Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Edwards Lifesciences Corp. (NYSE:EW)

Capital Asset Pricing Model (CAPM)

Intermediate level

Rates of Return

Edwards Lifesciences Corp., monthly rates of return

Microsoft Excel LibreOffice Calc
Edwards Lifesciences Corp. (EW) Standard & Poor’s 500 (S&P 500)
t Date PriceEW,t1 DividendEW,t1 REW,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 20.89 1,994.99
1. Feb 28, 2015 22.17 6.13% 2,104.50 5.49%
2. Mar 31, 2015 23.74 7.08% 2,067.89 -1.74%
3. Apr 30, 2015 21.11 -11.08% 2,085.51 0.85%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2019 81.65 2.76% 3,140.98 3.40%
59. Dec 31, 2019 77.76 -4.76% 3,230.78 2.86%
Average: 2.62% 0.88%
Standard deviation: 8.64% 3.45%
Edwards Lifesciences Corp. (EW) Standard & Poor’s 500 (S&P 500)
t Date PriceEW,t1 DividendEW,t1 REW,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2015 20.89 1,994.99
1. Feb 28, 2015 22.17 6.13% 2,104.50 5.49%
2. Mar 31, 2015 23.74 7.08% 2,067.89 -1.74%
3. Apr 30, 2015 21.11 -11.08% 2,085.51 0.85%
4. May 31, 2015 21.79 3.22% 2,107.39 1.05%
5. Jun 30, 2015 23.74 8.95% 2,063.11 -2.10%
6. Jul 31, 2015 25.36 6.82% 2,103.84 1.97%
7. Aug 31, 2015 23.48 -7.41% 1,972.18 -6.26%
8. Sep 30, 2015 23.70 0.94% 1,920.03 -2.64%
9. Oct 31, 2015 26.19 10.51% 2,079.36 8.30%
10. Nov 30, 2015 27.17 3.74% 2,080.41 0.05%
11. Dec 31, 2015 26.33 -3.09% 2,043.94 -1.75%
12. Jan 31, 2016 26.07 -0.99% 1,940.24 -5.07%
13. Feb 29, 2016 29.00 11.24% 1,932.23 -0.41%
14. Mar 31, 2016 29.40 1.38% 2,059.74 6.60%
15. Apr 30, 2016 35.40 20.41% 2,065.30 0.27%
16. May 31, 2016 32.83 -7.26% 2,096.95 1.53%
17. Jun 30, 2016 33.24 1.25% 2,098.86 0.09%
18. Jul 31, 2016 38.17 14.83% 2,173.60 3.56%
19. Aug 31, 2016 38.39 0.58% 2,170.95 -0.12%
20. Sep 30, 2016 40.19 4.69% 2,168.27 -0.12%
21. Oct 31, 2016 31.74 -21.03% 2,126.15 -1.94%
22. Nov 30, 2016 27.62 -12.98% 2,198.81 3.42%
23. Dec 31, 2016 31.23 13.07% 2,238.83 1.82%
24. Jan 31, 2017 32.08 2.72% 2,278.87 1.79%
25. Feb 28, 2017 31.35 -2.28% 2,363.64 3.72%
26. Mar 31, 2017 31.36 0.03% 2,362.72 -0.04%
27. Apr 30, 2017 36.56 16.58% 2,384.20 0.91%
28. May 31, 2017 38.36 4.92% 2,411.80 1.16%
29. Jun 30, 2017 39.41 2.74% 2,423.41 0.48%
30. Jul 31, 2017 38.39 -2.59% 2,470.30 1.93%
31. Aug 31, 2017 37.89 -1.30% 2,471.65 0.05%
32. Sep 30, 2017 36.44 -3.83% 2,519.36 1.93%
33. Oct 31, 2017 34.08 -6.48% 2,575.26 2.22%
34. Nov 30, 2017 39.07 14.64% 2,647.58 2.81%
35. Dec 31, 2017 37.57 -3.84% 2,673.61 0.98%
36. Jan 31, 2018 42.19 12.30% 2,823.81 5.62%
37. Feb 28, 2018 44.56 5.62% 2,713.83 -3.89%
38. Mar 31, 2018 46.51 4.38% 2,640.87 -2.69%
39. Apr 30, 2018 42.45 -8.73% 2,648.05 0.27%
40. May 31, 2018 45.77 7.82% 2,705.27 2.16%
41. Jun 30, 2018 48.52 6.01% 2,718.37 0.48%
42. Jul 31, 2018 47.48 -2.14% 2,816.29 3.60%
43. Aug 31, 2018 48.08 1.26% 2,901.52 3.03%
44. Sep 30, 2018 58.03 20.69% 2,913.98 0.43%
45. Oct 31, 2018 49.20 -15.22% 2,711.74 -6.94%
46. Nov 30, 2018 54.00 9.76% 2,760.17 1.79%
47. Dec 31, 2018 51.06 -5.44% 2,506.85 -9.18%
48. Jan 31, 2019 56.81 11.26% 2,704.10 7.87%
49. Feb 28, 2019 56.43 -0.67% 2,784.49 2.97%
50. Mar 31, 2019 63.78 13.02% 2,834.40 1.79%
51. Apr 30, 2019 58.69 -7.98% 2,945.83 3.93%
52. May 31, 2019 56.90 -3.05% 2,752.06 -6.58%
53. Jun 30, 2019 61.58 8.22% 2,941.76 6.89%
54. Jul 31, 2019 70.95 15.22% 2,980.38 1.31%
55. Aug 31, 2019 73.95 4.23% 2,926.46 -1.81%
56. Sep 30, 2019 73.30 -0.88% 2,976.74 1.72%
57. Oct 31, 2019 79.46 8.40% 3,037.56 2.04%
58. Nov 30, 2019 81.65 2.76% 3,140.98 3.40%
59. Dec 31, 2019 77.76 -4.76% 3,230.78 2.86%
Average: 2.62% 0.88%
Standard deviation: 8.64% 3.45%

Show all

1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of EW during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t


Systematic Risk (β) Estimation

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VarianceEW 74.57
VarianceS&P 500 11.88
CovarianceEW, S&P 500 9.07
Correlation coefficientEW, S&P 5001 0.30
βEW2 0.76
αEW3 1.95

Calculations

1 Correlation coefficientEW, S&P 500
= CovarianceEW, S&P 500 ÷ (Standard deviationEW × Standard deviationS&P 500)
= 9.07 ÷ (8.64 × 3.45)

2 βEW
= CovarianceEW, S&P 500 ÷ VarianceS&P 500
= 9.07 ÷ 11.88

3 αEW
= AverageEW – βEW × AverageS&P 500
= 2.620.76 × 0.88


Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF 1.41%
Expected rate of return on market portfolio2 E(RM) 12.56%
Systematic risk (β) of Edwards Lifesciences Corp.’s common stock βEW 0.76
 
Expected rate of return on Edwards Lifesciences Corp.’s common stock3 E(REW) 9.93%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(REW) = RF + βEW [E(RM) – RF]
= 1.41% + 0.76 [12.56%1.41%]
= 9.93%