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Essay / Research Paper Abstract
This 11 page paper Is written n two parts. The first part examines Proctor and gamble, looking at ratios such as the Price Earnings ratio (P/E), the dividend yield and the earnings per share (EPS). The paper uses this information along with the pattern of the common share price to assess if there should be a buy, hold or sell recommendation. The second part of the paper shows the student how calculate and use the weighted average cost of capital(WACC), and the capital asset pricing model (CAPM). After showing how to perform these calculations the two models are discussed, including how and why they give different answers for the cost of capital, the advantages and disadvantages of each model and how capital could be raised in the most efficient manner. The bibliography cites 6 sources.
Page Count:
11 pages (~225 words per page)
File: TS14_TEproctor.rtf
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Unformatted sample text from the term paper:
if we look at Proctor and Gamble, we can perform a ratio analysis and consider how this indicates the company is performing over the last five years. Question 1
The use of trend analysis can be useful guidance as it indicates the way that the company has performed in the past and allows the company to be benchmarked against
itself. There are several ratio we will use here. a). The First is the Price Earnings Ratio (P/E Ratio). The price earnings ratio is an indication of the cost of the
share against the earnings of the company. As a rough guide the price earnings ratio can be considered the number of years that it would take the company to earn
its market value. This is a good comparator ratio, the way it is calculated is usually to take the current market price of the share and then to divided that
by the earnings per share figure. The EPS that is used will usually be the nearest annual reports figure, and as such the P/E ratio is only a rough guide
to that figure, but has its greatest value in a comparison. This is a ratio where the lower figures tend to be better, higher figures may be seen in companies
that are expected to show high growth in the future or those shares which are over priced. 1999 2000 2001 2002 2003 P/E Ratio 36.6 32. 40.5 24.2
26.5 This indicates that the P/E ratio at the current time s quite low, as it has fallen in recent times, meaning that it will take the company less time
to earn the amount it would take to by=uty the coo ay at the market value. b). The Earning per Share (EPS) is often of interest to shareholders as it
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