Investors are irrational or naive
Explain how companies with substandard financial history can draw the attention of investors. Are investors irrational or naive?
Expert
There may be some companies in the world whose performance in the past may not be good due to poor management, poor market condition, increased competition, introduction of substitutes in the market. All these can lead to decrease in revenue and ultimately profits. Now there may be companies whose financial performance has decreased not due to some mismanagement but due to some hard hitting abnormal conditions such as poor market etc. Investors look out for distressed investments so that they can purchase the stake at low valuations. Investors know which company has good prospects and they can exit such investments at a high valuation at a later stage. They are very smart individuals.Investors are neither irrational nor naive. They took any investment decisions based on many factors such as future growth of the sector, the competition in the market, how to maximize returns etc. They take decisions after they know that they will get their required Rate of return from the investment. Further, investors are also not naive. It is their hard earned money. They make investments only after they are reasonably sure of a good and profitable exit. They apply various techniques of valuation to evaluate a company before investing in it. They do not invest in a company just by their whim They also have mandate which they have to fulfill.
You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information: Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm
Your Corp, Inc.'s data is as follows:Beta; 1.30Recent dividend; $.90Expected dividend growth; 7%Expected return of the market; 14%Treasury Bills are yielding; 4%Most recent stock price; $65 A] Us
What is nonlinearity in option pricing model?
What is the market risk premium within Spain at the present time – the number that I have to use in the valuations?
One of the projects the US loan would fund is to build earthquake-resistant buildings. The projectwill begin in March 2013, last for two years and is expected to have the following expenditures:start-up costs of $200,000 paid at the beginning of the first month; renta
Shawna desires to invest her recent bonus in a 4-year bond which pays a coupon of 11 % semi-annually. The bonds are selling at $962.13 nowadays. When she buys such bond and holds it to the maturity, what would be her yield? (Round to the nearest answer.) (i) 11.5%&nbs
The ROE is the ratio among net income and Shareholders’ equity. The meaning of Return on Equity is return to shareholders. Therefore, is ROE a correct measurement of the return to shareholders?
Effective Utilization of Funds: It is just the decision to maximize the return on investment of funds. When finance manager is not capable to raise the return by investing fund in profitable assets or other profitable projects, company’s busines
Regular supply of working capital: The working capital requirement (WCR) estimation helps to ensure that the supply of raw material, which is essential to production, is uninterrupted. Therefore, the firm will be able to get sufficient credits and fun
Ape Car Rental plans to begin its business by buying 10 cars at the average price of $18,000 each, depreciating them entirely over 5 years utilizing the straight-line method. It will rent space in a parking lot for $300 a month, paying the rent in advance every month.
18,76,764
1941167 Asked
3,689
Active Tutors
1420975
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!