1. Could you describe what is a strong IPO? 2. How can strong IPO lead to a very high gains? 5. Why can it allow investors early entry into a hot stock?
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1. Could you describe what is a strong IPO?
2. How can strong IPO lead to a very high gains?
5. Why can it allow investors early entry into a hot stock?
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Solved in 2 steps
- 1. How do you think today's low interest rate environment is impacting the time value of money? How might this change the value of an asset or liability? 2. What is the relationship between the concepts of net present value and shareholder wealth maximization? 3. Offer some reasons that the intrinsic value that you might calculate with the methodologies learned might yield a price different than what the stock trades at in the stock market. You can reference any method of valuation models in offering thoughts on why there might be differences between intrinsic and market values.Companies sell common stock to raise long-term capital. What are the pros and cons of selling stock? Is it better to sell common or preferred stock? Why?АВС XYZ Discount rate (r) Historical growth rate of 0.015+2*0.085=0.185 0.015+1.5*0.085=0.142 (58/30)^(1/30)-1=0.022 Not available. Cannot dividends compute without dividends Sustainable growth rate Fundamental value using dividend growth model with the historical growth rate Fundamental value using the 467*(1+0.185)/(0.185-0.045) dividend growth model with =3953 the sustainable growth rate Fundamental value using residual income growth 0.15*(1-0.7)=0.045 467*(1+0.185)/(0.185-0.022) 0.2*(1-0)=0.2 Not available. Cannot =3395 compute without dividends Not available. Cannot compute without dividends 80*(1+0.022)-(550*0.022)/(0. 185-0.022)=427.36 Not available. Cannot compute without dividends model with the historical growth rate Fundamental value using the 80*(1+0.045)-(550*0.045)/(0. residual income growth 12*(1+0.2)-(100*0.2)/(0.142- 0.2)=96.5 185-0.045)=420.35 model with the sustainable growth rate
- If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion? O 1. The stock offers a high dividend payout ratio. 02 The market is overvaluing the stock. O 3. The stock has a low level of risk. O 4. The market is undervaluing the stockYou are the CFO of a profitable firm that is financially constrained. The stock market is currently going through a boom phase (assume this is a bubble). From what you have learned in this course, you know that the rational decision would be to issue new shares and use this income to pursue positive NPV projects. Before you make this decision, what is the most important variable that you would examine Assume you have information on all these variables. Select one: O a. Market Q O b. Fundamental Q O c. Elasticity of price demand for common shares O d. Cash SavingsAs the economy goes through highs and lows, investors with stock in various companies can face significant risk, and significant benefits. How do you see the stock market affecting your own investing plans in the future? What types of risks do investors take? Do you have any companies you follow thru their stock prices?
- In a few sentences, answer the following question as completely as you can. You are discussing stock valuation techniques with your broker. You mention that your Finance professor stated that “a stock that will never pay a dividend is valueless.” Your broker says this is not true because you can always sell the stock to someone else (thus, a capital gain is possible) a share of stock represents a share of ownership in something tangible (i.e., the issuing firm).Argue for or against your broker’s position.Please make sure the answers are clear n easy to read.History suggests that all stock market bubbles will eventually pop and cause severe financial loss for many of those who purchased stock. Given this history, do you think that stock market bubbles will continue to occur? Why or why not?
- What are the benefits of a stock buyback to investors?you MUST explain your answer. Also, explain why 1 or 2 of the other options are FALSE: >>> Which of the following statements is CORRECT? a. The constant growth model takes into consideration the capital gains investors expect to earn on a stock. b. Two firms with the same expected dividend and growth rate must also have the same stock price. c. It is appropriate to use the constant growth model to estimate a stock’s value even if its growth rate is never expected to become constant. d. If a stock has a required rate of return rs = 12%, and if its dividend is expected to grow at a constant 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 at the dividend growth rate.Which one of the following action will not lead to reducing financial risk? Issuing bonus shares Issuing equity shares Issuing preferred stock Reducing dividend
