Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Part 1: Please respond to the following:
What are some advantages of valuating a stock based on discounted cash flows? With the availability of cash flow valuations, why might investors display trading biases and what might be some potential consequences? Why might corporations use call features and restrictive covenants on bond issues?
Part 2: Respond to this classmate's discussion below:
"DCF method is very regularly related to value firms and stocks. The advantage of applying this methodology is that it correlates to almost every parameter of business, which is vital for driving its intrinsic value such as WACC, reinvestment, growth. Moreover, its calculations are based on free cash flows from the firm, which is available for the investors. The strong foundation of the DCF method is what enables its use in other applications and valuation methodologies.Despite the above-listed advantage, this method is exposed to some disadvantages which may set the bias in valuation. The valuation exercise is based on essential levers such as WACC and growth rate. These numbers are quite challenging to estimate instantly and may involve the perception of the traders/analysts during estimation. Small delta change in certain variables results in a significant change within the value of the firm. So, proper caution has to be taken during the estimation of the variables that directions be used.Corporations may prefer to incorporate the call feature in their bond issue, which provides the right (but not obligation) to separate the bond on a specific date before maturity. This feature helps them to get added flexibility in deciding if to retire debt based on the operational cash flows and free cash flows coming from the business. However, it has been observed that the callable bonds frequently trade at a lower price than equivalent non-callable bonds. Restrictive covenants are additionally handled to restrain the actions of corporations in the bond issue. This is mainly gain the confidence of investors to the bond so that they may feel that their interests are protected. In the absence of covenants, the borrower may increase the firm's risk to an alarming level without compensating additional interest to the bondholders."
What is the nominal rate of return on this investment during the period, before inflation?
Is it unethical to avoid paying one’s debts by going into bankruptcy? Does a person have a moral responsibility to pay his or her debts?
Find the APR, or stated rate, in each of the following cases. (Use 365 days in a year. Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., ..
Estimate the futures price of the index for three-month and six-month contracts.
Suppose that the cleanup hitter for the Atlanta Braves promises to donate $614.00 for every homerun he hits. what is the future value of his contribution?
Which of the following statements best describe the function of financial markets in a competitive economy?
You expect to receive an uncertain cash flow of $1, 210 in two years. Your cost of capital is 10% (APR) compounded annually and the risk-free rate is 2% (APR) compounded annually. Excluding compensation for the time value of money, how much extra com..
Calculate and analyze the following ratios for your selected company for the last two years from the SEC Form 10-K: INVENTORY TURNOVER
Which of the following transactions takes place in secondary markets?
You do the math and decide you’d be willing to pay $3.44 to buy the project as an individual. What is the discount rate you are using to value this project?
What are some actions an entrenched management might take that would harm shareholders? How is it possible for an employee stock option to be valuable even if the firm’s stock price fails to meet shareholders’ expectations?
Compared to a zero-coupon bond that has a maturity of 4 years, which bond would change most to a rate change?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd