Let's assume you are a team of financial specialists working for a large corporation. The company has made a profit of $ 200,000 which is distributed as follows:
1. One fifth of the sum is paid out to preferred stock holders.
2. One forth goes to common stock holders.
3. The rest is invested back into a company. One half is used to buy a new machine and the rest is going to be invested in securities. Be careful, you will have one condition here, P/E ratio of chosen companies that issued those securities must be higher than 5. We have to bring in additional profit.
Therefor:
1. Compute the amount to be invested.
2. Think carefully about what to buy, ATTENTION - commodities and currencies are excluded.
3. Clearly and comprehensively describe why did you pick every security, what motivated you; give a short information about the issuer as well.
4. Prove that you indeed made a profit. How much is your employer richer? If you were not lucky, explain why your venture was unsuccessful and what did you learnt from it.
5. How would your portfolio change if you had one year?