It did not paste too great, but hopefully it works for ya. Question 4 - 88475 Francine LeMond works as an equity analyst for MegaMax Investments, one of the world’s largest broker-dealers. LeMond has been tasked with analysis of remnants, or legacy stocks that were not recommended or purchased by MegaMax but are still part of client portfolios. LeMond’s first chore of the day is to review some emerging-market equities in the Spencer portfolio. Financial results for all of the stocks appear strong, and the shares have gained substantially in value over the last year. But LeMond is concerned that the financials as stated do not accurately reflect the companies’ operations. Emerging markets present special problems for equity analysts, and LeMond intends to adjust financial results for these equities to accommodate the following issues: The risk of political instability Vulnerability of the companies to privatization Limited availability of foreign and domestic investment capital Unusually high inflation The first emerging-market company on LeMond’s list is Plicher, a company located in the African country of Llaho that makes construction equipment. In recent years Plicher’s sales and profits have soared, helped by a series of lucrative contracts to provide equipment for government road-building teams. In her analysis of Plicher, LeMond draws on the following information: The U.S. risk-free rate is 4%. The U.S. market-risk premium is 6.5%. The global market-risk premium is 9%. The Llaho inflation rate is 25%. The U.S. inflation rate is 3.5%. 10-year Treasury bonds yield 2.5% more than T-bills. The Llahoan government’s short-term bills pay a yield of 8.3%. Plicher’s marginal tax rate is 30%. Plicher’s equity value is $85.2 million. Plicher’s revenue estimate for the next 12 months is $146 million. Plicher’s assets are valued at $279.5 million. Plicher’s debt rating is A-, and its debt is valued at $194.3 million. On average, 10-year U.S. corporate bonds with rating of A- yield 1.3 % higher than a 10-year U.S. Treasury bond. On average, 10-year Plicher corporate bonds with a rating of A- yield 5.6% more than a 10-year U.S. Treasury bond. Worldwide, companies in Plicher’s industry typically have a beta of 1.6. Based on Plicher’s stock returns over the last five years, its beta is 3.4. LeMond spends several hours preparing revised financial statements, ratios, and valuation estimates for Plicher. Just as she finishes, her boss, Peter Cavanaugh, drops a new project on her desk. Kenton Koncepts, a maker of aircraft parts, just announced a new strategic plan, and Cavanaugh wants to know whether MegaMax should upgrade the stock from its current Neutral rating. With Kenton’s strategic plan are several pieces of information – a chart showing global aircraft orders and backlog over the last three years, detailed cost-cutting initiatives, a list of proposed plant upgrades, and a detailed list of Kenton’s products and the niches they address. LeMond prepares a short analysis of Kenton. As her last assignment of the day, LeMond turns to remnants Quintile Fusion, Blevins, and Karnack Analysis, all of which represent large positions in the Adams account. Below are some characteristics of the companies and their industries: Quintile Fusion Blevins Karnack Analysis Equipment maker trying to branch out into business consulting Sales growth rates above economic growth rate Sales growth rates well above economic growth rate Results in recent quarters have lagged economic growth rate Uses size and price advantage to take market share Has had trouble funding expansion Concerned about rivals’ new products and services eating into its market share Concerned about powerful brand losing momentum Concerned about market acceptance of new products Many rivals are growing huge through acquisitions Profit margins in line with market average Differentiates itself by specialization Hedges raw-materials prices aggressively to reduce volatility of expenses Information business spends little on manufacturing, much on personnel Manufacturing facilities are expensive to build, and technical expertise difficult to find Hiring is easier than it once was because of a large number of new graduates – labor costs declining Capacity utilization has increased sharply in recent years Using the information she gathered on the three firms, LeMond drew conclusions about the industries in which all three companies operated and about the profitability and pricing power of each company. Part 1) Which of the three remnants in the Adams account most likely has the greatest and least pricing power? Greatest Least A) Karnack Analysis Blevins B) Blevins Quintile Fusion C) Karnack Analysis Quintile Fusion Part 2) Which of the following information on Kenton Koncepts is most valuable in the analysis of long-term? Supply trends? Profitability? A) Order chart Cost-cutting initiatives B) Order chart Product list C) Plant upgrades Cost-cutting initiatives Part 3) Based only on the information above, where do Blevins’ and Karnack Analysis’ industries fall on the business life cycle? Blevins Karnack Analysis A) Growth Growth B) Mature Pioneer C) Mature Growth Part 4) Which of the following issues will be least effectively addressed if LeMond simply adjusts the financial statements by reducing the cash flows of each company in the country by a set amount? A) Unusually high inflation. B) Vulnerability of the companies to privatization. C) The risk of political instability. Part 5) Plicher’s cost of equity is closest to: A) 42.4%. B) 44.2%. C) 38.4%. Part 6) Assuming the cost of equity is 25.4% and the local risk-free rate is 15%, Plicher’s weighted average cost of capital is closest to: A) 10.15%. B) 15.67%. C) 18.64%.
