Finance Quiz

3. Using the cash flow indicator and investment valuation ratios, discuss which company is more likely to have satisfied stockholders.

Identify two ways in which a shareholder can realize a return on a share investment. Describe the relationship between them.

information the result is a percentage rate that shows the profit margin. The formula to determine

d) “The market system causes the economy to conserve most in the use of resources that are particularly scarce in supply. Resources that are scarcest relative to the demand for them have the highest prices. As a result, producers use these resources as sparingly as is possible.” Evaluate this statement. Does your answer to part c, above, bear out this contention? Explain. I need assistance with this question.

When determining which company has the most to offer it is necessary to look at each set of numbers from several different views. For instance this paper will cover vertical and horizontal analysis, profitability, solvency, and liquidity ratios. I will be explaining how each set of results play into the decision making of which company would be best to invest in, by comparing both companies numbers in able to collect the necessary data to make a calculated decision.

d) Calculate the new value per share after the capital structure change. (Hint: use your answers to parts b and c.)

The interest rate of a term deposit is at 5.2% per annum. Available investment fund is $200,000. Term Deposit will yield $10,400 p.a. by using $200,000 multiply by 5.2%. However, for compounded interest rate, 5 years investment will be $257,697 (ROI = $57,697). And 10 years investment will be $332,038 (ROI = $132,038), assume that the interest rate is constant within 10 years period. The risk is considered minimal.

Treasury bonds are issued by the government, have almost no default risk and the bond price goes down when interest rates rise. Corporate bonds are issued by corporations and carry default risk if the issuing corporation is not able to pay interest and principal payments. Corporate bonds make up a large portion of the overall bond market. Corporate bonds are characterized by higher yields than government securities cause there is a higher risk of a company defaulting than a government. The upside to this is that they can also be the most rewarding fixed-income investments because of the risk the investor must take on, where higher credit companies that are more likely to pay back their obligations will carry a relatively lower interest rate than riskier borrowers. Companies can issue bonds with fixed or variable interest rates and of varying maturity. Municipal bonds carry risk similar to corporate bonds, they are often issued by state and local governments. The major advantage of municipal bonds is for investors since the returns are free from federal tax, and furthermore, state and local governments will often consider their debt non-taxable for residents, making some municipal bonds completely tax free, sometimes called triple-tax free. The yield on a municipal bond is usually lower than that of an equivalent taxable bond. Foreign bonds are issued by foreign governments carry default and extra risk if the bond

stock price, which in turns spurs future production and investment in that company. If the

When considering potential investments it is important to know the present value of the investment so the firm knows how much to invest in order to reach a predetermined profit. The first investment opportunity involves an eight point five percent return rate over six years with a predetermined payout of twenty four thousand dollars. The initial investment amount must be determined. In order to do so, the present value will need to be calculated. This is done by using the present value equation, future value/ (1+R)^n. When calculated the company should initially invest fourteen thousand seven hundred and eleven dollars. This initial investment predicts a return on investment of twenty four thousand

b. as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will eventually decrease.

Duke increased his spending on steak from $7 to $11 per week because of a 12 percent salary increase, so his

Two firms with the same expected dividend and growth rate must also have the same stock price.

1. Which of the following statements is CORRECT?a. The constant growth model takes into consideration the capitalgains investors expect to earn on a stock.STATEMENT A is true because the expected growth rate is also the expected capitalgains yield.b. Two firms with the same expected dividend and growth rates must alsohave the same stockprice.c. It is appropriate to use the constant growth model to estimate a stock 'svalue even if itsgrowth rate is never expected to become constant.d. If a stock has a required rate of return rs = 12%, and if its dividend isexpected to grow at aconstant rate of 5%, this implies that the stock’s dividend yield is also 5%.e. The price of a stock is the present value of all expected future dividends,discounted

Company C fits the first set of description, and Company D fits the second set of description. Company D has higher current ratio and quick ratio, which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short-term investment, which was 55.6% while Company C, only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.