Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / E
E. A principal dissimilarity between bonds and stocks is the lack of a contractual agreement to pay dividends to stockholders, whereas bondholders are guaranteed their interest payment.
E. Scholars almost universally support technical analysis because it uses detailed statistical analysis to make predictions.
E. A stock's intrinsic value is based on assumptions about future cash flows made from technical analysis of the firm and the industry.
E. The future cash flows of a stand-alone project are as follows: 1 Year 0 4 Cash flow ($220,000) $80,000 $95,000 $60,000 $60,000 If the cost of capital is 16%, this project will contribute to shareholder wealth.
E. The decision rules for IRR are: Stand-alone: IRR >k reject the project IRR IRR, choose project A over project B IRRA
1. True - Beacause bond holders are given guaranteed interest payments and stock holders are given dividend out of profits or retined earnings but they are not compulsory payments. Shareholders are those who own stock in a company, whereas bondholders are those who own bonds issued by a company. Both investments offer the opportunity to make money, but there are risks inherent in each as well..
2. True - Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.
3. False - A Stocks intrinsic value is based on the future cash flows made from Fundamental analysis of firm and industry
4. False - The project will not contribute to the share holders wealth as the Net present value of the project is Negative
| Years | Cash Flows | 16% Discounting Factor | CF * DF |
| - | (220,000.00) | 1.00 | (220,000.00) |
| 1.00 | 80,000.00 | 0.86 | 68,965.52 |
| 2.00 | 95,000.00 | 0.74 | 70,600.48 |
| 3.00 | 60,000.00 | 0.64 | 38,439.46 |
| 4.00 | 60,000.00 | 0.55 | 33,000.00 |
| NPV | (8,994.55) |
5. question is not clear... The rules for stand alone are false and the rules for mutually exclusive are true