a a a a a a a a a a a a a
skip, u need to take break fr some time…studied too much …
lol. ok, im going to take the Cleveland Browns to the Super Bowl, when i come back, i want that answer to your intercorp question
B (or maybe C but i took B b/c of the cost advantage stuff) C (thought order side is demand analysis) B A A (don’t think i didn’t cheat and have to look at a notecard here) C (i must’ve f’d something but got pretty close to 18% so going there with it)
holy crap i just looked up the answers- thank goodness it’s only march and not end of may. smoooooooooooooooooked. don’t answer anything like mine above people- bad idea. BAD. last one i f’d the 1.3 and was using the 5.6. wow, not my best day ever on the ol’ forum.
I thought this was a study break?
bannisja Wrote: ------------------------------------------------------- > holy crap i just looked up the answers- thank > goodness it’s only march and not end of may. > smoooooooooooooooooked. don’t answer anything > like mine above people- bad idea. BAD. last one > i f’d the 1.3 and was using the 5.6. wow, not my > best day ever on the ol’ forum. You’re blowing many of us away. If there were a CFA Futures Market, I’d long every Banni, CPK, and Swaptiongamma contract I could get my hands on.
ooo a break to study not a break from studying . . i get it now =)
i just took a real break and it felt good. i think i might do some equity q’s end of chapter CFAI for a little while now to stop staring at a screen and then do one last SS11 q-bank 25 or so question quiz later tonight. i put the leading/trailing P/E and H-model formulas back into my head today, so all in all we’ll call it a productive day. baby steps.
hey Banni, if you wanna nice 5 minutes reliever, you gotta check out the post by Relentless in the CFA Level 1 Forum. I bumped it from like a year ago for the level one guys, but that entire thread is hilarious. its the one that’s like " Desperate for targeted level one advice…" or something like that…
SkipE99 Wrote: ------------------------------------------------------- > hey Banni, if you wanna nice 5 minutes reliever, > you gotta check out the post by Relentless in the > CFA Level 1 Forum. I bumped it from like a year > ago for the level one guys, but that entire thread > is hilarious. its the one that’s like " Desperate > for targeted level one advice…" or something > like that… +1. Gave me a good chuckle.
2nd most difficult vignette of the season after bannis this morning… that was outright fatality. Q1.C? (KA - differenciated, expensive equip, so barriers to entry huge for new entrants to hog away profits, inputs are rate to find like technical expertise, CU is great - thus the expected demands have overshadowede the supply from the industry) (Q - Concerned about rivals, Many rivals are growing, M&A activity, expenses are volatile and more cost to hedge them) Q2.A? Order chart - gives the historic supply trends Cost-cutting initiatives – the profitability numbers? Q3. B? Blevins – Mature Karnack Analysis – Pioneer Q4. B? Vulnerability will affect only the concerned companies, no?. Rest 2 have uniform effects on all the companies in the industry Q5 and Q6 are calculation pains… Q5.A? Q6.B?
sorry guys, put in a hard day. i am slowly becoming an equity master. we’ll see how the cfai end of chapter questions go. so much to do!
what the %#%? whats the answer ditch? you left me hangin