投資學(xué)10版習(xí)題答案17

1、 . . 9/9CHAPTER 17: MACROECONOMIC AND INDUSTRY ANALYSISPROBLEM SETS 1.Expansionary (looser) monetary policy to lower interest rates would stimulate both investment and expenditures on consumer durables. Expansionary fiscal policy (i.e., lower taxes, increased government spending, increased welfare t

2、ransfers) would stimulate aggregate demand directly.2.A depreciating dollar makes imported cars more expensive and American cars less expensive to foreign consumers. This should benefit the U.S. auto industry.3.This exercise is left to the student; answers will vary. Successful students will likely

3、discuss an industrys profitability, leverage, and growth opportunities, especially in relation to general macroeconomic conditions. 4.A top-down approach to security valuation begins with an analysis of the global and domestic economy. Analysts who follow a top-down approach then narrow their attent

4、ion to an industry or sector likely to perform well, given the expected performance of the broader economy. Finally, the analysis focuses on specific companies within an industry or sector that has been identified as likely to perform well. A bottom-up approach typically emphasizes fundamental analy

5、sis of individual company stocks and is largely based on the belief that undervalued stocks will perform well regardless of the prospects for the industry or the broader economy. The major advantage of the top-down approach is that it provides a structured approach to incorporating the impact of eco

6、nomic and financial variables, at every level, into analysis of a companys stock. One would expect, for example, that prospects for a particular industry are highly dependent on broader economic variables. Similarly, the performance of an individual companys stock is likely to be greatly affected by

7、 the prospects for the industry in which the company operates.5.Firms with greater sensitivity to business cycles are in industries that produce durable consumer goods or capital goods. Consumers of durable goods (e.g., automobiles, major appliances) are more likely to purchase these products during

8、 an economic expansion but can often postpone purchases during a recession. Business purchases of capital goods (e.g., purchases of manufacturing equipment by firms that produce their own products) decline during a recession because demand for the firms end products declines during a recession.6.a.G

9、old Mining. Gold traditionally is viewed as a hedge against inflation. Expansionary monetary policy may lead to increased inflation and thus could enhance the value of gold mining stocks.b.Construction.Expansionary monetary policy will lead to lower interest rates which ought to stimulate housing de

10、mand. The construction industry should benefit.7.Supply-side economists believe that a reduction in income tax rates will make workers more willing to work at current or even slightly lower (gross-of-tax) wages. Such an effect ought to mitigate cost pressures on the inflation rate.8.a.When both fisc

11、al and monetary policies are expansive, the yield curve is sharply upward sloping (i.e. short-term rates are lower than long-term rates) and the economy is likely to expand in the future.9.a.When wealth is redistributed through the governments tax policy, economic inefficiency is created. Tax polici

12、es should promote economic growth as much as possible.10.a.The robotics process entails higher fixed costs and lower variable (labor) costs. Therefore, this firm will perform better in a boom and worse in a recession. For example, costs will rise less rapidly than revenue when sales volume expands d

13、uring a boom.b.Because its profits are more sensitive to the business cycle, the robotics firm will have the higher beta.11.a.Housing construction (cyclical but interest-rate sensitive): (iii) Healthy expansionb.Health care (a noncyclical industry): (i) Deep recessionc.Gold mining (counter-cyclical)

14、: (iv) Stagflationd.Steel production (cyclical industry): (ii) Superheated economy12.a.Oil well equipment:Relative decline (Environmental pressures, decline in easilydeveloped new oil fields)b.Computer hardware:Consolidationc.Computer software:Consolidationd.Genetic engineering:Start-upe.Railroads:R

15、elative decline13.a.General Autos. Pharmaceuticals are less of a discretionary purchase than automobiles.b.Friendly Airlines. Travel expenditure is more sensitive to the business cycle than movie consumption.14.The index of consumer expectations is a useful leading economic indicator because, if con

16、sumers are optimistic about the future, they will be more willing to spend money, especially on consumer durables, which will increase aggregate demand and stimulate the economy.15.Labor cost per unit is a useful lagging indicator because wages typically start rising only well into an economic expan

17、sion. At the beginning of an expansion, there is considerable slack in the economy and output can expand without employers bidding up the price of inputs or the wages of employees. By the time wages start increasing due to high demand for labor, the boom period has already progressed considerably.16

18、.The expiration of the patent means that General Weedkillers will soon face considerably greater competition from its competitors. We would expect prices and profit margins to fall and total industry sales to increase somewhat as prices decline. The industry will probably enter the consolidation sta

19、ge in which producers are forced to compete more extensively on the basis of price.17.a.Expected profit = Revenues Fixed costs Variable costs= $120,000 $30,000 (1/3) $120,000 = $50,000b.c.If sales are only $108,000, profit will fall to:$108,000 $30,000 (1/3) $108,000 = $42,000This is a 16% decline f

20、rom the forecasted value.d.The decrease in profit is 16% = DOL 10% drop in sales.e.Profit must drop more than 100% to turn negative. For profit to fall 100%, revenue must fall by:Therefore, revenue would be only 37.5% of the original forecast. At this level, revenue will be: 0.375 $120,000 = $45,000

21、f.If revenueis $45,000, profit will be:$45,000 $30,000 (1/3) $45,000 = $018.Equity prices are positively correlated with job creation or longer work weeks, as each new dollar earned means more will likely be spent. High confidence presages well for spending and stock prices.19.a. Stock prices are on

22、e of the leading indicators. One possible explanation is that stock prices anticipate future interest rates, corporate earnings, and dividends. Another possible explanation is that stock prices react to changes in the other leading economic indicators, such as changes in the money supply or the spre

23、ad between long-term and short-term interest rates.20.a. Industrial production is a coincident indicator; the others are leading.21.b. If historical returns are used, the arithmetic and geometric means of returns are available. The geometric mean is preferred for multiperiod horizons to observe long

24、-term trends. An alternative to the equity risk premium is to use a moving average of recent historical market returns. This will reveal a low expected equity risk premium when times have been bad, which is contrary to investor expectations. When using historical data, there is a trade-off between l

25、ong and short time spans. Short time spans are helpful to reduce the impact of regime changes. Long time spans provide better statistical data that are less sensitive. 22.a. Foreign exchange rates can significantly affect the competitiveness and profitability for a given industry. For industries tha

26、t derive a significant proportion of sales via exports, an appreciating currency is usually bad news because it makes the industry less competitive overseas. Here, the appreciating French currency makes French imports more expensive in England.23.Determinants of buyer power include buyer concentrati

27、on, buyer volume, buyer information, available substitutes, switching costs, brand identity, and product differences. Point 1 addresses available substitutes, Point 2 addresses buyer information,and Point 4 addresses buyer volume and buyer concentration. Point 3, which addresses the number of compet

28、itors in the industry, and Point 5, new entrants, may be factual statements but do not support the conclusion that consumers have strong bargaining power.24.a. Product differentiation can be based on the product itself, the method of delivery, or the marketing approach.25.A firm with a strategic pla

29、nning process not guided by itsgeneric competitive strategy usually makes one or more of the following mistakes:The strategic plan is a list of unrelated action items that do not lead to a sustainable competitive advantage.Price and cost forecasts are based on current market conditions and fail to t

30、ake into account how industry structure will influence future long-term industry profitability.Business units are placed into categories such as build, hold, and harvest; with businesses failing to realize that these are not business strategies, but rather the means to achieve the strategy.The firm

31、focuses on market share as a measure of competitive position, failing to realize that market share is the result and not the cause of a sustainable competitive position.Smiths observations 2 and 3 describe two of these mistakes and therefore do not support the conclusion that the North Winerys strat

32、egic planning process is guided and informed by their generic competitive strategy.CFA PROBLEMS 1.a.Lowering reserve requirements would allow banks to lend out a higher fraction of deposits and thus increase the money supply.b.The Fed would buy Treasury securities, thereby increasing the money suppl

33、y.c.The discount rate would be reduced, allowing banks to borrow additional funds at a lower rate.2.a.Expansionary monetary policy is likely to increase the inflation rate, either because it may overstimulate the economy or ultimately because the end result of more money in the economy is higher pri

34、ces.b.Real output and employment should increase in response to the expansionary policy, at least in the short run.c.The real interest rate should fall, at least in the short-run, as the supply of funds to the economy has increased.d.The nominal interest rate could either increase or decrease. On th

35、e one hand, the real rate might fall see part (c), but the inflation premium might rise see part (a). The nominal rate is the sum of these two components.3.a.The concept of an industrial life cycle refers to the tendency of most industries to go through various stages of growth. The rate of growth,

36、the competitive environment, profit margins and pricing strategies tend to shift as an industry moves from one stage to the next, although it is generally difficult to identify precisely when one stage has ended and the next begun.The start-up stage is characterized by perceptions of a large potenti

37、al market and by a high level of optimism for potential profits. However, this stage usually demonstrates a high rate of failure. In the second stage, often called stable growth or consolidation, growth is high and accelerating, the markets are broadening, unit costs are declining, and quality is im

38、proving. In this stage, industry leaders begin to emerge. The third stage, usually called slowinggrowth or maturity, is characterized by decelerating growth caused by factors such as maturing markets and/or competitive inroads by other products. Finally, an industry reaches a stage of relative decli

39、ne in which sales slow or even decline.Product pricing, profitability, and industry competitive structure often vary by stage. Thus, for example, the first stage usually encompasses high product prices, high costs (R&D, marketing, etc.) and a (temporary) monopolistic industry structure. In stage two

40、 (stable growth), new entrants begin to appear and costs fall rapidly due to the learning curve. Prices generally do not fall as rapidly, however, allowing profit margins to increase. In stage three (slowing growth), growth begins to slow as the product or service begins to saturate the market, and

41、margins are eroded by significant price reductions. In the final stage, industry cumulative production is so high that production costs have stopped declining, profit margins are thin (assuming competition exists), and the fate of the industry depends on replacement demand and the existence of subst

42、itute products/services.b.The passenger car business in the United States has probably entered the final stage in the industrial life cycle because normalized growth is quite low. The information processing business, on the other hand, is undoubtedly earlier in the cycle. Depending on whether or not

43、 growth is still accelerating, it is either in the second or third stage.c.Cars: In the final stages of the life cycle, demand tends to be price sensitive. Thus, Universal cannot raise prices without losing volume. Moreover, given the industrys maturity, cost structures are likely to be similar acro

44、ss all competitors, and any price cuts can be matched immediately. Thus, Universals car business is boxed in: Product pricing is determined by the market, and the company is a “price-taker.”Idata: Idata should have much more pricing flexibility given its earlier stage in the industrial life cycle. D

45、emand is growing faster than supply, and depending on the presence and/or actions of an industry leader, Idata may set prices high to maximize current profits and generate cash for product development or set prices low in an effort to gain market share.4.a.A basic premise of the business cycle appro

46、ach to investment timing is that stock prices anticipate fluctuations in the business cycle. For example, there is evidence that stock prices tend to move about six months ahead of the economy. In fact, stock prices are a leading indicator for the economy.Over the course of a business cycle, this ap

47、proach to investing would work roughly as follows. As the investor perceives that the top of a business cycle is approaching, stocks purchased should not be vulnerable to a recession. When the investor perceives that a downturn is at hand, stock holdings should be lightened with proceeds invested in

48、 fixed-income securities. Once the recession has matured to some extent, and interest rates fall, bond prices will rise. As the investor perceives that the recession is about to end, profits should be taken in the bonds and reinvested in stocks, particularly those in cyclical industries with a high

49、beta.Generally, abnormal returns can be earned only if these asset allocation switches are timed better than those of other investors. Switches made after the turning points may not lead to excess returns.b.Based on the business cycle approach to investment timing, the ideal time to invest in a cycl

50、ical stock such as a passenger car company would be just before the end of a recession. If the recovery is already underway, Adams recommendation would be too late. The equities market generally anticipates the changes in the economic cycle. Therefore, since the “recovery is underway,” the price of

51、Universal Auto should already reflect the anticipated improvements in the economy.5.a.The industrywide ROE is leveling off, indicating that the industry may be approaching a later stage of the life cycle.Average P/E ratios are declining, suggesting that investors are becoming less optimistic about g

52、rowth prospects.Dividend payout is increasing, suggesting that the firm sees less reason to reinvest earnings in the firm. There may be fewer growth opportunities in the industry.Industry dividend yield is also increasing, even though market dividend yield is decreasing.b.Industry growth rate is sti

53、ll forecast at 10% to 15%, higher than would be true of a mature industry.Non-U.S. markets are still untapped, and some firms are now entering these markets.Mail order sale segment is growing at 40% a year.Niche markets are continuing to develop.New manufacturers continue to enter the market.6.a.Rel

54、evant data from the table supporting the conclusion that the retail auto parts industry as a whole is in the maturity stage of the industry life cycle are:The population of 1829 year olds, a major customer base for the industry, is gradually declining.The number of households with income less than $35,000, another important consumer base, is