Financial Management 534
Financial Management 534 2
Financial Management 534
1.
Goodman Industries Landry Incorporated
Year Stock
Prices
Dividend Annual
returns for
Goodman
Stock
Prices
Dividend Annual
returns for
Landry
2013 25.88 1.73 0.248 73.13 4.5 -0.010
2012 22.13 1.59 -0.042 78.45 4.35 0.132
2011 24.75 1.5 0.627 73.13 4.13 -0.100
2010 16.13 1.43 0.029 85.88 3.75 -0.004
2009 17.06 1.35 0.609 90 3.38 0.117
2008 11.44 1.28 83.63 3
To calculate the annual returns for Goodman Industries the values of 2013 are deducted
from the values of 2012 then the value obtained is added to the dividend of 2013 and the figure
obtained divided by the 2012 value.
The returns for 2013 are: 25.88 – 22.13 = 3.75 + 1.73 = 5.48/22.13 = 0.2476
The returns for 2012 are -0.042, while for 2011, 2019 and 2009 were 0.627, 0.029 and 0.609
respectively.
Market Index
Year Includes
dividend
Market
Returns
2013 17495.97 0.328
2012 13178.55 0.012
2011 13019.97 0.349
2010 9651.05 0.148
2009 8403.42 0.190
2008 7058.96
STDEV 0.138
The returns for the market index are calculated by deducting the values of 2013 from the
values of 2012 then the value obtained is divided by the 2012 value.
Financial Management 534 3
1b).
Year Av.
Annual
returns
(3
stock)
2013 0.188
2012 0.034
2011 0.292
2010 0.058
2009 0.305
2008
The annual returns for Goodman industries and Landry are added together with the
market returns and are then divided by three (Garrison, Noreen & Brewer, 2009).
2)
Goodman Industries Landry Incorporated
Year Stock
Prices
Dividend Annual
returns for
Goodman
Stock
Prices
Dividend Annual
returns for
Landry
2013 25.88 1.73 0.248 73.13 4.5 -0.010
2012 22.13 1.59 -0.042 78.45 4.35 0.132
2011 24.75 1.5 0.627 73.13 4.13 -0.100
2010 16.13 1.43 0.029 85.88 3.75 -0.004
2009 17.06 1.35 0.609 90 3.38 0.117
2008 11.44 1.28 83.63 3
STDEV 0.314 0.097
The STDEV formula is obtained from the excel spreadsheet.
Financial Management 534 4
Market Index
Year Includes
dividend
Market
Returns
2013 17495.97 0.328
2012 13178.55 0.012
2011 13019.97 0.349
2010 9651.05 0.148
2009 8403.42 0.190
2008 7058.96
STDEV 0.138
The STDEV formula is obtained from the excel spreadsheet.
3).
Year 1 Year 2 Year 3
D0 D1 D2 D3
150 157.5 165.38 173.64
The value of D1 is obtained by adding 5% on D0 while the value of D2 is obtained after
adding 5% of D1. D3 is also obtained the same way, 5% is added to D2 compounding (Ross,
Westerfield & Jaffe, 2013).
Financial Management 534 5
4).
Goodman Industries
Year Stock
Prices
Dividend Annual
returns for
Goodman
Present value
1 2013 25.88 1.73 0.248 0.219
2 2012 22.13 1.59 -0.042 -0.033
3 2011 24.75 1.5 0.627 0.435
4 2010 16.13 1.43 0.029 0.018
5 2009 17.06 1.35 0.609 0.331
The present value of the returns for Goodman industries for the first three years discounted at the
rate for 13% are 0.219 – 0.033 + 0.435 = 0.621
The least he can sell the stock is 25.88 – 0.621 = 25.259
Financial Management 534 6
References
Garrison, R., Noreen, W., & Brewer, P. (2009) Managerial Accounting , New York, NY:
McGraw-Hill Irwin. 65 -70
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013) Corporate finance (10th ed.) New York, NY:
McGraw-Hill Irwin.
