Each member works as a Financial Analyst. In this project you are required to utilize

the market model in analyzing individual stock risk. (Total Marks: 72)

a) The Stock Price Data Sample on Canvas contains 401 stocks for 121 recent consecutive

months from Dec 31, 2013 to Dec 31, 2023 (so that you will end up with 120 monthly

returns). Ignore dividends. Make sure that the stocks you picked have a good spread of

annualized returns in the range of 5-30 percent. Choose a number of stocks (the number

of stocks is the number of students in the group), such that the ticker symbol of each

stock begins with the same letter as the last name or first name of each group member. If

you do not find enough stocks using this criterion, then choose stocks such that the ticker

symbol begins with the same letter as the second letter in the members last name or first

name, and so on. Students in one group cannot pick the same stock. (5)

b) For each stock, report its SIC Code (SICCD). According to the U.S. SEC website of SIC

Code list (https://www.sec.gov/search-filings/standard-industrial-classification-sic-

code-list), describe the industry that the company belongs to. (5)

c) For each stock, estimate 120 monthly returns from January 2014 to December 2023.

Calculate the total risk, measured by volatility (standard deviation) of each stock. (5)

d) Obtain the market factor and risk-free return data from the Stock Price Data Sample Excel

file. Copy the market factor data next to each stocks return. (2)

e) For each stock, estimate its excess return in percentage. Excess return is the spread

between stock return and the risk-free return. (5)

f) For each stock, provide a scatter plot of stock excess return and the market factor. Based

on your own judgment(s), does the market factor seem to explain individual stock

returns? (5)

g) For each stock, provide a histogram of monthly stock returns. By your own judgement(s),

is stock return normally distributed? (5)

h) Estimate the market model in the form of CAPM. For each stock, report the beta. For

each stock, is beta statistically significant at the 5% level? What are two hypotheses in

testing the significance of beta? What test do we use to examine the significance? (15)

3

i) What stocks are riskier than the market index, and what stocks are safer than the market

index? Please provide your reason(s). (5)

j) For each stock, report the goodness-of-fit measure as R-squared. Please use your own

words to interpret the reported number. (10)

k) If one expects the stock market yields a 5% return, according to your regression results,

what are individual stock returns of all selected stocks? (5)

l) Compare the risk-adjusted fund performance (measured by alpha) for every stock using

the CAPM as a benchmark. Based on your subjective idea(s), which stock is potentially

the best investment according to its alpha? (5)

m) The efficient market hypothesis states that investors are rational, and in turn, stock returns

are not predictable. As a result, stock return is a random walk and assumed to be normally

distributed. Please check the normality of the regression errors (residuals). Based on your

own judgement(s), is regression error term normally distributed? Does it support the

efficient market hypothesis? (5)

..

[C] Monthly Returns and Measured Risk

[D] Market Factor and Risk Free Return

[E] STOCK Excess Return in Percentage

[F & G] Scatter Plots and Histograms

[H] Market Model (CAPM)

[I] Market Index Evaluation

[J] Goodness-of-Fit

[K] Stock Returns

[L] Comparison Using Risk Adjusted Fund Performance

[M] Regression Error Term

.

..

my stock is McDonalds (MCD)

Each member works as a Financial Analyst. In this project you are required to utilize

the market model in analyzing individual stock risk. (Total Marks: 72)

a) The Stock Price Data Sample on Canvas contains 401 stocks for 121 recent consecutive

months from Dec 31, 2013 to Dec 31, 2023 (so that you will end up with 120 monthly

returns). Ignore dividends. Make sure that the stocks you picked have a good spread of

annualized returns in the range of 5-30 percent. Choose a number of stocks (the number

of stocks is the number of students in the group), such that the ticker symbol of each

stock begins with the same letter as the last name or first name of each group member. If

you do not find enough stocks using this criterion, then choose stocks such that the ticker

symbol begins with the same letter as the second letter in the members last name or first

name, and so on. Students in one group cannot pick the same stock. (5)

b) For each stock, report its SIC Code (SICCD). According to the U.S. SEC website of SIC

Code list (https://www.sec.gov/search-filings/standard-industrial-classification-sic-

code-list), describe the industry that the company belongs to. (5)

c) For each stock, estimate 120 monthly returns from January 2014 to December 2023.

