...Beta Management Company In early January 1991, Sarah Wolfe was in her office considering new goals and directions for her company forth coming year. Ms. Wolfe was the founder and CEO fo the Beta Management Group, a small investment management company based in a Boston suburb. She dealt with a growing number of high-net-worth individual clients and had $25 million in assets under management. Beta’s investment success during the past year had brought in a steady stream of new clients and additional money from existing clients. At the same time, Ms. Wolfe had inquiries from some small institutions, and was hoping to expand her business in 1991. Beta Management Company was founded in 1988. A wealthy couple had become fed up with their investment losses stemming from the October 1987 crash and had asked their friend, Ms. Wolfe, to manage a portion of their money. While business was slow at first, she gradually developed a client base through good performance and word of mouth. She considered herself a market strategist, and Beta Management’s stated goals were to enhance returns but reduce risks for clients via market timing. Given the small size of her accounts, the easiest way for her to maintain and adjust equity market exposure was to “index”. She would keep a majority of Beta’s funds in no-load, low-expense index funds (with the remainder in money market instruments), adjusting the level of market exposure between 50% and 99% of Beta’s funds in an attempt to “time the...
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...| Beta Management Company Case Report | | Full name: Student ID: Class Time: Lecturer's Name: | Table of Contents I.Case background 2 II.Sarah Wolfe 2 III.Background of California R.E.I.T. and Brown Group, Inc. 3 IV.Return and risk 4 V.Summarize in bullet points what you learn from your case analysis. 7 VI.Appendix 8 I. Case background Who: Sarah Wolfe who is the founder and also the CEO of Beta Management Company Where: Small investment companies near a suburb of Boston When: The Beta Management Group was formed in 1988. Up to 1991, high-net-worth individual clients totaling $25 million in assets were under control by the Beta Management Group. What: She had been successful in the management of Beta’s funds by focusing on the Vanguard Index 500 Trust, even generating good returns in the worst of times. After doubling the size of Beta, she decided to pick some smaller stocks to go along with the index mutual fund. She also planned to increase the proportion of Beta’s assets in equities. II. Sarah Wolfe Strategy applied was to timing the market can be simply defined “buy low and sell high” to minimize the risk and enhance returns for clients since 1988. To get higher return by eliminating the risk was one of the good ways to add value for clients. Another strategy was to explore the range of market strategy. She has successfully adjusted the level of market exposures between 50% and 99%. The best way was chosen to maintain and adjust equity...
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...Moms In Motion, LLC (Moms) is a Service Facilitation provider for Medicaid CD-PAS (EDCD, ID & DD Waivers) enrollees and a Case Management provider for DD Waiver enrollees. Our mission is to enhance the outcome for all of our clients and their families, by using person-centered practices while providing superior service, sharing resources, continually expanding our knowledge, and networking. Our primary areas of growth will be advocating in the school systems for our younger clients, assisting young adults with transitioning to independence, and helping our aging clients to be cared for by the people who love them. We serve clients of all ages: children, young adults and aging. Mission Statement Learn more Advocacy We believe that every person, whether young or elderly, regardless of disability, has the right to nurturing, personalized care supported by those who love them. If you are facing the challenges of finding high-quality care for your loved one, and need the support of a Waiver or other program, there are resources available for you. Get in touch with us to find out about the Medicaid Waiver programs that may be available to help you provide for the care of your loved one. There are also community-driven programs that can help you to find the resources and assistance to encourage a high quality of life for your child, elderly parent, or other loved one. More info about DMAS’s Letter on Managed Care Organization (MCO) Moms in Motion is a...
