What does the economist mean by this statement

Reference no: EM132519607

Finance Questions -

Question 1 - ABC Ltd. has issued Ordinary Share Capital comprising 4 million shares of £1 nominal value.

It is forecast to earn £1.5 million profit in each of 2020 and 2021. In 2022 this rises to £2 million, remaining at that level for 2023 and 2024. In 2025 the profit rises to £2.5 million, and will remain at that level thereafter. ABC Ltd's cost of capital is 9%.

Required: a) Assuming that today is 1st Jan 2020, calculate the value of the company and of one ordinary share, using a 'discounted cash flow' approach. For the purpose of this question you may assume that profit equals cash flow.

b) The Statement of Financial Position as at 31st December 2019 shows that the net assets (and therefore the capital plus reserves) of the same company are equal to only £17.1 million. Explain two reasons why this so-called 'book value' of a company is often lower than the valuation arrived at by discounting future revenue streams

Question 2 - Brazil is currently producing too many soy beans, a lot more than the socially optimal quantity."

What does the economist mean by this statement? Use a diagram to explain your answer.

Question 3 - Mr Finnigan holds shares in S plc. He wishes to diversify his investment by selling half of those shares, and re-investing the money elsewhere. He has identified three possible companies in which to buy shares. Below are the correlation co-efficients between historical returns of shares in S plc and the historical returns of shares in those three companies:

Company	Correlation co-efficient
F plc	Negative 0.42
J plc	Zero
W plc	Positive 0.26

Reference no: EM132519607

Questions Cloud

Contentious issue : Scenario analysis : Pick a contentious issue that has not been satisfactorily resolved between the United States and China,

Describe the payback period : Describe the payback period. How is it calculated? What is the criterion rule? What are the advantages and disadvantages?This is for quiz review study.

Compute the cash flow from assets for each year : If the projected annual sales decrease by 5% to $19 million per year, how much would the project's NPV change? compute the cash flow from assets for each year.

Identify governmental regulatory agency : Identify a governmental regulatory agency whose regulations would also apply to that same healthcare entity type.

What does the economist mean by this statement : What does the economist mean by this statement - Brazil is currently producing too many soy beans, a lot more than the socially optimal quantity

What kind of managerial functions you will use : What kind of managerial functions you will use to run your business and how and What are management skills do you think would be most important

Will york need to pay any money to the county : Will York need to pay any money to the county? If so, how much? The Anderson County board of supervisors has agreed to fund an ambitious

Increasing fear of terrorism : With the increasing fear of terrorism since 9/11, how do we prepare to prevent, deter and respond to an enemy that we do not know, that can strike at any time,

Extract tom mac onyango trial balance as at april : Extract Tom Mac Onyango Trial Balance as at 30th April 2018. Open ledger accounts to record the transactions,Tom Mac Onyango operates a retail shop.

User Account

All Pages