Calculate the total risk, measured by volatility (standard deviation) of each stock. (5)

d) Obtain the market factor and risk-free return data from the Stock Price Data Sample Excel

file. Copy the market factor data next to each stocks return. (2)

e) For each stock, estimate its excess return in percentage. Excess return is the spread

between stock return and the risk-free return. (5)

f) For each stock, provide a scatter plot of stock excess return and the market factor. Based

on your own judgment(s), does the market factor seem to explain individual stock

returns? (5)

g) For each stock, provide a histogram of monthly stock returns. By your own judgement(s),

is stock return normally distributed? (5)

h) Estimate the market model in the form of CAPM. For each stock, report the beta. For

each stock, is beta statistically significant at the 5% level? What are two hypotheses in

testing the significance of beta? What test do we use to examine the significance? (15)

3

i) What stocks are riskier than the market index, and what stocks are safer than the market

index? Please provide your reason(s). (5)

j) For each stock, report the goodness-of-fit measure as R-squared. Please use your own

words to interpret the reported number. (10)

k) If one expects the stock market yields a 5% return, according to your regression results,

what are individual stock returns of all selected stocks? (5)

l) Compare the risk-adjusted fund performance (measured by alpha) for every stock using

the CAPM as a benchmark. Based on your subjective idea(s), which stock is potentially

the best investment according to its alpha? (5)

m) The efficient market hypothesis states that investors are rational, and in turn, stock returns

are not predictable. As a result, stock return is a random walk and assumed to be normally

distributed. Please check the normality of the regression errors (residuals). Based on your

own judgement(s), is regression error term normally distributed? Does it support the

efficient market hypothesis? (5)

Assignment Brief FIN610

Companies Selected:

Jarir Marketing Company

United Electronics Company (eXtra)

Hi,

Please read the following assignment requirements carefully and follow them strictly. This brief covers what the professor expects, the format, academic integrity rules, and the data sources you should use for reliable financial information.

TASK OBJECTIVE

We are required to complete a comparative financial analysis of two companies in the retail sector, including financial ratios and an ESG (Environmental, Social, Governance) evaluation. The work must be data-driven, analytical, and professionally presented.

REQUIRED STRUCTURE ( 4,000 words)

The report should be organized into the following sections:

1? Company Overview & ESG Context

For each company, provide:

Brief company background and operations

Market position in the retail sector

Core products and segments

ESG overview (environmental policies, social responsibility, governance structure)

Comparative ESG summary between Jarir and eXtra

The focus must be on analysis, not lengthy description.

2? Financial Ratio Calculations

Use the last two years financials (e.g., 2023 and 2024).

Calculate the following ratios for both companies:

Liquidity:

Current Ratio

Quick Ratio (if available)

Profitability:

Net Profit Margin

Return on Assets (ROA)

Return on Equity (ROE)

Efficiency:

Total Asset Turnover

Inventory Turnover

Leverage:

Debt-to-Equity Ratio

Debt Ratio

For each ratio:

Show the formula

Present calculated values for both years and both companies

Explain what the ratio means and why it matters

The Excel file must show all formulas and calculations.

3? Financial Performance Analysis

Discuss:

Which company is financially stronger?

Which ratios are improving vs declining?

Are liquidity or leverage ratios a concern?

Who manages assets better?

Which firm shows better profitability?

Use evidence from ratios, trends, and year-on-year comparison.

4? ESG & Financial Linkage

This section must tie ESG performance to financial results:

How do environmental or social initiatives influence profitability or risk?

Does governance quality help financial stability?

Is there a visible relationship between ESG strength and financial outcomes?

