One Year Ago, Matt Bought 100 Shares of ACE Corp

question 77

Essay

One year ago, Matt bought 100 shares of ACE Corp. stock for $5,619 including commission. He is about to sell the ACE stock for $6,528 net of commissions. When he made the purchase the S&P 500 index was at 907; now it is 1070. The beta of ACE stock is 0.98, and the market's risk-free rate is 4.0%. No dividends were paid. Based on Jensen's measure, did Matt make a good purchase?

---

Definitions:

Cash Balance

The amount of cash held by an entity at any given time, visible on financial statements.

Cash Receipts

The money received by a business during a given period, including revenues from sales, services, and other receipts.

Raw Material B

Basic materials used in the production process to manufacture goods, referred to here as "Material B."