Reference no: EM131516562
Investment Research Assignment
Imagine that you have $100,000 to invest. You are going to invest it all in one investment for the next 5 years, at least, at which point you will reevaluate both your investment and personal situations.
You will invest it all in one of the following investments - these are your only 2 options:
A. A bank account earning 5% per year.
B. Common stock of __________.
You will be performing the analysis from the perspective of an investor who is 25 years from retirement and the investor's income is greater than living expenses. The investor has a liquid net worth of $1,000,000 of which 40% is invested in the S&P 500 index, 40% in a medium-duration, high quality bond fund and 20% in a savings account earning 5% interest per year. You are to determine if the investor should take $100,000 from the savings account and purchase $100,000 of this company's common stock.
Where are you going to invest your $100,000? Why?
Your recommendation should comprehensively but succinctly provide sufficient information for the investor to approve your recommendation by being able to address the investor's reasonable questions including the following:
• What is your objective? What is the problem? What are you trying to figure out?
• What historical financial information helped you make your decision - ratios, growth rates, margins, projections, competition?
• What role does risk play and how do you account for it in your analysis?
• What industry information helped you make your decision - such as competition, overall markets, and state of the economy?
• What are you assuming about the future?
• What are the critical factors that led you to choose the option you chose?
• What decision analysis tools helped you to make your decision?
Please limit your response to 3 pages, typed, double-spaced, plus no more than 2 pages of exhibits. This is both a math and a story assignment: your math has to support your story and your story has to support your math. 3 pages of text plus 2 pages of exhibits is not a lot to cover this assignment; you need to be concise, relevant, and convincing in those 5 pages.
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