Analysis of a Firm's Risk and Return: Campbell Soup Company

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One way to express an investment’s return in percentage returns is by calculating the rate of return. The rate of return conveys the gain or loss of an investment for each unit invested. The 2008 returns for both the CPB and HNZ were negative returns .The 2009 returns for the CPB indicated a year of recovery for the stock when it gained over 433% from the previous year’s losses. Its competitors both experienced exponential growth with GIS experiencing an above average increase on ROR with HNZ having an even higher return. The two competitors had a stronger return than CPB, which was recovering from a negative performance in the previous year. In 2010 the company experienced a negative return and losses with their stock declining. GIS had a bad year as their stock tumbled and was in the negative with an over 227% percent decline. The CPB Stock experienced a lower rate of return but still managed to outperform GIS stock. In retrospect its 2 major competitors, GIS and the HNZ had a good year with their returns indicating a normal to strong financial performance and positive return. To calculate the expected rate of return for 2012, I made assumptions based on the 10 year returns of the companies, and I classified the trends into – best case for the highest returns, normal for the average returns and worst case for the weak returns. The probabilities for each company were based on each company’s individual performance. The expected rate for CPB is somewhat conservative; however, given their past performance in the last year this is a generous return. It was interesting to note that CPB Company's rate of return has high variability as the company has experienced a wide range of returns in the past 10 years. The past 5 years have notably been challenging with selling prices falling below purchase prices in 4 years; this indicates low performance of the stock and reduced investor confidence in the stock. The probability distribution for possible outcomes for the...
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