Joy wants to invest his funds in shares in one of the two existing manufacturing companies. The following information about the dividend paid during the seven years of the Year Brown Company Avel Company 2000 500 300 2001 600 557 2002 665 615 2003 675 640 2004 785 790 2005 800 815 2006 815 795 If you as an investment consultant who is conducting an analysis of the two companies with Using trend analysis, which company would you recommend to Joy for his investment in 2010? (work with complete procedure)

Joy wants to invest his funds in shares in one of the two existing manufacturing companies. The following information about the dividend paid during the seven years of the Year Brown Company Avel Company 2000 500 300 2001 600 557 2002 665 615 2003 675 640 2004 785 790 2005 800 815 2006 815 795 If you as an investment consultant who is conducting an analysis of the two companies with Using trend analysis, which company would you recommend to Joy for his investment in 2010? (work with complete procedure)

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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Raghubhai
OPENER-IN-REVIEW In the chapter opener, you learned that with Brookdale Senior Living's stock price trading around $12.35 per share, one of the firm's investors proposed an idea that might net the firm's shareholders $21 per share in cash. Suppose that Brookdale acted upon the suggestion of Land and Buildings and that as a result Brookdale was able to distribute $21 per share in cash to its investors. Suppose that after selling its real estate assets and paying out cash to shareholders, Brookdale's shares were worth $5 per share. Are Brookdale's investors better or worse off? Specifically, calculate the percentage change in the wealth of share- holders (including the cash they received and the change in the value of their stock) that would hypothetically occur if Brookdale acted according to this plan. Now suppose that Brookdale had 185.45 million shares outstanding. What is the total dollar value of wealth created (or destroyed) by the restructuring pro- posed by Land and Buildings?
Mr. Carlos recently inherited a stock portfolio from his uncle. Wishing to learn more about the companies in which he is now invested, Mr. Carlos performs a ratio analysis on each one and decides to compare them to each other. Some of his ratios are listed below: Ratio Island Electric Utility Burger Heaven Fink Software Roland Motors Current ratio 1.10 1.3 6.8 4.5 Quick ratio 0.90 0.82 5.2 3.7 Debt ratio 0.68 0.46 0.0 0.35 Net profit margin 6.2% 14.3% 28.5% 8.4% Assuming that his uncle was a wise investor who assembled the portfolio with care, Robert finds the wide differences in these ratios confusing. Help him out, answering the following: What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? Why might the current and quick ratios for the electric utility and the fast food stock be so much lower than the same ratios for other companies? Why might it…
You owned 300 shares of Microsoft stock. But you just sold 100 shares this morning. Which one of the following statements best describes the stock sale transaction? Group of answer choices a. This is an example of a secondary market transaction. b. This is an example of primary market transaction. c. This is an example of an exchange of physical assets. d. This is an example of money-market transaction.
Mike wants to invest in a business in the manufacturing sector. He needs to understand the value of this company's shares as the recent annual dividend was N$2.50 per share(D0=N$2.50) and the required return is 12%. Find the market value of Textile CC shares under the following; 15.1. If dividends are expected to grow at a constant annual rate of 8% to infinity. 15.2 Dividends are expected to grow at an annual rate of 5% for each of the next 4 years, followed by a constant annual growth rate of 6% in years 5 to infinity 15.3 Dividends are expected to grow at an annual rate of 0% to infinity.
1) John made the following investments in Stock A. Calculate his money-weighted return earned over the 5- year period. The cost of equity for Stock A is 10% p.a. Balance from previous year New investment by investor Net balance at beginning of year Investment return for the year Investment gains or (loss) Withdrawal by investor Balance at end of year 1 0 100 100 -50% -50 0 50 2 50 950 1000 35% 350 -350 1000 3 1000 0 1000 27% 270 0 1270 4 1270 230 1500 10% 150 -150 1500 5 1500 0 1500 20% 300 -1800 0
Analysts' estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways Suppose, based on the earnings consensus of stock analysts, Gregory expects a return of 13.54% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued? O Undervalued Overvalued O Fairly valued Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Gregory considers replacing Atteric Inc.'s stock with the equal dollar allocation to shares of Company X's stock that has a higher beta than Atteric Inc. If everything else remains constant, the required return from the portfolio would increase
The right side of the balance sheet shows the firm’s liabilities and stockholders’ equity. Which of the following best describes shareholders’ equity? Equity is the sum of what the initial stockholders paid when they bought company shares and the earnings that the company has retained over the years. Equity is the difference between the paid-in capital and retained earnings. NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of today’s paper. In its annual report this year, NOW Inc. reported a net income of $136 million. Last year, the company reported a retained earnings balance of $459 million, whereas this year it increased to $540 million. How much was paid out in dividends this year? $4 million $217 million $55 million $280 million
Your friend Carra is interested in investing in Spark common stocks. She knows that you are taking finance and have learned about stock valuation using historical dividends information. Carra has collected the following dividends data on Spark and asked for your help to calculate the stock price of this company. Use the Constant Growth Dividend model you learned to perform stock valuation for this company. Use the past dividends data to estimate the constant growth rate (it is assumed that the dividends will grow at its historical average growth rate from now onwards) for the dividends. Under the assumption that Spark will continue this dividend pattern forever and Carra wants to earn an annual rate of return of 11% on this investment, what price would Carra be willing to pay for the stock price of this company? What happens to the stock price that Carra would be willing to pay if her required rate of return is 15% (which is greater than 10%)? Briefly interpret your answers.…
If a firm has retained earnings of $3.4 million, a common shares account of $5.4 million, and additional paid-in capital of $10.8 million, how would these accounts change in response to a 10 percent stock dividend? Assume market value of equity is equal to book value of equity. (Enter your answers in dollars not in millions. Input all amounts as positive values. Indicate the direction of the effect by selecting "increase," "decrease," or "no change" from the drop-down menu.)

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