FHCE 3200 Lecture Notes - Lecture 3: Trulia, Zillow

32 views1 pages

skychimpanzee456

27 Apr 2018

School

University of Georgia

Department

Financial Planning, Housing and Consumer Economics

Course

FHCE 3200

Professor

Williams

For unlimited access to Class Notes, a Class+ subscription is required.

9/24/2017 Reading questions 3 Hiren Patel

1. Sometimes the apartment of your dreams may be unaffordable. Many financial planning experts

recommend that in these situations you should find a roommate to help offset rental expenses. What is

your opinion on the benefits and disadvantages associated with having a roommate? Share your opinion

ad respod to other studets’ disussio posts; reah a olusio o hether ou ill or ill ot look

for a roommate now and after you graduate.

Off the back, the most obvious advantage is that they share half the rent, which can relieve a lot

of pressure depending on the type of area you live in. The downside of your roommate paying half the

ret eas half the spae. Aother doside is ou hae less pria, ut ith that eas ou o’t e

lonely and someone to do things during the weekend and what not. Although there are shared

responsibilities, you never know how clean and what not the other person is, that is a risk you must take

unless, you handpick your roommate you know well. With that being said, I ko for a fat I o’t lie

ith a rooate eause I ill hae a house i hih  parets ill lie i or I’ll lie  self ith 

SO.

2. Think of where you want to live after you graduate. How much do houses in that community cost?

(Search real estate websites such as Zillow or Trulia to see the selling prices for houses available.) How

much would it cost to rent a similar house in that community? (Use Craigslist or a similar rental website.)

Net, use the Ne York Ties’ Ret or Bu Calulator to get a recommendation on whether to rent or

buy (you will have to make assumptions about, for example, how long you plan to stay in that

community). What was that recommendation? Why do you agree or disagree with it?

After I graduate I want to live in an urban area and typically the houses cost around $350000.

The price to rent houses that are similar is approximately $1300, the number of bedrooms may vary.

The recommendation was to rent, however, I both agree and disagree with this. I can only agree to this

if there are lots of other ariales I do’t ko aout. I would want to buy a house If I knew the

longevity of my job and I knew for sure I was going to be at that house for at least 15 years. With that

being said I would weigh my decision on whether I know all the details.

find more resources at oneclass.com

Unlock document

This preview shows half of the first page of the document.
Unlock all 1 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Off the back, the most obvious advantage is that they share half the rent, which can relieve a lot: sometimes the apartment of your dreams may be unaffordable. Many financial planning experts recommend that in these situations you should find a roommate to help offset rental expenses. The downside of your roommate paying half the re(cid:374)t (cid:373)ea(cid:374)s half the spa(cid:272)e. a(cid:374)other do(cid:449)(cid:374)side is (cid:455)ou ha(cid:448)e less pri(cid:448)a(cid:272)(cid:455), (cid:271)ut (cid:449)ith that (cid:373)ea(cid:374)s (cid:455)ou (cid:449)o(cid:374)"t (cid:271)e lonely and someone to do things during the weekend and what not. Although there are shared responsibilities, you never know how clean and what not the other person is, that is a risk you must take unless, you handpick your roommate you know well. With that being said, i k(cid:374)o(cid:449) for a fa(cid:272)t i (cid:449)o(cid:374)"t li(cid:448)e (cid:449)ith a roo(cid:373)(cid:373)ate (cid:271)e(cid:272)ause i (cid:449)ill ha(cid:448)e a house i(cid:374) (cid:449)hi(cid:272)h (cid:373)(cid:455) pare(cid:374)ts (cid:449)ill li(cid:448)e i(cid:374) or i"ll li(cid:448)e (cid:271)(cid:455) (cid:373)(cid:455)self (cid:449)ith (cid:373)(cid:455)

Related Questions

International Research Journal of Applied Finance ISSN 2229 â 6891

Vol. VI Issue â 8 August, 2015 Case Study Series

A Stock Valuation Case: An Application of the âMethod of Comparablesâ for Macyâs Shares

Halil D. Kaya* ,Julia S. Kwok

Abstract

The primary focus of this case is the application of the âMethod of Comparablesâ in the estimation of the value of a security. An investment decision will be made based on the comparison of the selling price and the estimated value. A security will be good for purchase if the estimated value is higher than the market price. This method utilizes basic financial ratios that are commonly provided by financial web sites. First, using Yahoo Finance website, the pricing, sales, book value of equity and shares outstanding data are collected for both the target firm and the competitor firms. Then, the pricing multiples (i.e. price earnings ratio, price to sales ratio and price to book ratio) of the competitors are calculated. After that, those multiples along with the target firmâs earnings, sales, book value and shares outstanding data are used to estimate target firmâs share value. The case also examines the impact of treating ânegativesâ in the data. Students will learn that replacing negative earnings with zeros tend to induce less bias in target firmâs value estimation than excluding the ânegativeâ data altogether.

