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- Explain why a financial investor in stocks cannot earn high capital gains simply by buying companies with a demonstrated record of high profits.36. Assume you have placed a value of operations on Champion Inc. of $3,500,000. The firm has marketable securities of $75,000. In addition, the firm recently reported total assets of $7 million along with long-term debt of $1.5 million and preferred stock of $250,000. If Champion has 500,000 shares outstanding, what is the intrinsic value of the firm’s common stock? Only typed answerTrue or False: 1. Susan is expecting the economy to worsen over the next few years, perhaps falling into a recession. Investing in the construction industry should be part of Susan’s strategy. 2. Preference shares combine the fixed income features of bonds with the same price appreciation potential as ordinary shares
- D & R A1 11 - 3 Question 11. Hedging with Stock Index Futures You manage a portfolio that is currently all invested in equities in companies in five major Canadian industries. The market value involved and beta for each industry are shown in the table below. Industry Market Value Beta Oil and Gas $1,100,000 1.2 Technology 900,000 1.5 Utilities 1,500,000 0.8 Financial 1,000,000 1.3 Pharmaceutical 800,000 1.1 You believe that the Canadian equity market is on the verge of a big but short-lived downturn. You would move your portfolio temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and re-establishing your equity position. Instead, you decide to hedge your portfolio with three-month S&P/TSX 60 index futures contracts for one month. Currently, the level of the S&P/TSX 60 index is 851.38, the three-month futures price of the S&P/TSX 60 is 856.40, and one contract is for $200 times…3) Stock, Stock Options, and Restricted Stock are the market based unconditional compensations. Select an alternative True False5. Milton Friedman's view that the sole responsibility of a corporate executive is to increase profits rests upon the idea that all corporate executives are employees of the shareholders of a company. True or False
- For problems 1 – 5, use a discount rate of 10%. 1.What would be the value of an asset that returns a cash flow of $1000 one year from now? 2.What would be the value of an asset that returns a cash flow of $1000 in each of the next five years starting one year from now? 3.What would be the value of an asset that returns a cash flow of $100 in each of the next five years starting one year from now plus an additional $1000 at the end of the fifth year? 4.What would be the value of an asset that returns a cash flow of $100 in each of the next five years starting one year from now and $200 per year in years six through ten? 5.What would be the value of an asset that returns a cash flow of $100 each year forever starting one year from now?Net worth is a measure of a firm's profits. unrelated to stockholders' equity. the difference between a firm's assets and liabilities. listed on the asset side of a firm's balance sheet.Imprudential, Inc., has an unfunded pension liability of $414 million that must be paid in 19 years. To assess the value of the firm’s stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 7.9 percent, what is the present value of this liability?
- You and your friend have opened an account on E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions the company has taken. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at the end of the year.The Darkroom Windowshade Company has 100,000 shares of stock outstanding. The investors in the firm awn the following numbers of shares: investor 1 has 20,000 shares; investor 2 has 18,000 shares; investor 3 has 15,000 shares; investor 4 has 10,000 shares; investor 5 has 7,000 shares; and investors 6 through 11 have 5,000 shares each. What is the minimum number of investors it would take to vote to change the companys top management? If investors I and 2 agree to vote together, can they be certain of always getting their way in how the company will he run?Why is it hand to forecast future movements in stock prices?
