ECONOMICS PROJECT REPORT

Professor: Dr Ritu Srivastava

Forecasting Global Performance for a Mickey Mouse Organization

Submitted on September7th, 2016

Shubham Srivastava (16DM218)

Somya Sharma (16DM222)
Sreekanth S. Pillai (16DM225)
Tantril Bhatia (16DM236)
Tunhina Pahwa (16DM240)
Zara Khan (16DM258)

Group 2
Subject name - Managerial economics
Class - PGDM (Section D)

Birla Institute of Management Technology

Greater Noida
 CONTENT

1. Abstract
2. Introduction
3. What do you mean by forecasting?
4. But why use forecasting?
5. Methods of Forecasting
6. Elasticity
7. Disadvantages of forecasting
8. Parameters considered under Regression Analysis of Models.
9. Simple Linear Regression (Case 1 &2 )
10.Multiple Regression (Case 3&4)
11.Conclusion
12.Reference
Abstract:

We had to forecast the global performance of Walt Disney (Mickey Mouse) organization. After going through the
case study we did the data extraction, regression analysis, and then we interpreted that data. We took the reference
of Dominic Salvatore for defining all the parameters, and did all the steps accordingly.

Introduction:
The Walt Disney Company is a worldwide known brand which provides entertainment in various forms. It has
operations in 4 business segments-

1. Media networks:
Companys television, radio networks, cable/satellite and international broadcast operations, production and
distribution of television programming, and Internet operations.

2. Parks and resorts:

Four destination resorts in the United States, Japan, and France. Different parks include Animal Kingdom, Magic
Kingdom, Epcot Centre, and Disney-MGM Studios.

3. Studio entertainment:
Disney produces live-action and animated motion pictures, television animation programs, musical recordings, and
live stage plays.

4. Consumer products:
It mainly consists of Cartoon Character merchandises.

To use the limited capital resources efficiently, Disney was able to bring foreign investors to finance both
the Tokyo and Paris facilities. In turn, Disney is responsible for the design and management of both operations,
retains an important equity interest, and enjoys significant royalties on all gross revenues.

Due to its ability to turn a poorly performing company into outstanding operating performance, the Walt
Disney Company is one firm that doesn't mind being called a "Mickey Mouse Organization.

What do mean by forecasting?

Forecasting is a process used to make future predictions about the firm with the help of past present data.
It helps in business analysis to make decisions related to allocation of resources for future development. These
decisions are made analyzing the demand of the product and services offered by the firm.
All the major decisions related to production and expenditures on advertisement are taken using forecasting.

But why use forecasting?

The main aim of forecasting is to improve the firms short term operational decision making and planning for its
long term growth by reducing the risk or uncertainty it faces.
Various techniques of forecasting ranging from nave and inexpensive to sophisticated and expensive tools help us
to predict the following:

Estimate demand
Sales forecasting
Future financial plan
Resource allocation
Methods of forecasting.

Forecasting can be majorly divided into two types:

1. Qualitative forecasting
2. Quantitative forecasting.

Qualitative forecasting methods:

Consumer surveys
Historical analogy
Market experiments
Expert opinion
Delphi method
Opinion poll

Quantitative forecasting methods:

Time series data analysis

Smoothing techniques
Econometric models
Input output forecasting

Elasticity

Elasticity is the degree of responsiveness of percentage change in quantity demanded to percentage change in
price.
Elasticity for linear regression model can be given as:
Y= a + bX

The elasticity is given as:

 Operating Statistics for The Walt Disney Company
(Data in dollars per share)