Answer this by integrating financial data with ESG disclosures.

5? Managerial Recommendations

Provide 34 practical, finance-based recommendations for each company or both combined, such as:

Improve inventory efficiency

Strengthen working capital management

Reduce financial risk by adjusting capital structure

Enhance ESG reporting to attract investors

Each recommendation must be clearly justified with ratio evidence.

POWERPOINT PRESENTATION (1012 slides)

In addition to the Word report, prepare a professional PowerPoint that includes:

Title slide

Company overviews (Jarir & eXtra)

Key financial results

Liquidity comparison

Profitability comparison

Efficiency comparison

Leverage comparison

ESG comparison

Strategic recommendations

Conclusion

The slides must be:

Visually clean

Graph-based (bar charts, line graphs)

Minimal text

Executive presentation quality

You should be able to present it in 57 minutes comfortably.

ACADEMIC INTEGRITY REQUIREMENTS

These are crucial:

Turnitin similarity must NOT exceed 15%

AI content must NOT exceed 15%

All content must be original interpretation and analysis

No direct copying from reports without citation

Every data point must be referenced

REFERENCING DETAILS

Use APA 7th edition formatting:

In-text citation example:

(Author, Year) or (Company Name, Year)

Reference list example:

Jarir Marketing Company. (2024). Annual report 2023/2024. Retrieved from [URL]

United Electronics Co. (eXtra). (2024). Annual financial statements. Retrieved from [URL]

At the end of the report, include a numbered reference list (1, 2, 3, ) matching in-text citations.

SOURCES FOR FINANCIAL DATA (OFFICIAL)

1)

Jarir Marketing Company

Saudi Tadawul (financial statements)

https://www.saudiexchange.saSearch for Jarir Marketing Company Annual Reports Financial Statements

Jarir Investor Relations

https://ir.jarir.comAnnual reports, financial highlights, ESG/disclosures

2)

United Electronics Co. (eXtra)

Saudi Tadawul (financial statements)

https://www.saudiexchange.saSearch United Electronics Co. or eXtra Annual Reports

eXtra Investor Relations

https://www.extra.net.sa/en/investor-relationsAnnu… reports and financial data

3) ESG / Sustainability Disclosures

If available in:

Jarir sustainability section ESG reports

eXtra corporate governance reports

Saudi Exchange ESG disclosures

ADDITIONAL NOTES

Make sure to download the actual annual report PDFs for both 2023 and 2024.

Use official sources only (Tadawul, investor relations websites).

Extract the income statement, balance sheet, and cash flow items needed for ratio calculations.

SUBMISSION REQUIREMENTS

You must submit:

Word Report (~4,000 words)

Excel file (with all calculations and formulas visible)

PowerPoint presentation (1012 slides)

If anything is unclear, please confirm before starting so that the deliverables match the assignment exactly.

Assignment Brief FIN610

Companies Selected:

• Jarir Marketing Company
• United Electronics Company (eXtra)

Hi,

Please read the following assignment requirements carefully and follow them strictly. This brief covers what the professor expects, the format, academic integrity rules, and the data sources you should use for reliable financial information.

TASK OBJECTIVE

We are required to complete a comparative financial analysis of two companies in the retail sector, including financial ratios and an ESG (Environmental, Social, Governance) evaluation. The work must be data-driven, analytical, and professionally presented.

REQUIRED STRUCTURE ( 4,000 words)

The report should be organized into the following sections:

1? Company Overview & ESG Context

For each company, provide:

• Brief company background and operations
• Market position in the retail sector
• Core products and segments
• ESG overview (environmental policies, social responsibility, governance structure)
• Comparative ESG summary between Jarir and eXtra

The focus must be on analysis, not lengthy description.

2? Financial Ratio Calculations

Use the last two years financials (e.g., 2023 and 2024).

