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Regarding the previous page, consider you and your partner are planning to become a franchise of an international food chain (L’Osteria, Subway, ...) and think about the following problems:
• What impact do you think current economic conditions have on your investment plan
• Explain the nature and the current status of risks involved in your plan.
Step by step
Solved in 3 steps
- Explain briefly why stock prices are a leading economic indicator.Which of the following is an example of a stock rather than a flow? Group of answer choices Derek has $2,568 in his checking account. Brant mows 25 lawns per week. Ana collects $5,000 per month rent on her property that she leases. Connie earns $75,000 per year.Suppose you buy a house for $250,000. One year later, the market price for the house has fallen to $200,000. What is the return on your investment in the house if you made a down payment of 10 percent and took out a mortgage loan for the other 90 percent?
- Questions: Compute the expected intrinsic price of each stock in year 5. Assume that All stocks are fairly priced such that the intrinsic and market values are equal. Dividends are paid at the beginning of the year How many units of each stock will Stephanie buy? Support your response with relevant computations. What will be the total investment cost for shares? Show appropriate calculations. Which bonds are acceptable for investment? Justify your response with suitable computations. What will be the total cost of investment in bonds? Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed…A business contemplates building a new manufacturing facility and will need to seek loanable funds of $130 million. It expects that the new facility will yield a 12% return on investment (ROI). Given the current loanable funds market equilibrium depicted in the graph below, is it likely that the firm will borrow the money to build the new facility? Why?Scenario 14-3 Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year. Refer to Scenario 14-3. What is Victor's opportunity costs of operating his new business?
- Determine which of the two investment projects of Problem 5 the manager should choose if the discount rate of the firm is 30 percent. Additional information. Problem 5 states determine which of two investment projects a manager should choose if the discount rate of the firm is 10 percent. The first project promises a profit of $100,000 in each of the next four years, while the second project promises a profit of $75,000 in each of the next six years.what equation can determine whether a stock or asset is overvalued significantly?Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)
- Indicate whether the statement is true or false, and justify your answer. 1. The internal rate of return is defined as the interest rate that makes the net present value of an investment stream exactly equal to zero. 2. In part, physicians’ salaries are higher than secretaries’ salaries because it takes more years to train to become a physician than it does to become a secretary. 3. The fact that practicing surgeons who have finished residency earn more than practicing pediatricians implies that the rate of return to choosing surgery exceeds the rate of return to choosing pediatrics for a medical school graduate.Imagine you overhear two of your colleagues talking and one says to the other, "Companies should use investment entry modes whenever possible because they offer the greatest control over business operations." Do you agree or disagree with this statement? Explain. Are there times when other market entry modes offer greater control? Explain.Suppose that the return from holding a particular firm’s stock goes from 15% in one year to 18% in the following year. The majority shareholder claims that “the stock return only increased by 3%,” while the chief executive officer claims that “the return on the firm’s stock increased by 20%.” Reconcile their disagreement.
