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Sometimes employee’s performance is highly based on his/her ability to perform; in such situations salaries are based on employee competency. This type of salaries is termed as:
Seven important keys for this are as follow.
1.Understand what forecasting is and is not
As a result of this a better environment will established for business activities. Accuracy and remove the game plan is also can be achieved.
2. Forecast demand and plan supply
In this way you can improve capital planning and customer service.
3. Communicate, corporate and collaborate
It is very helpful to get all important information for to forecast and it is trustable for user. More accurate and relevant forecast can be got.
4. Eliminate island of analysis
With this key more reliable and accurate forecast can be achieved.
5. Use tools wisely
With the help of this efficiency and effectiveness will be get.
6. Make it important
With the help of this forecasting key developers can take serious the issue that are under discussion. Accuracy and credibility can also be achieved.
Forecast performance can be including in the individual performance plans. Errors can be removed and improvement can be also achieved. Confidence of the forecasting can also be increased.
IA new investor wants to add bonds and shares in his portfolio and he has two options available with the following information.
I. Company ABC issued a five-year bond with face value of Rs.1,000. The bond offers 12% semiannual coupon payment. The market interest rate for such type of investment is 14% per annum while current market price of bond is Rs.940.
II. The stock of company XYZ is being sold at Rs.54 per share while the forecasted dividend is Rs.6 for first year and Rs.7 for the second year. The price of the stock after year 2 is expected to be Rs.55. The Company paid most recent dividend as Rs.5 whereas the rate of return for such type of investment is 14% per annum.
You are required to help the investor in valuation of both investment options by calculating:
Intrinsic value of the bond. (8 marks)
Intrinsic Value of stock today. (8 marks)
Identify either bond and stocks are overvalued or undervalued. Justify your answer with proper calculation and reasoning. (4 Marks)
Intrinsic value of the stock
Do = Current dividend = Rs.5 D1 = Rs.6
D2 = Rs.7
Value of Stock:
Po = D1/ (1+i)n + D2/ (1+i)n + P2/(1+i)n Po = 6/ (1.14)1+ 7/ (1.14)2 + 55/ (1.14)2 Po = 5.26+5.39+42.32
Po = Rs.52.97
Bond and Stock valuation Solution
Overvaluation or undervaluation of securities
Bond is overvalued because market price is more than intrinsic value i.e. Market price > Intrinsic value
940 > 929.76
Stick is also overvalued as its market price is more than its intrinsic value i.e. Market price > Intrinsic value
54 > 52.97
‘In the Public Interest’ is an excessively used cliché in mass media. What do you know about it?
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