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Stocks versus other types of investments

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As an investment manager, you frequently make decisions about investing in stocks versus other types of investments, and about types of stocks to purchase.

(a) You are considering an investment in an initial public offering (IPO) by Arunaxmi Co., which has performed very well recently, according to its financial statements. The firm will use some of the proceeds from selling stock to pay off some of its bank loans. How can you apply stock valuation models to estimate this firm's value, when its stock was not publicly traded? Once you estimate the value of the firm, how can you use this information to determine whether to invest in it? What are some limitations involved in estimating the value of this firm?

Reference no: EM132535556

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