What are some of your long term investment goals

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Reference no: EM133498631

Question I - Long Term Stock Market Returns

Watch the following video on S&P500 Long Term Market Performance

Answer the following questions (written as an essay, no questions pasted):

1. What are some of your long term investment goals?

2. Should you be investing for the long term or short term?

3. What is your investment horizon (# years) for these goals?

4. What important points did you get from the video?

5. Using the LIRN Databases (Statista or other) find a company that has perform better than the S&P 500 for the last number your equaling your investment horizon. What can you learn from this company performance, industry, products, etc. LIRN and Statista tips below.

Question II - Fundamental Analysis

Conduct a fundamental analysis on Appaloosa, a clothes manufacturer. Appaloosa specializes in preteen clothes and produces only a modest amount of clothes for other age groups. Its sales of preteen clothes account for one-third of the total preteen market, both domestic and abroad. Appaloosa's balance sheets and income statements for the past two years are presented in Exhibit 1. Appaloosa's per-share earnings and dividends are given in Exhibit 2. Except for the most recent year, 20X9, and 20X8, per-share earnings have steadily increased, and dividends have risen every year for the past 10 years. This pattern of earnings and dividend growth is impressive.

For Appaloosa to be a good investment, it should have strong fundamentals and be financially sound. Analyze Appaloosa using ratios to analyze the firm's financial statements. You can compare the two years and compare to the industry averages given in Exhibit 3.

Currently, Appaloosa's stock sells for $50. You could invest in U.S. Treasury bills that yield 3.5%, but the stock market is expected to earn an annual 9.5%. The data are in the file, keystone-analysis-data.xlsx (file available in Week 7 folder). Should you buy Appaloosa stock? Answer the following questions:

1. Compute the ratios shown in Exhibit 3 for both years of Appaloosa. What is your conclusion?

2. What is the firm's current payout ratio compared to its historical payout ratio?

3. What are the annual growth rates in the earnings per share and the dividend per share? Why is the growth rate in the dividend not sustainable?

4. Is there any reason to believe that the firm has changed its dividend policy?

5. Compute the PE ratio, PS ratio, and PB ratio. (Note that you can infer the number of outstanding shares from net income/EPS.) Does Appaloosa's PE, PS, and PB ratios suggest the firm is undervalued?

Reference no: EM133498631

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