Calculate the following ratios for both companies:

Liquidity:

• Current Ratio
• Quick Ratio (if available)

Profitability:

• Net Profit Margin
• Return on Assets (ROA)
• Return on Equity (ROE)

Efficiency:

• Total Asset Turnover
• Inventory Turnover

Leverage:

• Debt-to-Equity Ratio
• Debt Ratio

For each ratio:

Show the formula

Present calculated values for both years and both companies

Explain what the ratio means and why it matters

The Excel file must show all formulas and calculations.

3? Financial Performance Analysis

Discuss:

• Which company is financially stronger?
• Which ratios are improving vs declining?
• Are liquidity or leverage ratios a concern?
• Who manages assets better?
• Which firm shows better profitability?

Use evidence from ratios, trends, and year-on-year comparison.

4? ESG & Financial Linkage

This section must tie ESG performance to financial results:

• How do environmental or social initiatives influence profitability or risk?
• Does governance quality help financial stability?
• Is there a visible relationship between ESG strength and financial outcomes?

Answer this by integrating financial data with ESG disclosures.

5? Managerial Recommendations

Provide 34 practical, finance-based recommendations for each company or both combined, such as:

• Improve inventory efficiency
• Strengthen working capital management
• Reduce financial risk by adjusting capital structure
• Enhance ESG reporting to attract investors

Each recommendation must be clearly justified with ratio evidence.

POWERPOINT PRESENTATION (1012 slides)

In addition to the Word report, prepare a professional PowerPoint that includes:

1. Title slide
2. Company overviews (Jarir & eXtra)
3. Key financial results
4. Liquidity comparison
5. Profitability comparison
6. Efficiency comparison
7. Leverage comparison
8. ESG comparison
9. Strategic recommendations
10. Conclusion

The slides must be:

Visually clean

Graph-based (bar charts, line graphs)

Minimal text

Executive presentation quality

You should be able to present it in 57 minutes comfortably.

ACADEMIC INTEGRITY REQUIREMENTS

These are crucial:

• Turnitin similarity must NOT exceed 15%
• AI content must NOT exceed 15%
• All content must be original interpretation and analysis
• No direct copying from reports without citation
• Every data point must be referenced

REFERENCING DETAILS

Use APA 7th edition formatting:

In-text citation example:

(Author, Year) or (Company Name, Year)

Reference list example:

Jarir Marketing Company. (2024). Annual report 2023/2024. Retrieved from [URL]

United Electronics Co. (eXtra). (2024). Annual financial statements. Retrieved from [URL]

At the end of the report, include a numbered reference list (1, 2, 3, ) matching in-text citations.

SOURCES FOR FINANCIAL DATA (OFFICIAL)

1)

Jarir Marketing Company

Saudi Tadawul (financial statements)

• for Jarir Marketing Company Annual Reports Financial Statements

Jarir Investor Relations

• reports, financial highlights, ESG/disclosures

2)

United Electronics Co. (eXtra)

Saudi Tadawul (financial statements)

• United Electronics Co. or eXtra Annual Reports

eXtra Investor Relations

• reports and financial data

3) ESG / Sustainability Disclosures

If available in:

• Jarir sustainability section ESG reports
• eXtra corporate governance reports
• Saudi Exchange ESG disclosures

ADDITIONAL NOTES

Make sure to download the actual annual report PDFs for both 2023 and 2024.

Use official sources only (Tadawul, investor relations websites).

Extract the income statement, balance sheet, and cash flow items needed for ratio calculations.

SUBMISSION REQUIREMENTS

You must submit:

1. Word Report (~4,000 words)
2. Excel file (with all calculations and formulas visible)
3. PowerPoint presentation (1012 slides)

If anything is unclear, please confirm before starting so that the deliverables match the assignment exactly.

Attached Files (PDF/DOCX): S2225489 Amira Dissertation 2025.docx

Note: Content extraction from these files is restricted, please review them manually.