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...Beta Management Company | | |Investment Management case study | Table of contents Backgrounds……………………………………………………….……1 Strategies………………………………………………………………...1 Background of California R.E.I.T and Brown Group Inc……………2 Return and risk…………………………………………………….....…2 Summary………………………………………………………………...4 Appendix………………………………………………………………...5 Background: Beta Management Company is a small investment management company based in a Boston suburb founded in 1988. As the company developed, they had roughly 25 million dollars in the 1991. The goal of the company is to enhance returns but reduce risks for clients via market timing. Currently, the company’s funds were invested into the Vanguard 500, an S&P 500 no-load and low-expense index funds (with the reminder in money market instruments). As time goes by, Sarah Wolfe who is the founder of this company think about increasing her equity exposure to 80% with the purchase of individual stock. Strategies: Firstly, Sarah Wolfe uses a market timing strategy based on two portfolios: the Vanguard Index and money market. In order to obtain the capital gains, once the company predicts the market value will rise, it will transfer its assets from the money market to the Index. The limit will up to a maximum 99% of total assets. On the other hand when the company expects the market value will decrease, it...
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...25721 Investment Management BMC Case Study Student Name: Junwei Wang Student ID: 11516655 Class Time: 6 p.m. – 9 p.m. Tuesday Lecturer: Wing Bui Table of content Q 1. 1 Q 2. 1 Q 3. 2 Q 4. 2 Q 5. 3 Beta Management Company I. Case Background Beta Management Company was founded in 1988 by Ms. Wolfe. Beta Management Company is a small investment management company based in a Boston suburb. Beta Management Company was successful in 1989 and 1990. This success had brought in enough new money to double the size of the company. However, Ms. Wolfe had lost some potential new clients who had thought it unusual that Beta Management used only an index mutual fund and picked none of its own stocks. Sarah Wolfe was considering Beta’s new goal and directions for coming year. II. A. Ms. Wolfe decided to follow “ index” to adjust equity market exposure. This is a good strategy due to that at the beginning of the foundation of the company, the size of her account was small and there were no much money for her to take a risk. The strategy she followed was the lowest risky way. Ms. Wolfe kept a majority of Beta’s funds in no-load, low-expense index funds, adjusting the level of market exposure between 50% and 99% of Beta’s funds in...
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...FIN 5439 – Capital Structure and Risk Management Nimlendran Guidelines for the “Cost of Capital at Ameritrade” Case This is a group assignment: * Each group will provide answers to the questions given below Note: You do NOT have to provide a full case report * Submit only one report per team. Submit a word document on Canvas course site. * The report should be well formatted and using 12 point font. Double spaced. All the tables should have their headings and all the units (% , million etc.) clearly indicated. A Word document should be submitted on the course website by one team member before the deadline: All calculations and estimates using Excel should be in formatted tables and inserted directly into the Word document. Note: From the Excel output, only include the important estimates and relevant statistics such as t-stats and standard errors. GRADIN RUBRIC Grade Item | Points out of 100 | Presentation including grammar and style, tables, follow instructions) | 20 | Q1 | 10 | Q2 | 10 | Q3 | 10 | Q4 | 20 | Q6 | 30 | Learning Objectives The case provides an opportunity to understand how capital market data and asset pricing model(s) can be used to estimate the cost of capital (or the required rate of return) for real investments. You do NOT have to write a formal report, but you should provide concise answers with all the assumptions stated clearly for the questions given below. * Estimate stock returns from prices by adjusting...
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...h case Applied corporate finance | TeleTech Corporation 2005 | Case Analysis | | | | | CONTENTS 1. Executive Summary 2. Introduction 3. Analysis 4. Conclusion 1. Executive Summary Teletech Corporation is one of the frontrunners in Telecommunications industry. The company is mainly concentrated along two lines of business, the first being Telecommunication services and the second being Products and Systems (P&S) Segment. Telecommunication services accounted for 75% of the market value of the assets and the other 25% was occupied by P&S, however the ROC for the year 2004 for P&S is greater than Telecommunication services with a noticeable difference of 1.9%. The Current Book Value of Net Assets is$ 16 billion – 11.4 to Telecommunication, 4.6 to P&S. The Telecommunications Services segment currently has 7 million customers mainly belonging to the Southwest and Midwest and is considered as the dominant service providers of consumer satisfaction and product quality. It also has its revenues growing at an average rate of 3% (2000-2004). Its 2004 figures indicated a NOPAT of 1.18 billion, Net Assets: 11.4 Billion, Revenues: 11 Billion. Its Capital Budget is between 1.5 and 2 billion every year for 10 years and there is No tax rate relief for capital investments. Some factors that are playing to the advantage of this segment include Teletech expanding via acquisitions in Latin America, an overall deregulation of...
