Reference no: EM13994712
PURPOSE
To evaluate the corporate finance concept of market efficiency, equity issuance and shareholders' wealth as well as supported by the foundation of corporate finance theories.
REQUIREMENT
Answer the following questions using the relevant information given and corporate finance theories.
QUESTION
1. Market efficiency was developed in 1970 by Economist Eugene Fama whose theory on efficient market hypothesis (EMH), stated that it is not possible for an investor to outperform the market because all available information is already built into all stock prices. Discuss why a financial decision maker such as a corporate treasurer or CFO should be concerned with market efficiency.
2. Empirical evidence indicates that stock price declines with the announcement of seasoned equity offerings. Discuss the possible reasons why the stock price typically drops on the announcement of a seasoned new equity issue.
3. Google search of the phrase "beat the market" yields more than 14 million results. Many are investing and trading strategies that promise to outperform a market benchmark. The idea of generating market-beating returns is pervasive.
Suppose you invest in the stock market and double your money in a single year while the market, on average, earned a return of only about 15%. Is your performance a violation of market efficiency? Explain.
4. Horseshoe Corporation is planning to raise fresh equity capital by selling a large new issue of common stock. Horseshoe, a publicly traded corporation, is trying to choose between an underwritten cash offer and a rights offering (not underwritten) to current shareholders, Horseshoe's management is interested in maximising the wealth of current shareholders and has asked you for advice on the choice of issue method. What is your recommendation? Explain.
Assignment Format:
a. Each answer must contain 750-1250 words and must have introduction, body and conclusion.
b. Use double space and 12-point of Times New Roman font.
c. The assignment should contain about 3000 - 5000 words (15 - 20 pages) in total.
d. Provide reference using the American Psychological Association (APA) format.
e. References should be latest (year 2005 onwards).
Draw a feynman diagram that explains the decay
: Draw a Feynman diagram that explains this decay. Create a Feynman diagram for a process where the Λ(+C) (udc) mass = 2285 MeV/c2) decays to a Λo(uds) (mass = 1116 MeV/c2) plus leptons (including neutrinos).
|
Contract on a natural gas fired power plant
: Value the following tolling contract on a natural gas fired power plant. You will turn in an Excel file with your calculations. A well-organized spreadsheet should allow me to change some of your assumptions to see the effect on the contract value
|
Effective way to decrease the incidence of foodborne illness
: which of the following is the most effective way to decrease the incidence of foodborne illness?
|
Another cipher
: Another cipher, which has been historically used by the Freemasons, is removing all the vowels from a word. Write a function string removevowels(string s) that returns a copy of the string s, with vowels removed. For example, can you guess what was s..
|
Corporate finance concept of market efficiency
: To evaluate the corporate finance concept of market efficiency, equity issuance and shareholders' wealth as well as supported by the foundation of corporate finance theories.
|
What is the most expensive car that he can afford
: A recent engineering graduate intends to purchase a new car. He plans to pay $2000 down and to finance the balance over a Cyear period. The maximum amount that he can repay each month is $200. What is the most expensive car that he can afford, assumi..
|
Demand and supply of the product are both highly sensitive
: Various beverages are sold by roving vendors at Busch Stadium, home of the Saint Louis Cardinals. Demand and supply of the product are both highly sensitive to changes in the weather. During summer months the demand for ice cold beverages grows rapid..
|
Prepare the journal entry to record the contingent liability
: By the traditional approach to measuring loss contingencies, what amount would Heinrich record at the end of 2011 for the loss and contingent liability?
|
What conditions this relationship would not hold in reality
: In theory, other things being equal, a percentage increase in a country’s rate of inflation should lead to a percentage decrease in the value of its currency. Under what conditions this relationship would not hold in reality.
|