James River’s Price was $20.98 at the beginning of 1995. What conditions must hold to use the constant growth model? Do many “real world” stocks justify the constant growth assumptions? The dividends grow at a constant rate forever to use the constant growth model. No, many “real world” stocks do not satisfy the constant growth hypothesis because the real world circumstances can be unpredictable and harder to forecast so being able to continually grow your business at a specific rate each year is difficult.
Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities. This could be due to quick expansion of inventory with the intention of increasing sales. While this is currently considered a weakness and is concerning, a rise in the ratio should be seen by 2013 due to the increase of suggested sales. 3. I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year.
Consumer price and producer price in 2009 to 2012 continue to drop and raise the price for consumers was not steady. The direction and magnitude of price change in the Producer Price Index for finished goods anticipates a similar change in the Consumer Price Index for all items. When this assumed relationship is contradicted by the actual movements of the two series. The answer is that conceptual and definitional differences between the PPI and CPI—differences which are consistent with the uses of the two measures—contribute to the differences in their price movements. A primary use of the PPI is to deflate revenue streams in order to measure real growth in output.
(Source 1/3) The 16 billion barrels of oil that lie untapped there would be more than enough to replace the oil Americans would purchase from Iraq for over 58 years. (Source 6/2)With our growing dependency on foreign oil increasing more and more every day, we can not afford to wait any
All else being equal, cash received sooner is better. • The timing of cash flows a firm can generate is very important in determing the value of a firm. All else being equal, cash received later is better. • The timing of cash flows a firm can generate is irrelevant in determing the value of a firm. FCF= sales revenues-operating costs-Operation
With reference to extract one, assess the likely effect of a fall in the sterling exchange rate on the UK’s deficit in the trade of goods and services. (12 marks) A fall in the exchange rate of 25% means the pound becomes weaker, this means imports are more expensive, and exports are cheaper. As a result of this, this may mean a large increase in demand for exports and a considerable decrease in demand for imports, therefore decreasing the deficit of the balance of payments in the UK as predicted. However, if the goods we are importing and exporting are inelastic, meaning they have a less than proportional response to price, an increase in the price of imports, and a decrease in the price of exports may not have a great effect on the trade of goods and services and so therefore not improve on the deficit the UK holds. As stated in extract 1, it tells us that the goods we import are not made in the UK and so makes it impossible to replace the imports, therefore meaning that we still have to import goods, despite the high prices due to the low exchange rate of sterling.
In the demand side, Methanex’s revenue was exposed to the fluctuation of the demand for methanol, since Methanex only produced methanol. This situation was more serious in the supply side, where the price the “raw material”, natural gas was subject to fluctuating prices, interruptions to supply lines and international policies and regulations governing imports and exports. In last decades, some plants in New Zealand and Egypt had to shut down temporally for fluctuating price of natural gas or political issues. The options for Methanex to solve/relieve these issues include: • Using derivatives on natural gas and methanol to hedge the risk from price fluctuation • Expanding the market in China to explore opportunities in both demand and supply sides • Exploring opportunities in areas where long-term contacts on demand (in methanol) or supply (in natural gas) instead of focusing only on the richness in natural gas reserve • Expanding new products lines to reduce the risk from strongly relying on a single product. It could also make use of the idle resources (plants, machines, etc.)
Describe the Federal Reserve’s assessment of the current economic activity and financial markets. The levels of uncertainty associated the projections for economic growth and inflation is considered greater than the levels that have been consistent over the past 20 years. The contributing factors for this assessment include the severity of the recent recession, the uncertain effects of the current stance of monetary policy, uncertainty about the direction of fiscal policy, and structural dislocations in the labor market (Monetary Policy Report, 2011). The most frequently cited downside risks included a potential for a large negative effect on consumer spending from higher food and energy prices, a weaker labor market, falling house prices,
Market Equilibration Process Paper Nancy Holly ECO/561 Economics June 14, 2012 Arnella Trent, Facilitator Abstract Market equilibrium is the balance between supply and demand in economics. The market is considered equal when there is no excess supply or demand within the market. The laws of supply and demand affect the market such that equilibrium is achieved within a competitive market when all other things are considered equal. A real-world example of market equilibrium is the cost of gas. Changes of Demand and the Effect on Gas Prices Law of Demand The law of demand states that the cost of an item is related to the demand for the item.
There are still many people who criticize and oppose the raising the minimum wage. Many believe that increasing the minimum wage would maximize the unemployment rate when in reality it would actually create more job opportunities. This is because increasing the minimum wage will require high relative price for unskilled labor which concludes that firms will have a high demand for skilled labor. The increase of minimum wage increases earnings and reduces