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...commercial airplanes was depressed because of terrorism risks, war, and SARS, a contagious illness that resulted in global travel warnings. Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and the defense business. Thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing’s overall corporate WACC. In doing so,...
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...CAPM in Public Utility Rate Cases: Comment Author(s): Dennis E. Peseau and Thomas M. Zepp Reviewed work(s): Source: Financial Management, Vol. 7, No. 3 (Autumn, 1978), pp. 52-56 Published by: Wiley on behalf of the Financial Management Association International Stable URL: http://www.jstor.org/stable/3665011 . Accessed: 08/02/2013 07:25 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. http://www.jstor.org This content downloaded on Fri, 8 Feb 2013 07:25:31 AM All use subject to JSTOR Terms and Conditions Utility Regulation and the CAPM: A Discussion On the Use of the CAPM Cases: in Comment Public Utility Rate Dennis E. Peseau and Thomas M. Zepp The authors are Senior Economists on the staff of the Oregon Public Utility Commissioner. * In a recent issue of Financial Management, Professors Eugene Brigham and...
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...Testing is a process used to help identify the correctness, completeness and quality of developed computer software. With that in mind, testing can never completely establish the correctness of computer software. [pic]There are many approaches to software testing, but effective testing of complex products is essentially a process of investigation, not merely a matter of creating and following rote procedure. One definition of testing is "the process of questioning a product in order to evaluate it", where the "questions" are things the tester tries to do with the product, and the product answers with its behavior in reaction to the probing of the tester. Although most of the intellectual processes of testing are nearly identical to that of review or inspection, the word testing is connoted to mean the dynamic analysis of the product—putting the product through its paces. The quality of the application can and normally does vary widely from system to system but some of the common quality attributes include reliability, stability, portability, maintainability and usability. Refer to the ISO standard ISO 9126 for a more complete list of attributes and criteria. Testing helps is Verifying and Validating if the Software is working as it is intended to be working. Thins involves using Static and Dynamic methodologies to Test the application. Because of the fallibility of its human designers and its own abstract, complex nature, software development must be accompanied by quality...
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...commercial airplanes was depressed because of terrorism risks, war, and SARS, a contagious illness that resulted in global travel warnings. Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique different estimates of beta and to manipulate the levered-beta formulas. Boeing competes in both the commercial aircraft and the defense business. Thus, deriving the appropriate benchmark WACC for the 7E7 project requires isolating the commercial aircraft component from Boeing’s overall corporate WACC. In doing so, students...
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...Case Questions Case #5 – Marriott Corporation: The Cost of Capital 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of its cost of capital? Does this make sense? 3. What is the weighted average cost of capital for Marriott Corporation? a. What risk free rate and risk premium did you use to calculate the cost of equity? b. How did you measure Marriott’s cost of debt? 4. If Marriott used a single corporate hurdle rate for evaluating investment opportunities in each of its lines of business, what would happen to the company over time? 5. What is the cost of capital for the lodging and restaurant divisions of Marriott? a. What risk free rate and risk premium did you use in calculating the cost of equity for each division? Why did you choose these numbers? b. How did you measure the cost of debt for each division? Should the debt cost differ across divisions? Why? c. How did you measure the beta of each division? Case Hints and Suggestions The primary objective of this case is to show students how the CAPM is used to compute the cost of capital. Students learn to calculate beta based on comparable companies and to lever betas to adjust for capital structure. Students are asked to determine the appropriate risk-less rate and market risk premium. This case also encourages students to focus on the choice of time period to estimate expected returns and the difference between...
