INVESTMENT AVENUES 1.1 INTRODUCTION TO INVESTMENT The money one earns is partly spent and the rest is saved for meeting future expenses‚ instead of keeping savings idle one may like to use savings in order to get returns on it in the future‚ this is called as investment. In an economic sense‚ an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance‚ an investment is a monetary asset purchased with the idea that the asset will provide
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Introduction to Securities Investment (Understanding Investment Decision Process) Individual’s Objective: Maximize utility (=degree of satisfaction) from consumption‚ subject to income & wealth‚ and market opportunities. In order to achieve the objective‚ people save a portion of (current) income for future spending‚ and reverse is also true. => efficient saving. Where to save? (Security types in Chapter 3) 1. Real assets: 2. Financial assets: represent claims on future cash payoffs
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was obvious from the first glance that batching strategy was the right one‚ as it was profitable. On the contrary‚ the non-batching strategy it was not profitable and there was a loss of $ 201.58. This is due to the fact that batching allows the restaurant to use fewer chefs which lowers the fixed costs maximizing the profit. We can also notice that in the cases of batching versus the cases of non batching there was an increase in the revenue from the dining room whereas there was also a decline
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happen to the stock’s required rate of return? 6.00% 7.00% 11.00% 13.00%* Stock R has a beta of 1.5‚ Stock S has a beta of 0.75‚ the expected rate of return on an average stock is 13 percent‚ and the risk-free rate of return is 7 percent. By how much does the required return on the riskier stock exceed the required return on the less risky stock? 2.5% 3.0% 3.5% 4.5%* An investment has a 50% chance of producing a 20% return‚ a 25% chance of producing an 8% return‚ and a 25% chance of producing
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CHAPTER 18 Investment Decisions: Ratios Test Questions 1.Income multipliers: a. are useful as a preliminary analysis tool to weed out obviously unacceptable investment opportunities. 2.The overall capitalization rate calculated on a potential acquisition: a. is the reciprocal of the net income multiplier. 3.The operating expense ratio: c. expresses operating expenses as a percent of effective gross income. 4.The equity dividend rate: b. expresses before-tax cash flow as a percent of the
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with a delicious treat. I decided to stop by the local Denny’s after dropping off my wife at work. The children and I were hungry and I did not feel like making breakfast. The restaurant turned out to be a great choice as it was not only clean and friendly‚ but the food was also delicious. Upon walking into the restaurant I noticed a very large aquarium in the waiting area. At first glance it was an amazing site. The vibrant colors of the two large yellow and blue fish seemed to pop out at you
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RJR Nabisco Valuation When assessing the valuation of RJR Nabisco bids‚ the Special committee should utilize the Capital Cash Flow method. The Capital Cash Flow method‚ when applied appropriately‚ should yield the same valuation when discounting a company’s Free Cash Flow. To get Capital Cash Flows (CCF)‚ Net Income is adjusted by adding back non-cash expenses and other reconciliations to form cash flow‚ decreasing Capital Expenditures‚ decreasing changes in Net Working Capital and finally‚ adding
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INTRODUCTION TO INVESTMENT What is Investment? An investment is the choice by the individual‚ after thorough analysis‚ to place or lend money in a vehicle (e.g. property‚ stock securities‚ and bonds) that has sufficiently low risk and provides the possibility of generating returns over a period of time. Placing or lending money in a vehicle that risks the loss of the principal sum or that has not been thoroughly analyzed is‚ by definition speculation‚ not investment. In the case of investment
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Penta ltd (Investment appraisal) Introduction What is investment appraisal? It is the activity responsible for carrying out a cost benefit analysis to justify capital expenditure for a new investment. Capital investment decisions are those decisions that make current outlays in return for a stream of benefits in future years. . The characteristic of many investments is risk and uncertainty. many organisations prefer to avoid high risk investments but may consider these investments if they
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24/02/2013 1 25721 INVESTMENT MANAGEMENT Lecturers: Sean Anthonisz Nadima El-Hassan Jianxin Wang Brandon Zhu Subject Coordinator: Jianxin Wang Objectives 2 Why do you take this subject? What do you expect to learn? How much did you pay for this subject? Is this a good investment? Investment Decisions 3 How much should I invest in risky assets? How much should I invest in different risky assets? How many risky assets should I hold? When not to diversify? How to determine
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