Most important cornerstone to successful investing

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Reference no: EM13749056

Question 1: What is something you believe you can do better or understand substantially better than most people? (Something productive/mildly related to the world please, no balancing on 2 fingers)

Question 2: What is the most important cornerstone to successful investing?

Question 3: On the day of Alibaba's IPO, September 19, 2014, the S&P 500 moved down 0.96 points, why?

Question 4: Seeing that you have some knowledge of the business world, your friend comes to you for an investment advice. Your friend asks "Based on the projected economic trends, should I be long or short the S&P 500 in the next 12-month period?" What is your answer to your friend?

Question 5: Stock A has a beta of 2 and trades at $10. Stock B has a beta of 0.5 and trades at $50. Both stocks are worth $55. Which stock is risker?

Question 6: What is the most important determinant of return? In other words, if you are searching for higher returns, what should you do?

Question 7: Looking at the model below, point out a major strategic mistake the management has been making. As a background, the average enterprise makes roughly 12% return on invested capital, which is reasonably the same rate that investors use as a discount rate in valuing businesses.

 

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Minket share

30.0%

31.5%

33.0%

34.5%

36.0%

37.5%

39.0%

40.5%

42.0%

43.5%

45.0%

Revenue

600

643

687

732

779

828

878

930

984

1040

1097

COGS

360

386

412

439

468

497

527

558

591

624

658

Gross profit

240

257

275

293

312

331

351

372

394

416

439

SG&A

72

77

82

88

94

99

105

112

118

125

132

R&D

36

39

41

44

47

50

53

56

59

62

66

Operating profit

132

141

151

161

171

182

193

205

217

229

241

Interest expense

0

0

0

0

0

0

0

5

5

10

15

Pretax income

132

141

151

161

171

182

193

200

212

219

226

Tax proNision (20,0)

26

28

30

32

34

36

39

40

42

44

45

Net income

106

113

121

129

137

146

155

160

169

175

181

Shares outstanding

100

100

100

100

100

100

100

100

100

100

100

Earnings per share

S1.06

$1.13

$1.21

S1.29

S1.37

$1.46

$1.55

S1.60

S1.69

S1.75

$1.81

Cument assets

150

203

261

325

396

475

564

664

778

908

1059

Cuttent liabtlities

100

135

174

217

264

31'

3"6

443

518

605

706

Working capital

50

63

87

108

132

15S

1SS

221

259

303

353

PP&E

200

271

348

434

528

634

752

885

1037

1210

1412

Total operating assets

250

338

435

542

661

792

940

1107

1296

1513

1765

Current assets

150

203

261

325

396

475

564

664

778

908

1059

PP&E

200

271

348

434

528

634

752

885

1037

1210

1412

Intangibles

0

0

0

0

0

0

0

0

0

0

0

Total assets

350

473

609

759

925

1109

1316

1549

1814

2118

2472

Current hataities

100

135

174

217

264

317

376

443

518

605

706

Total debt

0

0

0

0

0

0

0

50

50

100

150

Total liabilities

100

135

174

217

264

317

376

493

568

705

856

Shareholder's equity

250

338

435

542

661

792

940

1057

1246

1413

1615

Reference no: EM13749056

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