Question 1
The "U.S. 10-year Treasury" bond rate as the risk-free rate is 4.12.
In addition, to this I also need a value for the market risk premium.
Use an assumed market risk premium of 7.5%.
Question 2
Please note that the following information contained in this document
must be used to complete the subsequent questions.
1.	IBM's beta (ß) 
2.	IBM's current annual dividend 
3.	IBM's 3-year dividend growth rate (g) 
4.	Industry P/E 
5.	IBM's EPS. 

Price & Valuation
IBM: Current price ? 76.28, 52 week range ? 71.85 to 99.10, 60 mo.
Beta ? 87.72, 200 day avg. price ? 89.50
IMB: EPS - $4.87, Price / Earning ? 15.65, PEG ratio ? 1.58, Price /
Sales ? 1.27, Price / Book ? 4.12
Industry: EPS ? NA, Price/Earning ? 23.20, PEG ratio ? 0.1, Price /
Sales ? 1.42, Price/Book ? 7.0
IBM: Latest Qtr total return ? 5.1%, Latest 12 mo. T.R. ? 20.4%,
Relative Strength ? 18.4%, Latest Fiscal T.R. ? 20.4%, Total Return
(5yr trailing) - -7.8%
Growth Trends
Latest Annual Income: IBM - $7583.0 and Ind. ? NA
1 Yr income growth: IBM ? 111.9% and Ind. ? 232.43%
3 Yr income growths: IBM - -9.2% and Ind. - -28.54%
5 Yr income growths: IBM - -4% and Ind. - -19.5%
10 Yr income growths: IBM ? NA and Ind. ? NC%
Latest Annual Revenue: IBM - $89131.0 and Ind. ? NA
1 Yr Revenue Growth: IBM ? 9.8% and Ind. ? 15.21%
3 Yr Revenue Growth: IBM - -0.3% and Ind. - -33.14%
5 Yr Revenue Growth: IBM - 0.5% and Ind. ? 3.34%
10 Yr Revenue Growth: IBM ? 3.4% and Ind. ? 3.63%
Latest Annual EPS: IBM - $4.87 and Ind. ? NA
1 Yr EPS Growth: IBM ? 109.7% and Ind. ? 261.9%
3 Yr EPS Growth: IBM - -8.0% and Ind. - -33.14%
5 Yr EPS Growth: IBM - -2.1% and Ind. - -27.26%
10 Yr EPS Growth: IBM ? NA and Ind. ? NC%
Annual Divided/Share: IBM - $0.80
Dividend Yield: IBM ? 1.05%
3 Yr Dividend Growth Rate: IBM - 8.2%
5 Yr Dividend Growth Rate: IBM ? 9.4%
Financial Strength
IBM: Total Debt/Equity - .85 
IBM: Long Term Debt/Equity ? 0.61
IBM: Long Term Debt Assets ? 0.16
IBM: Current Total Debt - $23,632
IBM: Current LT Debt (mil): $16,986
IBM: Book Value/Share - $16.44
IBM: Current Ratio ? 1.2
IBM: - Quick Raito ? 1.0
IBM: Current Inv. Turnover ? 16.9
IBM: Current Receivable Turnover ? 3.2
Management Effectiveness
Return on Assets: IBM ? 7.3% and Ind. ? 3.4%
3 Yr Avg. R.O.A. : IBM ? 6.6% and Industry ? 3.5%
5 Yr Avg. R.O.A. : IBM ? 7.5% and Ind. ? 5.7%
10 Yr Avg. R.O.A. : IBM ? 6.8% and Ind. ? 5.9%
Revenue/Employee (000?s): IBM - $251 and Ind. ? NA
Return on Equity: IBM ? 27.2% and Ind. ? 9.2%
3 Yr avg. return on equity: IBM ? 25.2% and Ind. ? 10%
5 Yr avg. return on equity: IBM ? 30.7% and Ind. ? 17.2%
10 Yr avg. return on equity: IBM ? 27.5% and Ind. 17.8%
Income / Employee: IBM - $21 and Ind. ? NA
Cash Flow
Annual Oper. Cash Flow (mil): IBM - $12,314 and Ind. ? NA
1 Yr Oper. Cash Flow (mil): IBM ? 26.8% and Ind. ? 30.43%
3 Yr Oper. Cash Flow (mil): IBM - -4.2% and Ind. - -10.9%
5 Yr Oper. Cash Flow (mil): IBM - -2.2% and Ind. ? -7.07%
10 Yr Oper. Cash Flow (mil): IBM ? NA and Ind. ? 16.86%
Annual Price/Cash Flow: IBM ? 12.8
1 Yr Avg. Price/Cash Flow: IBM ? 12.8%
3 Yr Avg. Price/Cash Flow: IBM ? 14.4%
5 Yr Avg. Price/Cash Flow: IBM ? 13.8%
10 Yr Avg. Price/Cash Flow: IBM ? 11%
Share Information
IBM
Market Cap (mil) - $158,708.47
Shares Outstanding (000?s) ? 1,699,416
# of institutional Shareholders ? 3422
Shares held by institutions  (000?s) ? 948,066
% Held by institutions ? 55.1% 
*Industry - Diversified Computer Sys
*N/A - Not Available
*N/C - Not Calculable
*N/E - Negative Earnings
*N/M - Not Meaningful
*N/S - Negative Stockholders Equity



Question 3
With all of this information I have given you, can you use the CAPM to
calculate IBM's required rate of return or ks?
Question 4
Use the CGM to find the current stock price for IBM. We will call this
the theoretical price or Po.
Question 5
I need to  find IBM's current stock quote, or P. Then compare Po and P
to see if there are any differences? Can you explain what factors may
be at work for such a difference in the two prices?
Question 6
Please assume the market risk premium has increased from 7.5% to 10%;
and this increase is due only to the increased risk in the market. In
other words, assume krf and stock's beta remains the same for this
exercise. What will the new price be? Explain what happened.
Question 7
Please recalculate IBM's stock using the P/E ratio model and the
needed info found in the IBM data above, Explain why the present stock
price is different from the price arrived at using CGM.
Price and Valuation View chart

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Clarification of Question by wiredog-ga on 17 May 2005 04:42 PDT

I need this by EOB of the 18th.

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Request for Question Clarification by livioflores-ga on 17 May 2005 08:27 PDT

What is the question in "question 1"?

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Clarification of Question by hayesslave-ga on 17 May 2005 08:37 PDT

Sory - that is point 1.  I already answered.  The bond rate is 4.12 as
of yesterday.  This info. is needed to answer the rest of the
questions.  I think that the value for the market risk premium is 7.%
%.

Hope this clears it up.

I don't get it.  What's all this have to do with your fiancé? (and
congratulations, by the way).

Months back, someone warned that the exam-question season would come in May.

What about a pact that we commenters just won't post anything to
questions that are obviously homework or exam questions if there are
misspellings?

Researchers can do as they choose.

That is fine.  Do not need it for homework (ha).  Been out of school
for some time now.  Finances are needed to acquire a Fiance'.  I am
doing some research.  Need some help on a report and thought that this
would be the fastest way.

That is intriguing:  "wiredog" :: "hayesslave"?

I would have thought G-A's system would only allow the original "user"
to post a clarification  - and not the same person using a different
"user" name ...

Does internet give outlet to otherwise suppressed split personalities?

Question - Will I get notified if this question does not get answered?
 My boss is hammering me to get this done.  If it is not going to get
answered how do I know when to pull if off.  He told me to get the
info to him today at EOB.  Lost?????

Hi,
You will get an email with every posting (if you haven't turned off that facility).
GA Researcher Livioflores-ga, who posted the clarification, is someone
who has an interest in this kind of question, but it seems that it has
faded.
My apologies for my flippant comments, but sometimes any "traffic" on
a question attracts scrolling browsers.

Hi!!

I saw the question and note that something was missed in the named
Question 1, this is why I request for a clarification, not only for me
(I have not enough financial skills to answer this) but for any other
researcher that could be interested in this question.