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MM 6055 CAPITAL MARKET

MBA R47 & 48 August 2013 Henny Zahrany (29112551)

MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2013

EXECUTIVE SUMMARY

I.

Objective

Telkom stock price dividend history from 2010-2013. An investor buy three lots of Telkom shares in the beginning of 2010, buy another two lots at the beginning of 2011, sells one lot at the beginning of 2010 & sells four remaining shares at the beginning of 2013. 1. What are the arithmetic & geometric time weighted rate of return for the investors? 2. What is the Rupiah weighted rate of return?

II. Analysis 1. What are the arithmetic & geometric time weighted rate of return for the investors? Data: Beginning of 2010: Buy 3 lots Beginning of 2011: Buy 2 lots Beginning of 2012: Sells 1 lot Beginning of 2013: Sells 4 lots Price of share at the beginning of 2010: 1885 Price of share at the beginning of 2011: 1535 Price of share at the beginning of 2012: 1435 Price of share at the beginning of 2013: 1862.5 (Theres a stock split, but happened after the selling).

Time Weighted Returns Cash Flow


Year 2010Year 2011- Year 20122011 2012 2013 2010 2011 2011 2012 2012 2013 -1885 244.94 -1535 251.4 - 266.8739 05 64 1392. 93 5

1535

1392. 5

1862.5

HPR year 2011 HPR year 2012 HPR year 2013

-6% 7% 53%

a) Arithmetic Average

HPR avg = (-6% + 10% + 48%)/3= 18%

b) Geometric Average

HPR avg= [(1-6%)*(1+7%)*(1+53%)]1/3 1= 16% 2. What is the Rupiah weighted rate of return? The rupiah weighted rate of return is equal the IRR for the cash flows.
TOTAL CASH FLOW EACH YEAR Year cash flow

2010 282750 0

2011 367410. 75 153500 0 116758 9

2012 62866 0 71750 0 13461 60

2013 53374 8 37250 00 42587 48

NET

282750 0

NPV= Rp.0= -2827500/(1+IRR)0 -1167589/(1+IRR)1 +1346160/(1+IRR)2 +4258748/(1+IRR)3 IRR= 14.7%

III. Conclusion and Recommendation 3.1 Conclusion


The Arithmetic average or the average HPR for a time series of return without compounding for all the transactions starting from the beginning of 2010 until the beginning of 2013 is 18%. While the Geometric average or the average HPR for a time series of return with compounding is 15%. The rupiah weighted average return or the IRR for the cash flows is 14.7%.

3.2 Recommendation : Overall the average return of the transactions compounded or not gives a positive rate of return or gain a profit. Even the average of return when the NPV of the cash flows is zero is counted for 14.7%. Reference http://finance.yahoo.com/q/hp? s=TLKM.JK&a=00&b=1&c=2010&d=08&e=9&f=2013&g=m