value equity in year 10 = (P/E) x Earning In Year 10 Market value equity in year 10 = 14 x 6796.85 = $95,155.97 Step 3: Annualized CGY for 10-year holding = (market value equity in year 10/current market value equity)^(1/10) - 1 Annualized CGY for 10-year = (95155.97/10893)^(1/10) = 0.2420 = 24.20% Step 4: Long-term expected return = Annualized CGY for 10-year holding + dividend yield Long-term expected return = 24.20 + 0.8 = 25% Step 5: Real risk-adjusted long term expected return = 25 - 6.1 - 2 = 16.9% Comparison: The CVS’s real risk-adjusted long term expected return is higher than that of Cisco System’s, 16.9% and 1.1%, respectively. This indicates that CVS has more potentials to give back to its stockholders.
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In the case GMO: The value versus growth dilemma, it stated: “typical characteristics of value stocks include mature companies or companies in slow growth industries, and companies that paid dividends to shareholders (Barton 6).” CVS is an attractive investment, as it fulfill all the above items, Dick Mayo would be interested in investing. RR Donnelley: Step 1: Earning in year 10 = Earning now x (1+growth rate)^10 Earning in year 10 = 905 x (1+0.12)^10 = $2810.80 Step 2: Market value equity in year 10 = (P/E) x earning in year 10 Market value equity in year 10 = 14 x 2810.80 = $39351.10 Step 3: Annualized CGY for 10-year holding = (market value equity in year 10/current market value equity)^1/10 - 1 Annualized CGY for 10-year holding = (39351.10/2370)^1/10 - 1 = 0.3244 = 32.44% Step 4: Long-term expected return = Annualized CGY for 10-year holding + dividend yield Long-term expected return = 32.44 + 4.5 = 36.94% Step 5: Real risk-adjusted long term expected return = 36.94 - 6.1 - 2 = 28.84% Comparison: The R.R. Donnelley’s real risk-adjusted long term expected return is much more higher than that of Cisco System’s, 28.84% and 1.1%, respectively making R.R. Donnelley’s stocks more attractive. In the case GMO: The value versus growth dilemma, it stated: “typical characteristics of value stocks include mature companies or companies in slow growth industries, and companies that paid dividends to shareholders (Barton 6).” R.R. Donnelley is a very attractive investment, as it fulfill all the above items and has a high real risk-adjusted long term expected return, Dick Mayo would be interested in investing.
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