Cash Capital Year-End

Year Revenues Dividends Earnings Book Value
Flow Spending Stock Price
1980 $0.59 $0.11 $0.10 $0.02 $0.09 $0.69 $1.07
1981 0.65 0.10 0.21 0.02 0.08 0.75 1.09
1982 0.64 0.09 0.38 0.03 0.06 0.80 1.32
1983 0.79 0.11 0.20 0.03 0.06 0.85 1.10
1984 1.02 0.13 0.12 0.03 0.06 0.71 1.25
1985 1.30 0.18 0.12 0.03 0.11 0.76 2.35
1986 1.58 0.24 0.11 0.03 0.15 0.90 3.59
1987 1.82 0.34 0.18 0.03 0.24 1.17 4.94
1988 2.15 0.42 0.37 0.03 0.32 1.48 5.48
1989 2.83 0.55 0.46 0.04 0.43 1.87 9.33
1990 3.70 0.65 0.45 0.05 0.50 2.21 8.46
1991 3.96 0.58 0.59 0.06 0.40 2.48 9.54
1992 4.77 0.72 0.35 0.07 0.51 2.99 14.33
1993 5.31 0.78 0.49 0.08 0.54 3.13 14.21
1994 6.40 0.97 0.65 0.10 0.68 3.50 15.33
1995 7.70 1.15 0.57 0.12 0.84 4.23 19.63
1996 10.50 1.32 0.86 0.14 0.74 7.96 23.25
1997 11.10 1.51 0.95 0.17 0.92 8.54 33.00
1998 11.21 1.52 1.13 0.20 0.90 9.46 30.00
1999 11.34 1.30 1.03 0.20 0.66 10.16 29.25
2000 12.09 1.98 1.02 0.21 0.90 11.65 28.44
2001 12.52 1.89 0.89 0.21 0.98 11.23 20.72
2002 12.40 1.06 0.53 0.21 0.55 11.48 16.31
2003 13.23 1.19 0.51 0.21 0.66 11.63 23.33
2007-20092 18.10 2.25 0.45 0.21 1.65 17.55

Various variables used in regression are as follows:

T-value
T value is a type of coefficient divided by its standard error .Here smaller the value Standard error of regression,
better is the fit of the regression line to the observation or sample points. The standard error of the regression can
be used to estimate confidence intervals for dependent variables.

P value
P value helps us to determine confidence that the independent variable has some correlation with the dependent
variable. It gives us the probability of getting a result equal to or more than the observed value when the null
hypothesis is proved true.

P value should be as low as possible as the low value of p-value indicates that whether we should reject the null
hypotheses or not.
R2 value
It is defined as the proportion of total variation or dispersion in the dependent variable here it is explained by the
variation in the independent variables. The R2 in the regression is the variation between the independent variable to
the dependent variable. R2 value explains us about the variability of y from x. It gives us the information about the
goodness of fit of a model. Higher the value of R2, relation between y and x is considered to be better.

Limitations
R2 value is only used for linear regression model, not for multiple regression models. This is because R2 tells us
about the goodness of single variable not multiple variables.

F value
F value tells us that the variation among the groups. Higher F ratio means the variation obtained is more than what
expected to see by chance.

Significance F
Significance value should be as low as possible as the low value tells that regression analysis is good.
For example,
if Significance of F= 0.040, then there is a 4% chance that the regression output was obtained by chance.

Coefficients
In linear model or multiple model of regression, the coefficient size of each independent variable tells us about the
effect of it on other dependent variable. The signs before independent variables shows a positive and negative
effect on dependent variable, that means if independent variable has positive sign, independent variable will
increase and vice versa.
 Case 1

YEAR EPSI STOCK PRICE

1980 0.09 1.07
1981 0.08 1.09
1982 0.06 1.32
1983 0.06 1.1
1984 0.06 1.25
1985 0.11 2.35
1986 0.15 3.59
1987 0.24 4.94
1988 0.32 5.48
1989 0.43 9.33
1990 0.5 8.46
1991 0.4 9.54
1992 0.51 14.33
1993 0.54 14.21
1994 0.68 15.33
1995 0.84 19.63
1996 0.74 23.25
1997 0.92 33
1998 0.9 30
1999 0.66 29.25
2000 0.9 28.44
2001 0.98 20.72
2002 0.55 16.31
2003 0.66 23.33

EPSI Line Fit Plot

35
30
25
20 STOCK PRICE
STOCK PRICE 15 Predicted STOCK PRICE
10
5
0
0 0.2 0.4 0.6 0.8 1 1.2

EPSI

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.931710916
R Square 0.868085231
Adjusted R Square 0.862089105
Standard Error 3.944629684
Observations 24
ANOVA
Significanc
Df SS MS F eF
Regressio 144.774350 3.77599E-
n 1 2252.70386 2252.70386 8 11
342.322273 15.5601033
Residual 22 5 4
2595.02613
Total 23 3

