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Investment Analysis
There is a significant difference between bonds and stocks, and they should not be treated the same when evaluating a portfolio. There are a handful of similarities, such as the fact that their value derives from the net present value of expected future cash flows, but the two securities are fundamentally different.
A bond entitles the holder to a cash flow from the issuer. Equity represents a share of ownership in the company. From this arises the first key difference -- the risk. Risk refers to the chance that the expected cash flows will be disrupted. With equity, this means that the earnings could drop, reducing not only the dividend but also the future profit potential as well. The value of the company's cash flows is likely to change if the company's performance suffers a downturn. With a bond, the only risk is the risk of default. Default typically will not occur except in the event of bankruptcy....
Therefore, there is a low risk of default with most companies. If the issuer's performance suffers, this will not necessarily result in an increased risk of default.
The second major difference between bonds and equities is with respect to the issuer. Bonds can be issued not only by corporations but by governments as well. This gives the investor a wider range of options with respect to issuers. Treasure bonds are considered to be no risk, and most other government bonds are considered to be low risk. As we have seen with equities, in particular the collapse of even major corporations, that degree of safety simply does not exist with equities.
The value of equities tends to fluctuate based on recent earnings trends. For the most part, interest rates are not a major factor, other than in the contribution they make to the discount rate. Bonds, on the other hand, are subject to significant fluctuation…
Financial Analysis Over the past decade, increasing attention has been paid to the issue of corporate governance. As a result of multiple major scandals, new laws have been passed and the role of the SEC has been expanded. Sarbanes-Oxley introduced sweeping corporate governance reforms, and despite its high costs there are many tangible benefits. Many business advocates argue for lower regulatory standards, but there is a strong economic case to be
Stock Analysis FedEx Corporation (FDX) is the stock I have chosen for this exercise. The first page that Yahoo Finance shows has the stock price, last trade, change, previous close, open and bid/ask. There are also daily and annual ranges, volume and average volume, market cap, P/E, and dividend information. A small daily price chart is also there. This is the basic stock information, especially for day traders or short-term investors,
Investment Analysis Identify the Components of Realized Return of Common Stock The real return on the sale of stock is often referred to as the realized return as this is the true rate of return of the risk of investment. Many often mistake the realized return as the gain from the sale of the stock in the secondary market, or at most, the inclusion of dividends that have accrued over the period
Investment Analysis Investing money for the future is one of the key components of creating a secure future, and retirement. While many Americans do not plan for future years, other then a company retirement plan and social security retirement benefits, research shows that when a person takes an active role in their retirement planning, they are more likely to create a future which will support their standard of living after they
28% This gives project B. An IRR of -0.028% Part C Using the above assessments each may indicate which investment may be preferred. Using the payback period project a has a payback period of 4 years, whereas project B. has a payback period of 3 years 8 months. If the fastest payback period is preferred than project B. will be chosen. The NPV which discounts the net revenues into a net present value shows
9% for the past seven years (Index Mundi, 2009). An inflation rate of 2% per annum shall be assumed for our future cash flows model, the additional 0.1% reflecting a desire for conservativeness in our estimates. Karl's pension pays him 80% of his current salary, which is not expected to increase in the final three years. The pension benefit is indexed to inflation. We will assume a 30% tax rate for