CASE 1

Time Value of Money: A Home Investment Decision Dilemma

Focus

Cash Flow Timing, Opportunity Cost, and Investment Choice

Case Background

A senior executive enrolled in the Executive MBA program is evaluating a residential real estate investment in Riyadh as part of a broader personal investment portfolio. While the investment is personal in nature, the executive recognizes that the decision closely resembles corporate capital investment decisions, particularly in terms of cash flow timing, opportunity cost, uncertainty, and strategic flexibility.

The executive must choose between immediate commitment and delayed entry, each with distinct financial profiles and risk exposures. In addition to the expected cash flows, the executive is concerned about liquidity, future flexibility, and the cost of committing capital today versus preserving it for alternative opportunities.

Investment Alternatives

Option A Immediate Purchase

• Purchase price today (Year 0): SAR 1,800,000
• Expected annual gross rental income (Year 1 onward): SAR 150,000
• Expected annual operating and maintenance costs: SAR 30,000
• Net rental cash inflow (before growth): SAR 120,000
• Expected annual rental growth rate: 2%
• Expected vacancy risk:
• 1 vacant year during the holding period (expected to occur around Year 7)
• Holding period: 15 years
• Expected resale value at Year 15: SAR 2,200,000
• Transaction and selling costs at exit: 5% of resale value

Option B Delayed Purchase

• Purchase occurs after 3 years
• Expected purchase price at Year 3: SAR 2,050,000
• Expected annual gross rental income (from Year 4 onward): SAR 180,000
• Expected annual operating and maintenance costs: SAR 30,000
• Net rental cash inflow (before growth): SAR 150,000
• Expected annual rental growth rate: 2.5%
• Expected vacancy risk:
• Lower vacancy risk due to newer development and stronger demand
• Holding period: 15 years from purchase
• Expected resale value at exit: SAR 2,600,000
• Transaction and selling costs at exit: 5% of resale value

Capital Allocation Considerations

• If Option B is selected, the executive can invest the SAR 1,800,000 for the first three years in a low-risk financial instrument yielding 4% annually.
• The executives overall required rate of return for real estate investments is 8%, reflecting risk tolerance and alternative investment opportunities.
• The executive values flexibility and is concerned about committing capital too early in an uncertain market environment.

Executive Decision Context

The executive must decide whether the earlier cash flows and earlier asset ownership of Option A outweigh the higher expected cash flows, lower vacancy risk, and deferred capital commitment of Option B.

This decision mirrors corporate finance trade-offs between:

• Immediate investment vs. waiting
• Higher certainty vs. higher expected return
• Early cash flows vs. strategic flexibility

Required Tasks (Executive-Level Analysis)

1. Cash Flow Evaluation

• Estimate and structure the expected cash flows for both options.
• Incorporate growth, vacancy risk, and exit values into the analysis.

1. Time Value of Money Analysis

• Evaluate both options using appropriate present value techniques.
• Explicitly consider the opportunity cost of capital in Option B.

1. Comparative Assessment

• Compare the investment attractiveness of Option A and Option B based on timing, risk, and value creation.

1. Executive Recommendation

• Recommend one option and clearly justify the decision using financial reasoning.

1. Qualitative Considerations

• Identify non-financial factors that could influence the final decision (e.g., flexibility, risk tolerance, market uncertainty).

Important Note to Students

This case is designed to assess individual executive judgment and decision-making, rather than mechanical accuracy alone. You are expected to demonstrate independent financial reasoning, thoughtful assumption-setting, and the ability to justify decisions under uncertainty. There is no single correct answer; evaluation is based on the clarity, logic, and defensibility of your analysis.

You must clearly state and justify at least three key assumptions underlying your analysis. Assumptions should be specific to the case context and supported by sound reasoning. Generic, unsupported, or externally copied assumptions will receive limited credit.

In addition to presenting your final recommendation, you must explain why the alternative option was rejected and identify the conditions under which your decision would change.

Finally, you are required to relate this investment decision to your own professional experience (or organizational context) by briefly discussing a similar decision you have encountered, highlighting key similarities and differences.