Standard Upper Lower

Coefficients Error t Stat P-value Lower 95% 95% 90.0% Upper 90.0%
- -
1.47591454 1.12560824 0.27246148 4.72216099 1.39955 -
Intercept -1.661301578 2 6 9 7 8 4.19566 0.873057
2.60863142 12.0322213 3.77599E- 25.9776602 26.9082
EPSI 31.38763074 5 6 11 9 36.7976 3 35.86703

RESIDUAL OUTPUT

Predicted
STOCK
Observation PRICE Residuals
1 1.163585189 -0.093585189
2 0.849708882 0.240291118
3 0.221956267 1.098043733
4 0.221956267 0.878043733
5 0.221956267 1.028043733
6 1.791337804 0.558662196
7 3.046843034 0.543156966
8 5.871729801 -0.931729801
9 8.38274026 -2.90274026
10 11.83537964 -2.505379642
11 14.03251379 -5.572513794
12 10.89375072 -1.35375072
13 14.3463901 -0.016390102
14 15.28801902 -1.078019024
15 19.68228733 -4.352287328
16 24.70430825 -5.074308247
17 21.56554517 1.684454827
18 27.21531871 5.784681293
19 26.58756609 3.412433908
20 19.05453471 10.19546529
21 26.58756609 1.852433908
22 29.09857655 -8.378576552
23 15.60189533 0.708104669
24 19.05453471 4.275465287

INTERPRETATION
Concept used:
In the given case we have used the concept of single linear regression where earning per share is taken in the X-
AXIS and Stock price on Y-AXIS
The equation used of Linear regression:
y=a+bx
Where,
a=intercept/stock price
b=EPSI

Substitution of values:

Here in this question we are getting the equation as:

share price= -$1.666+$31.388*EPSI value
R2 value obtained from table is 86.8%
From regression table we obtained similar values of the equation i.e. intercept value is -1.661 and EPSI
value is 31.388.

Solving the equation for 2007-2009 period:

Pt= -$1.661+$31.388*EPSI

EPSI value for 2007-2009 is $1.65

Putting it in equation, we get

Pt= (-1.661 +51.79) $

Pt=$50.13

Model variables:

R2 (86.8%) - The value of R2 shows that variability of stock price with EPS is good which indicates 86.8%
of the data analysis is correct.
Earning elasticity = 0.8879.

Statistical significance
According to R2, the model is statistically not significant even after considering one variable.
In case of Multiple Model we use the values of Adjusted R.

Here we consider only one variable so the coefficient of determination is proportionate but it will increase
when we consider more variables.

T& P Values- Larger the value of T, more are the chances of the estimation being farther from the actual
values. So in case of intercept coefficient (-1.13) it is less than that of slope (12.03), it is lower than the alpha
level so we reject the null hypothesis. Intercept P value is 0.27 which is comparatively high so we reject the
null hypothesis for intercept but not for slope.

Intercept coefficient-The intercept value tells whether final output will have some significant value or not. If
the value of EPSI becomes 0 then stock price will be negative.
But looking at the p value of intercept which is high, according to theory we should neglect the intercept
value.

Slope coefficient- Since the slope coefficient is $31, we can say that with every $ increase in earnings the
average price will rise by 31$.

Significance F- The significance F has a great importance in regression analysis. As in our analysis,
significance F value is 3.77599E-11 that means value is very low. It signifies that regression analysis is
overall good.
As we can see from forecast that stock price in the year 2003 is $23.33 but in the period of 2007-2009 share price
increases up to 50.13 that means Disneys stock price should grow up to $50.13 at an annual rate of appreciation
at16.5% per year. As stock price of Disneys increases with 16.5% annually, now the investors will think of
investing in Disney. From the given data we can see that the R2 value is 86.8% which explains the variation of y
from x in the data.

