Answer All Questions Assignment Example | Topics and Well Written Essays - 2000 words

Answer All Questions - Assignment ExampleDecisions that can be prescribed in financial call be covered in the financial strategy (Bender & Ward, 2012). Thus, it could be stated that the financial decisions are different from business decisions that the order may undertake however, they are related to each other and have implications for them. (iii) There are four reasons that market comfort might differ from fundamental jimmy which are abandoned below a. The share expense often reflect future prospect of the companys performance (Bender & Ward, 2012). If the market expects that the financial results of a company forget exceed the expected growth rates than the share price will react positively in advance (Bender & Ward, 2012). This is usually reflected by high price to earnings ratio. It is understood that companies stock which have higher price to earnings ratio are likely to show increase in the market value of their shares as the market develops an expectation that these c ompanies are likely to outperform their expected targets. For example, a recent launch of iPhone 5 pushed the market value of Apples stocks higher. b. ... ecomes mature and better view of the companys performance becomes clearer the market value of shares will begin to coincide with the fundamental value of business per share. c. The company announces a future investment project which is expected to yield higher returns for the company and thus, the market reacts positively to the news. Although, the investment is yet to be placed by the positive sentiments about the projections that the company makes for its investment decision can have positive impact up on the market value of the companys shares. For example, a company Medinah Minerals announced its exploration project in South America which lead to major interest by shareholders in its stocks and the market value went up above the fundamental value of the company. d. If a company approaches to takeover another company then manag ers or shareholders of the target company may slip in in the market to alter the market value of its shares so that higher bid can be achieved. In this case, the market value of shares will be higher than the fundamental value of the company. This is a strategy to prevent takeover bids by other entities. For example, this defense tactic is very much common in the US as compared to the UK. Q2 (i) Year 0 1 2 3 NPV Project A Cash Flows (240,000.00) - - 325,000.00 Discount Factor 1.00 0.90 0.81 0.73 Discounted CF (240,000.00) - - 237,637.20 (2,362.80) 0 1 2 3 NPV Project B Cash Flows (198,000.00) 110,800.00 82,500.00 45,000.00 Discount Factor 1.00 0.90 0.81 0.73 Discounted CF (198,000.00) 99,819.82 66,958.85 32,903.61 1,682.28 NPV is the sum of future cash flows discounted to the present time and it is understood that precisely those projects which result in positive NPV must be accepted by companies and all those projects which have negative NPV