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

Answer All Questions - Assignment ExampleDecisions that can be prescribed in monetary terms ar covered in the financial strategy (Bender & Ward, 2012). Thus, it could be stated that the financial decisions argon different from business decisions that the accompany may undertake however, they ar related to each separate and go for implications for them. (iii) There are four reasons that food market place value might differ from fundamental value which are given below a. The share price often reflect future prospect of the companys performance (Bender & Ward, 2012). If the market expects that the financial results of a company impart exceed the expected growth judge than the share price entrust react positively in advance (Bender & Ward, 2012). This is usually reflected by gamey 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 ex pectation that these companies 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 construe 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 displace by the positive sentiments about the projections that the company makes for its investment decision can have positive touch 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 takeove r another company then managers or shareholders of the target company may enter 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 gist of future cash flows discounted to the present time and it is understood that only those projects which result in positive NPV must be accepted by companies and all those projects which have negative NPV