Case 2

YEAR BOOK VALUE STOCK VALUE

1980 0.69 1.07
1981 0.75 1.09
1982 0.8 1.32
1983 0.85 1.1
1984 0.71 1.25
1985 0.76 2.35
1986 0.9 3.59
1987 1.17 4.94
1988 1.48 5.48
1989 1.87 9.33
1990 2.21 8.46
1991 2.48 9.54
1992 2.99 14.33
1993 3.13 14.21
1994 3.5 15.33
1995 4.23 19.63
1996 7.96 23.25
1997 8.54 33
1998 9.46 30
1999 10.16 29.25
2000 11.65 28.44
2001 11.23 20.72
2002 11.48 16.31
 2003 11.63 23.33

BOOK VALUE Line Fit Plot

35
30
25
20 STOCK VALUE
STOCK VALUE 15 Predicted STOCK VALUE
10
5
0
0 2 4 6 8 10 12 14

BOOK VALUE

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.877183
R Square 0.769449
Adjusted R
Square 0.75897
Standard Error 5.214862
Observations 24

ANOVA
Significan
df SS MS F ce F
1996.74 1996.7 73.423
Regression 1 1 41 65 1.85E-08
598.285 27.194
Residual 22 4 79
2595.02
Total 23 6

Coefficient Standar P- Lower Upper Lower Upper

s d Error t Stat value 95% 95% 90.0% 90.0%
1.58479 1.9947 6.4479 0.4400 5.88263
Intercept 3.161324 1 9 0.0586 -0.12533 79 1 9
BOOK 0.25470 8.5687 1.85E- 2.7107 1.7451 2.61984
VALUE 2.182484 2 6 08 1.654264 05 23 5

RESIDUAL OUTPUT

Predicted
STOCK Residu
Observation VALUE als
-
1 4.667238 3.59724
2 4.798187 -
 3.70819
-
3 4.907312 3.58731
-
4 5.016436 3.91644
-
5 4.710888 3.46089
-
6 4.820012 2.47001
-
7 5.12556 1.53556
-
8 5.714831 0.77483
9 6.391401 -0.9114
10 7.24257 2.08743
0.47538
11 7.984614 6
0.96611
12 8.573885 5
4.64304
13 9.686952 8
14 9.9925 4.2175
4.52998
15 10.80002 1
7.23676
16 12.39323 8
2.71610
17 20.5339 2
11.2002
18 21.79974 6
6.19237
19 23.80762 6
3.91463
20 25.33536 7
-
21 28.58726 0.14726
-
22 27.67062 6.95062
-
23 28.21624 11.9062
-
24 28.54361 5.21361

Interpretation:
The method used here for forecasting is linear regression of stock price.
Linear regression equation (Y) = a+bx

Where:

A = intercept/stock price

b = constant coefficient

x = book value

Given equation:

Pt = $3.161+$2.182*x
Given book value is $17.55, putting it in the above equation we get-

Pt = $3.161+$2.182*$17.55

Pt = $41.46

R2 (76.9%)- the value of R square shows that variability of stock price with EPS is good, that means 76.9%
data in analysis is correct.

Statistical significance:-
According to R square, the model is statistically not significant even after considering one variable.
For more than one variable we use the values of Adjusted R.

In this, we consider only one variable so the coefficient of determination is proportionate, but will increase
when we consider more variables.

T & P values- The T Value of intercept is close to 2 and the T Value for slope is higher than usual so it does
not seem statistically significant. Intercept P value is very less at around 0.58. So we cannot reject the null
hypothesis.

Intercept coefficient- The intercept value tells us whether final output will have some value or not, if the
book value becomes 0 then stock price will be negative.
Now, looking at the P value of intercept which is normal, according to the theory we should not neglect the
intercept value.

Slope coefficient- Since the slope coefficient is $2.18, we can say that with every $ increase in earnings the
average price will rise by $2.18.

Significance F- The significance F has a great importance in regression analysis as in our analysis,
significance F value is 1.85E-08, that means value is significantly low, this means regression analysis is
good and if the value would have been higher then analysis would not have been significant.

Elasticity is 1.82 which is elastic, that means for every change in the price of book value will have a high effect on
stock price.

If the value line forecast of 2007-2009 is true or accurate then the book value per share will be $41.46 from $23.33
as in base year 2004. As book value is increasing from $23.33 to $41.46, investors will invest more in Disney.
Average Annual rate will be 12.2%per year from 2003 to 2007-2009.

