1. Money is (for obvious reasons) extremely important in our society and has been for several years. Acquiring it, however, can be easier said than done, which is why using investment opportunities can be advantageous. However, like any good thing, it is risky and the pros and cons of it must be taken into account. 2. Think of two investment opportunities and compare them to each other. Give a brief outline of what they are, how they work, and what kind of results can be expected from them. Also go over the risks associated with them and what could go wrong in your investment. 3. Make an argument for one of the two investment opportunities. Suppose you are about to make an investment of $1,000-which opportunity would give you the most for that money? Why? Give strong support for your reasoning.

1. Money is (for obvious reasons) extremely important in our society and has been for several years. Acquiring it, however, can be easier said than done, which is why using investment opportunities can be advantageous. However, like any good thing, it is risky and the pros and cons of it must be taken into account. 2. Think of two investment opportunities and compare them to each other. Give a brief outline of what they are, how they work, and what kind of results can be expected from them. Also go over the risks associated with them and what could go wrong in your investment. 3. Make an argument for one of the two investment opportunities. Suppose you are about to make an investment of $1,000-which opportunity would give you the most for that money? Why? Give strong support for your reasoning.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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When comparing the performance of two investment alternatives, which characteristicsof investments do you need to know? Please explain how you use those characteristics in making yourinvestment decision.
Benefits of diversification. Sally Rogers has decided to invest her wealth equally across the following three assets: a. What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs, and find the standard deviation of each asset pair. a. What is the expected return of investir 8.40% (Round to two decimal places.) What is the expected return of investing % (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) States Probability 35% Asset M Return 10% Boom Normal 54% 7% Recession 11% -2% Asset N Return 21% 12% 1% Asset O Return - 2% 7% 10% X
investments we make today generate cash flows at different time intervals in the future.This makes the evaluation process complicated.How do you address this issue when ivaluating investment projects
Please describe NPV, IRR and their relationship. How do you evaluate each for making an investment decision? That is, what is a favorable NPV and IRR for making an investment decision. If you were developing a capital budgeting process at your employer, how would you prioritize your projects? What is the NPV when IRR = WACC, IRR>WACC, and IRR<WACC? There is a duplex for sale in Absecon for $700,000 at this time. It has 2 units that generate a total of $25,000 in gross rent. The property taxes are $4,000, commercial property insurance is $2,000, flood insurance is $1,000, and annual maintenance is $2,000. You expect to sell it in one year at a price growth of 0%. What is the NPV with a WACC of 10%. Is the IRR greater or less than the WACC? Would you invest in this project and why?
SECTION B Answer all the questions below:. B1) Do you think capital budgeting is important? Justify? B2) List all the techniques of Capital Budgeting? You think are relevant today? B3) Do you think that these techniques are really helpful to financial managers? B4) Do you think that these techniques can be used in situations like COVID-19? B5) According to you which technique is better and why?
In a few sentences, answer the following question as completely as you can. According to the CAPM, the expected return on a risky asset depends on three components. Describe each component, and explain the role of each one in determining expected return.
1. Which of the following investors is best suited to an investment objective that is mainly focused on generating capital gains? A well-paid young executive with excess income and preparing for retirement A retired couple whose pension income is insufficient to provide for their regular living expenses A young couple investing their savings for the eventual purchase of a home A salaried person who relies on investment income to meet the costs of raising and educating her children
The benefits of CSR investments a. are always easy to measure quantitatively b. must be evaluated qualitatively for the projects that cannot be evaluated quantitatively c. must be evaluated using all three aspects of the triple bottom line d. cannot be evaluated qualitatively
A3) Finance 1. What is the most correct implication of the additional funds needs (AFN) ________ If AFN is negative, then you must secure additional financing. If AFN is negative, then you have extra funds to pay off debt. If AFN is positive, then you have extra funds to buy some short-term investments. If AFN is positive, then you have extra funds to repurchase additional new stock.
Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. QUESTION) Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%. Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077…
Firms use several techniques to estimate risk, see Chapter 8. After describing these techniques, explain how firms incorporate risk in the investment evaluation process. Give examples of alternative ways a firm can use to estimate the cost of equity, and by extension the Weighted-Average Cost of Capital (WACC or Kw). Be specific as to the reasons firms use multiple hurdle rates when considering different investment projects.
Technically, the required return of an investment can be determined by determining the investments risk profile. However, many intangible factors influence an investor’s decision to invest. Discuss the intangible factors that may come into play in the investment decision process.

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