Introduction

March 14, 2015 was a sunny day. Mary took advantage of the nice weather to have lunch at the Mall. On her way back to work, she walked by Susanâs investment office. Susan was Maryâs college roommate. They both liked shopping together to find new fashionable clothes. Looking at her watch, Mary realized she had half an hour to spend. She thought she would drop by and say hello to Susan.

The Performance of Macyâs

âHi, Susan, how are you?â How is your business?â said Mary. Susan was a recent finance graduate. Susan replied, âI am doing fine. Thank you. After so many years, the market is still recovering from the mortgage crisis; many investors have been buying back stocks that they have sold during the crisis. What are you up to?â âI want to start my investment in securities, too. I have a couple thousand dollars, would Macyâs be a good stock to invest in now? That was our favorite store to shop among all of the department stores,â Mary exclaimed. She added, âAlso, I read from Motleyâs Foolâs article on Macyâs today about its earnings per share growth for the last 16 quartersâ (Zahid Waheed, 2014).

In response to Maryâs questions, Susan checked the monthly adjusted returns of Macyâs in Yahoo Finance. She found that, since March 2010, Macyâs stock price had an average annual increase of 23.5% over the last 5 years. The stock rose from $19.98 to $57.38. Susan then told Mary that Macyâs was indeed a growing stock. She added that its success could be attributed to the omni-channel integration, e-commerce and magic selling strategies which allowed merging of sales channels, online shopping and better customer care. Since investment strategy 101 is to buy low, and sell high, given Macyâs stock price had been going up, Susan was not sure whether Macyâs was currently overvalued or undervalued by the market.

The Method of Comparables

Susan remembered her class lecture on the two types of valuation of stocks, namely absolute and relative evaluation. The absolute evaluation focuses on finding the intrinsic value of the security based on fundamentals. That involves more complicated models of discounting cash flows from dividends, operations and residual income.

On the other hand, relative evaluation is quick and easy to use. It assumes two similar securities should sell for one price in an efficient market, i.e. âLaw of One Price.â So an analyst can estimate its stock price by multiplying target companyâs specific earnings, sales and equity value data by the earning, sales and equity âper shareâ financial multiples of its competitors.

Since Mary was not familiarized with financial models, Susan decided to use the easy-toperform-and-analyze âComparables Methodâ to estimate the relative value of Macyâs stock.

The Financial Data

Dillards, JC Penney and Nordstrom were selected as competitors of Macyâs as they were all in retail department store business. Susan would need some financial data regarding these companies. She went to SECâs (i.e. Securities and Exchange Commission) website and downloaded these companiesâ most recent balance sheet and income statement data. Out of those statements, she knew that she would need the EPS (i.e. earnings per share), the sales number, the number of outstanding shares, and the book value of equity. She also knew that she would need the current share price for each company. After some work, she had found all the necessary information to run the analysis. Below were the data that she had gathered:

All data are in US$ except for the number of outstanding shares. The share price as of March 15, 2014 is shown in the first column. The âEarnings per shareâ is shown in the second column. The third column reports the book value of equity. The last column shows the number of outstanding shares.

Firm	P ($)	EPS ($)	Sales ($)	BV of equity ($)	# of shares
Macy's	58.58	3.93	27,931 mil.	6,249 mil.	378.3 mil.
Dillard's	90.61	7.10	6,532 mil.	1,992 mil.	45.6 mil.
JC Penney	8.71	-5.57	11,859 mil.	3,087 mil.	249.3 mil.
Nordstrom	61.33	3.77	12,166 mil.	2,080 mil.	194.5 mil.

The Decision

Susan thinks that the following steps would be necessary to perform the analysis:

1.Based on the data above, calculate Sales per share, BV of equity/share values of all firms. Note that EPS is directly given.

2.Calculate P/E, P/Sales, and P/B for all of Macyâs competitors based on the data obtained.

3.Find the average of the P/E, P/Sales, and P/B multiples for the three competitors.

4.Multiply those averages calculated in step 3 with Macyâs EPS, Sales per share, and BV of equity/share values, respectively to get three value estimates for Macyâs shares.

5.The average of the three estimates would then be Susanâs best estimate of Macyâs value per share.

answer # 1-5 please

pearotter934

FHCE 3200 Lecture Notes - Lecture 3: Trulia, Zillow

Document Summary

Get access

Related Documents

FINA 3000 Lecture Notes - Lecture 99: Human Capital, Social Capital, Zillow

FIN 101 Lecture Notes - Lecture 11: Savings Account

MCS 2100 Lecture Notes - Lecture 7: Refinancing, Roofer, Credit History

Related Questions