S&P Projects

Chapter 2

1. Index Construction Using the monthly closing prices for Canwest Global Com-Nvtg (CWG), Rogers Communication-Cl B (RG) and Shaw Communication Inc-Cl B (SJR), construct price weighted, value weighted, equally weighted and geometric indices for the Broadcasting and Cable TV industry in Canada over the most recent six months.

   Notes:

   1. Click on "Company" in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.

Chapter 3

1. Margin Returns You purchased 500 shares of Imperial Oil (IMO) twelve months ago on a 50% initial margin. If the maintenance margin were 30%, would you have received a margin call over the past year? If you paid 8% on your margin loan, what was your return for the year? Base your answers on the monthly closing prices.

2. Short Sale Returns You shorted 300 shares of Abitibi Consolidated Inc. (ABY) twelve months ago at the closing price. If the initial margin was 50%, what was your return for the year? Ignore interest on the margin loan and base your answers on the monthly closing prices.

   Notes:

   1. Click on “Company” in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.

Chapter 5

1. Calculating Average Returns and Standard Deviations Using the monthly closing prices on a company’s stock, e.g. Biovail Corp (BVR), calculate the return each month for the past year. What is the average monthly return for this company over the past year? What is the standard deviation of monthly returns for this stock?

   Notes:

   1. Click on “Company” in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.

Chapter 6

1. Correlation and Diversification Pick two companies in the same industry, e.g., Enbridge Inc. (ENB) and TransCanada Pipelines Ltd. (TRP). Using the monthly closing prices, calculate the return each month for the past year. Then calculate the correlation between their returns. Using one of these two companies, calculate the correlation between that company and a company in another industry, say Nortel Networks Corp. (NT). Is the benefit of diversification greater between the companies within the same industry or companies in different industries? Why?

2. Minimum Variance Portfolio Using the monthly closing prices for Manulife Financial Corp. (MFC) and Big Rock Brewery Ltd. (BEERF) over the past twelve months, calculate the return each month for the past year. Using these returns, calculate the average return, standard deviation and correlation of returns between the two securities. Is there a minimum variance portfolio with non-negative weights in each of these two securities?

   Notes:

   1. Click on “Company” in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.

Chapter 14

1. Stock Pricing Enbridge Inc. (ENB) is a dividend paying company. Using the historical dividends available, calculate the average growth rate in dividends for Enbridge. If this growth rate is applied to the dividend discount model, is the stock priced correctly? What growth rate is necessary given the most recent stock price in the data? How do you reconcile your answers?

2. Plowback and Growth Rates Using the available information for Canadian National Railway Co (CNR), calculate the average plowback ratio and Return on Equity over the same time period. What growth rate do these numbers imply?

   Notes:

   1. Click on “Company” in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.

Chapter 15

1. DuPont System Using two companies in the same industry, e.g., Barrick Gold Corp (ABX) and Echo Bay Mines Ltd. (ECO), calculate all five ratios of the DuPont System for the past three years using the annual financial statements of these companies. Comment on the reasons why ROE is different for the two companies and why ROE has changed for each company over the past three years.

2. Inventory Turnover Using the financial statements, calculate the inventory turnover for Nortel Networks Corp (NT) and Alcan Inc. (AC) for the past five years. What do you notice about the difference in the inventory turnover for these two companies?

3. Valuation Ratio Analysis Pick two companies in the same industry, e.g., Noranda Inc. (NRD) and Inco Ltd. (N). Examine the valuation ratios (e.g. P/E ratio) for the trailing twelve months on the Financial Highlights page. How do the companies compare to each other and the industry? If you were to invest in one of these two companies, which would it be? Why?

4. Profitability Ratio Analysis Pick two companies in the same industry, e.g., Shaw Communication Inc -Cl B (SJR) and Rogers Communication -Cl B (RG). Examine the profitability ratios (e.g. ROA) for the trailing twelve months on the Financial Highlights page. Which company has generated greater profits? How do the companies compare to the industry?

5. Statement of Changes in Financial Position Choose a company, e.g., Air Canada -Cl A (ACNAF), and using the most recent quarterly financial records, construct a Statement of Changes in Financial Position for that company.

6. Standardized Financial Statements Pick two companies in the same industry, e.g., Imperial Oil Ltd. (IMO) and Petro-Canada (PCZ), and calculate the standardized income statement and balance sheet using the most recent quarterly information. Comment on any similarities and differences in your calculation.

7. DuPont System and the Compound Leverage Factor Using the five ratio Dupont equation, calculate the tax burden, interest burden, operating profit margin, total asset turnover and leverage ratio for one company, e.g., BCE Inc. (BCE), over the past four years using the most recent annual financial statements. How has the compound leverage factor affected the company over this time period?

   Notes:

   1. Click on “Company” in the Market Insight home page to access the ticker box.
   2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
   3. The share prices are given in U.S. dollars, not Canadian dollars.