Case Study on Holding Period Returns and Total Returns to Shareholders

FINANCE
STUDENT ID:
[Pick the date]

Case Study 1
1) The Holding Period Returns can be computed using the formula shown below.
Holding period returns = (Pricen+1 – Pricen + Dividend)/ Pricen
The closing adjusted prices as on June 30 for the two companies are given below.
The dividend data for the two companies during June 30, 2013 to June 30, 2018 is shown below.
Based on the above data the annual holding returns of the two stocks are indicated as follows.
2) The expected returns based on the historical performance of the stock would be average
returns on the stock.

Expected Returns on Dominos Pizza Enterprises = (104.41+ 70.94+95.11-21.12+4.71)/5 =
50.81% p.a.
Expected Returns on Retail Food Group = (27.05 + 30.26 + 12.40-5.13 -84.83)/5 = -4.05%
3) The total returns to shareholders needs to be computed for each company based on the
formula provided.
The relevant input values for Domino Pizza Enterprises are as follows.
P5 = $ 51, P0 = $9.78, Total dividends = $3.288
Hence, total returns of shareholders (DPE) = [(51 + 3.288)/9.78]1/5 -1 = 40.89%
The relevant input values for Retail Food Group are as follows.
P5 = $ 0.54, P0 = $3.1785, Total dividends = $1.1275
Hence, total returns of shareholders (DPE) = [(0.54 + 1.1275)/3.1785]1/5 -1 = -12.10%
4) Based on the above computations, it is apparent that Dominos Pizza Enterprises has given
significant superior returns in comparison to RFG over the last five years. The total returnof
shareholders on DPE has been about 41% p.a.in comparison to negative returns of 12% p.a.
on the RFG stock.
5) The relevant inputs for the two companies for the computation of the requisite rations for the
2017/2018 financial year is shown below.