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...buoyant market, and the management sensed a growing restlessness on the part of shareholders. To enhance the shareholders’ value, the company planned to repurchase some of its outstanding common stock. To guide the management in its decision, the company sought the advice of Lynch Investments in establishing a program to repurchase some of its outstanding common stocks. This leads to Katzu Mizuno, an associate of Lynch Investments, to investigate what source of fund is appropriate for the repurchase program and the possible effect of such action in the company. CASE ANALYSIS This case analysis aims to answer the following problem: How should the company finance its plan to repurchase its outstanding common stock in order to enhance its shareholder value? The company will be less flexible if it would have a debt-equity ratio of 72%. But since the said D/E ratio would “still be moderate with respect to the industry”, MCI’s bond rating won’t go below a medium grade of BBB. MCI needs to unlevered and then re-lever the target company’s equity beta. Unlevering the target’s equity beta yields an estimated beta comparable to the other major competitors which have different debt structure (see Exhibit B). Thus, re-levering this equity beta to reflect MCI’s target capital structure yields the appropriate risk for MCI to use in estimating a cost of capital if ever the issuance of additional $ 2 billion debt is pursued (see Exhibit A). Comparing the unlevered beta of MCI to the other major...
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...| | | | | | I. Case background In this case study, Sarah Wolfe who was the founder and CEO of the Beta Management Group, a small investment management company based in a Boston suburb in 1989, wanted to expand her business in 1991 by changing investment strategy. II. Sarah Wolfe Previous investment strategy: Her company‘s stated goals were to enhance return and reduce risks, so that during first several years she put majority of company’s funds in index funds, account for between 50% to 99%. Because she did not have so much money to invest in other financial instruments and thought index funds was safer, especial Vanguard’s Index 500 Trust, than other financial instruments in 1989. According to the appendix 1, we can calculate the standard deviation of SP500 was 3.59% during 1989 and monthly average return was 2.36%. Although the index funds return was not that high, this strategy choose by Ms. Wolfe had a low risk level so it should be a good choice for her relate to her amount of funds in beginning period. However, index funds could not be always well, the monthly average return of index funds dropped to -0.15% which means if she still put all her money in index funds, she would lose a lot of money. Fortunately, Ms. Wolfe reduced Beta’s equity position to 50% in June due to she successfully forecasted the big drop of SP500 index in August and September (-9.03% and -4.89% respectively). Therefore, she still made money for its clients during downward...
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...1) Based on the first three paragraphs of the case, explain Beta Management Company's (BMC) investment strategy. Is it compatible with market efficiency theories? BMC’s Investment Strategy To enhance returns and reduce risks is a general objective of risk-averse investors and shouldn’t be considered an investment strategy proper. BMC follows a market timing investment strategy based on two portfolios: the Vanguard Index and money market (i.e., short-term) instruments. When BMC expects the market to rise, it transfers its assets from the money market to the Index (up to a maximum of 99% of total assets), seeking to obtain capital gains; when BMC expects the market to fall, it transfers back the assets from the Index to the money market instruments (down to a minimum of 50%), so as to avoid capital losses. By setting a floor of 50% on the investment on the Index, BMC endeavours to maintain at all times a return spread so as to “enhance returns”, while seeking to partly capitalize on unpredicted rises (at the cost of losses if the market behaves as predicted). By setting a very high ceiling for the investment in the Index (99%), BMC is willing to take on extra risk to try to fully capitalize on predicted rises. The investment strategy has thus some aggressive elements in it. The objective of “risk reduction” might better accomplished by setting both a lower ceiling and, particularly, a lower floor. Advantages of the Vanguard Index: - Low transaction costs (important in a market...
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