Problem Set 1
Problem Set 1
Problem Set 1
STOCK VALUATION
Robert Balik and Carol Kiefer are senior vice presidents of the Mutual of Chicago Insurance
Company. They are co-directors of the company’s pension fund management division, with Balik
having responsibility for fixed-income securities (primarily bonds) and Kiefer being responsible
for equity investments. A major new client, the California League of Cities, has requested that
Mutual of Chicago present an investment seminar to the mayors of the represented cities, and
Balik and Kiefer, who will make the actual presentation, have asked you to help them. To illustrate
the common stock valuation process, Balik and Kiefer have asked you to analyze the Bon Temps
Company, an employment agency that supplies word-processor operators and computer
programmers to businesses with temporarily heavy workloads.