Case 3

YEAR EPSI BOOK VALUE STOCK PRICE

1980 0.09 0.69 1.07
1981 0.08 0.75 1.09
1982 0.06 0.8 1.32
1983 0.06 0.85 1.1
1984 0.06 0.71 1.25
1985 0.11 0.76 2.35
1986 0.15 0.9 3.59
1987 0.24 1.17 4.94
1988 0.32 1.48 5.48
 1989 0.43 1.87 9.33
1990 0.5 2.21 8.46
1991 0.4 2.48 9.54
1992 0.51 2.99 14.33
1993 0.54 3.13 14.21
1994 0.68 3.5 15.33
1995 0.84 4.23 19.63
1996 0.74 7.96 23.25
1997 0.92 8.54 33
1998 0.9 9.46 30
1999 0.66 10.16 29.25
2000 0.9 11.65 28.44
2001 0.98 11.23 20.72
2002 0.55 11.48 16.31
2003 0.66 11.63 23.33

EPSI Line Fit Plot BOOK VALUE Line Fit Plot

35 35
30 30
25 25
20 STOCK PRICE 20 STOCK PRICE
STOCK PRICE 15 Predicted STOCK STOCK PRICE 15 Predicted STOCK
PRICE PRICE
10 10
5 5
0 0
0 0.5 1 1.5 0 5 10 15

EPSI BOOK VALUE

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.953312
R Square 0.908804
Adjusted R
Square 0.900119
Standard
Error 3.356984
Observation
s 24

ANOVA
Significanc
df SS MS F eF
1179.18 104.636
Regression 2 2358.37 5 5 1.2E-11
11.2693
Residual 21 236.6562 4
Total 23 2595.026

Coefficient Standard Upper Lower Upper

s Error t Stat P-value Lower 95% 95% 90.0% 90.0%
0.39074 1.07132
Intercept -1.11194 1.268791 -0.87638 1 -3.75053 1.526657 -3.2952 5
EPSI 21.77718 3.844318 5.66477 1.27E- 13.78249 29.77188 15.1621 28.3922
 2 05 7
BOOK 3.06209 0.00591 1.35796
VALUE 0.869404 0.283925 4 7 0.27895 1.459857 0.380843 5

RESIDUAL OUTPUT

Predicted Residual
Observation STOCK PRICE s
1 1.447898 -0.3779
2 1.28229 -0.19229
3 0.890217 0.429783
4 0.933687 0.166313
5 0.81197 0.43803
6 1.9443 0.4057
7 2.937104 0.652896
8 5.131789 -0.19179
9 7.143479 -1.66348
10 9.878037 -0.54804
11 11.69804 -3.23804
12 9.755058 -0.21506
13 12.59394 1.736056
14 13.36898 0.841024
15 16.73946 -1.40946
16 20.85848 -1.22848
17 21.92363 1.326367
18 26.34778 6.65222
19 26.71209 3.287912
20 22.09415 7.155853
21 28.61608 -0.17608
22 29.99311 -9.27311
23 20.84627 -4.53627
24 23.37217 -0.04217

INTERPRETATION

Method used in this multiple regression model of stock price

Equation given y=a+b0x1+b1x2

This means equation will be like Pt=-$1.112+$21.777x1+$0.869x2

X1=EPS

X2=book value

Given value of x1 and x2 are 1.65 and 17.55

Putting these values in any of the equation

Pt=-$1.112+$21.777*1.65+$0.869*17.55

Pt=$50.08.

Model variables:

R2 (90.08%) - The value of R2 shows variability of stock price with EPS which is good. That means 90.08% data
analysis is correct.

Statistical significance
 According to R2, the model is statistically not significant even after considering one variable. For more than one
variable we use the values of Adjusted R.

In this we consider only one variable so that coefficient of determination is proportionate but will increase when
we consider more variables.

Intercept coefficient-the intercept value tells whether final output will have some value or not. If the value of EPS
and book value becomes 0 then stock price will be negative.
But by looking at the p value intercept which is high, we should neglect the intercept value. (According to theory)

Slope coefficient- Since the slope coefficient is $21.77, we can say that with every $ increase in earnings the
average price will rise by $21.77.

Significance F- The significance F has a great importance in regression analysis. In our analysis significance F value is
1.2E-11 which is very low, this means regression analysis is good and vice versa.

T and P Values- The sample intercept here is closer to population intercept because the T & P value for the intercept
are low at -.87 & .39. The sample value for the 1st slope may not be equal to population value as the parameters are
very large at 5.664 & 1.27.

But the P Value =.005 and T value = 3.062 for the 2nd intercept is lower so its sample value may be equal to population.

Earning elasticity is 0.61.

Using this model, and forecasting the stock price of Disneys for 2007-2009, there is an increment in the stock of
$50.08 from $23.33 from the year 2003. Disneys stock price should grow roughly around $50.08. Average annual rate
will be 16.5% from 2003 to 2007-2009.

Case 4
 REVENUES CASH FLOW CS Dividends EPSI BOOK STOCK
YEARS VALUE PRICE
0.59 0.11 0.1 0.02 0.09 0.69 1.07
1980
0.65 0.1 0.21 0.02 0.08 0.75 1.09
1981
0.64 0.09 0.38 0.03 0.06 0.8 1.32
1982
0.79 0.11 0.2 0.03 0.06 0.85 1.1
1983
1.02 0.13 0.12 0.03 0.06 0.71 1.25
1984
1.3 0.18 0.12 0.03 0.11 0.76 2.35
1985
1.58 0.24 0.11 0.03 0.15 0.9 3.59
1986
1.82 0.34 0.18 0.03 0.24 1.17 4.94
1987
2.15 0.42 0.37 0.03 0.32 1.48 5.48
1988
2.83 0.55 0.46 0.04 0.43 1.87 9.33
1989
3.7 0.65 0.45 0.05 0.5 2.21 8.46
1990
3.96 0.58 0.59 0.06 0.4 2.48 9.54
1991
4.77 0.72 0.35 0.07 0.51 2.99 14.33
1992
5.31 0.78 0.49 0.08 0.54 3.13 14.21
1993
6.4 0.97 0.65 0.1 0.68 3.5 15.33
1994
7.7 1.15 0.57 0.12 0.84 4.23 19.63
1995
10.5 1.32 0.86 0.14 0.74 7.96 23.25
1996
11.1 1.51 0.95 0.17 0.92 8.54 33
1997
11.21 1.52 1.13 0.2 0.9 9.46 30
1998
11.34 1.3 1.03 0.2 0.66 10.16 29.25
1999
12.09 1.98 1.02 0.21 0.9 11.65 28.44
2000
12.52 1.89 0.89 0.21 0.98 11.23 20.72
2001
12.4 1.06 0.53 0.21 0.55 11.48 16.31
2002
13.23 1.19 0.51 0.21 0.66 11.63 23.33
2003
 BOOK VALUE Line Fit Plot EPSI Line Fit Plot
35 35
30 30
25 25
20 20
STOCK PRICE STOCK PRICE
STOCK PRICE 15 STOCK PRICE 15
10 10
5 5
0 0
0 2 4 6 8 101214 0 0.5 1 1.5

BOOK VALUE EPSI

Dividends Line Fit Plot CS Line Fit Plot

35 35
30 30
25 25
20 20
STOCK PRICE STOCK PRICE
STOCK PRICE 15 STOCK PRICE 15
10 10
5 5
0 0
0 0.1 0.2 0.3 0 0.5 1 1.5

Dividends CS

CASH FLOW Line Fit Plot REVENUES Line Fit Plot

35 35
30 30
25 25
20 20
STOCK PRICE STOCK PRICE
STOCK PRICE 15 STOCK PRICE 15
10 10
5 5
0 0
0 0.5 1 1.5 2 2.5 0 5 10 15

CASH FLOW REVENUES

SUMMARY OUTPUT
 Regression Statistics
Multiple R 0.971295
R Square 0.943414
Adjusted R
Square 0.923443
Standard
Error 2.939003
Observatio
ns 24

ANOVA
Significan
df SS MS F ce F
2448.18 408.030 47.2381
Regression 6 5 8 4 1.12E-09
146.841
Residual 17 6 8.63774
2595.02
Total 23 6

Coefficient Standar Lower Upper Lower Upper

s d Error t Stat P-value 95% 95% 95.0% 95.0%
1.39818 - 0.09740 0.49724 0.49724
Intercept -2.45268 9 1.75418 7 -5.4026 4 -5.4026 4
REVENUE 1.63374 1.45523 0.16382 5.82439 - 5.82439
S 2.37749 7 7 1 -1.06942 6 1.06942 6
CASH 8.97623 0.09153 0.92813 19.7598 - 19.7598
FLOW 0.821628 1 4 8 -18.1166 2 18.1166 2
4.79801 0.01142 23.7262 3.48040 23.7262
CS 13.60332 1 2.8352 6 3.480401 4 1 4
73.3461 0.24140 0.81212 172.453 - 172.453
Dividends 17.70624 5 7 8 -137.041 1 137.041 1
0.02571 0.97978 36.3225 - 36.3225
EPSI 0.437353 17.0087 3 5 -35.4479 8 35.4479 8
BOOK 1.77615 - 0.36166 2.08233 - 2.08233
VALUE -1.66503 8 0.93743 4 -5.41239 6 5.41239 6

RESIDUAL OUTPUT

Predicted
Observatio STOCK Residua
n PRICE ls
1.42463
1 -0.35463 1
-
2 1.171892 0.08189
-
3 3.537529 2.21753
-
4 1.378736 0.27874
5 1.08683 0.16317
0.61777
6 1.732225 5
 1.49442
7 2.095577 3
1.64962
8 3.290373 7
-
9 6.244135 0.76414
0.56225
10 8.767749 1
-
11 10.42386 1.96386
-
12 12.57273 3.03273
3.60526
13 10.72473 7
0.29058
14 13.91942 1
-
15 18.64282 3.31282
-
16 20.00181 0.37181
-
17 24.84325 1.59325
5.70565
18 27.29435 1
19 29.0033 0.9967
2.74920
20 26.5008 1
1.93227
21 26.50772 7
-
22 26.42197 5.70197
23 19.9532 -3.6432
1.77038
24 21.55962 1

Interpretation:

Model used = multiple regression model of stock price.

Multiple regression equation: y=a+b0x0+b1x1+b2x2+b3x3+b4x4+b5x5

A=Intercept/stock price

B0-Revenue

B1-Cash flow

B2-Capital spending

B3-Dividends

B4=EPSI

B5=Book value

Pt=-$2.453+$2.377x0+$0.822x1+$13.603x2+$17.706x3+$0.437x4+-$1.665x5
Pt= -$2.453+$2.377*$18.10+$0.822*$2.25+$13.603*$0.45+

$17.706*$.021+$0.437*$1.65-$1.665*$17.55

Pt=$23.77

Model Variable:
R2 (94.34%)- the value of R2 shows, variability of stock price with EPSI is good, meaning 94.3% data is
analysis is correct.
But it's not significant for multiple regressions, as we use absolute R values.

Statistical significance:
According to R2, the model is statistically not significant even after considering one variable.

Intercept coefficient- If all the variables become 0, the average value of the stock for the year 2007-09 will
be - $2.453.

Slope coefficients-All other slope coefficients other than Dividend will have very small impact in the stock
price.
$1 change in dividend will change the stock price by around $17.

Significant F- The occurrence of output obtained by regression is high because the value of significance is
1.12E-09 which is lower than it should be.

Elasticity:

Earnings - (.012)

Book value-(-.82) The different elasticity of stock price with respect to different variables are-

Revenue-(1.34)

Cash Flow-(.041)

Capital Expenditure-(.29)

Dividends-(.15)

Using this model, stock value price of Disney should grow from $23.33 to $23.77 in year 2007-2009. Looking at
the change values of the entire variable in the year 2007, there is a little increase in stock price and there will be
only 0.4% average annual rate per year from 2003 to 2009.

Independent variables may results in errors for coefficient, when compared to previous data which is statistically
important.

Conclusion:
After series of data analysis and interpreting step by step each case, it is seen that the global performance of Disney
will increase as per the data. The stock price increases when all the variables are changed but when all the variables
are changed at once there is a slow growth in stock price of 0.46% per year.
 References
Managerial economics by DOMINICK SALVATORE
Elasticities in estimated linear models | The Lazy Economist
Retrieved from http://blog.modelworks.ch/?p=104

Advantages and Disadvantages of Forecasting Methods of Production and Operations Management |

Chron.com. (n.d.).
Retrieved from http://smallbusiness.chron.com/advantages-disadvantages-forecasting-methods-production-
operations-management-19309.html