Investment Management MGMT 4803 Course Work (10%) Due: April 13, 2022 Before an investor puts money into any company, it is important that he/she know how the company is performing. As an Investment Advisor, you will need to guide your clients in their investment decisions. Conducting industry and company analysis, as well as valuing a firm's asset/securities are methods used to decide if investing in a company is worthwhile. Required: (a) Give an example of a growth company and a cyclical company and discuss why you have identified both companies as such. (10 marks) (b) Select any two companies of your choice, one which follow a cost leadership strategy and one which follow a differentiation strategy. Discuss why you believe both companies are following the low cost strategy or differentiation strategy. (10 marks) (c) Discuss the importance or benefits of engaging in a SWOT analysis to the companies you have identified in your discussions above. (10 marks) Note: Companies selected should be local firms. Use evidence to support your discussions. (d) Given the following data, calculate the value for each security The current dividend paid to common stock holders of Telcon Corporation is $5 per share. Dividends are expected to grow at an annual rate of $12%. The market requires a rate of return of 18% per annum. What is the stock's current price? 1. 12 marks) What is the value of preferred stock where the dividend rate is 9% on a $100 par value? The appropriate discount rate for the stock for this level of risk is 15% (2 marks) The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and would mature in 30 years, on December 31, 2008. Coupon payments are made semiannually on June 30 and December 31) What was the price of the bond on January 1, 1984, 5 years later after issue, assuming that the yield to maturity is 10 percent? (3 marks) iv. In EACH case (i, ii and iii) above, explain how an investor would use the value of the security to decide if investing in the firm is worthwhile. (3 marks) Total 40 marks Investment Management MGMT 4803 Course Work (10%) Due: April 13, 2022 Before an investor puts money into any company, it is important that he/she know how the company is performing. As an Investment Advisor, you will need to guide your clients in their investment decisions. Conducting industry and company analysis, as well as valuing a firm's asset/securities are methods used to decide if investing in a company is worthwhile. Required: (a) Give an example of a growth company and a cyclical company and discuss why you have identified both companies as such. (10 marks) (b) Select any two companies of your choice, one which follow a cost leadership strategy and one which follow a differentiation strategy. Discuss why you believe both companies are following the low cost strategy or differentiation strategy. (10 marks) (c) Discuss the importance or benefits of engaging in a SWOT analysis to the companies you have identified in your discussions above. (10 marks) Note: Companies selected should be local firms. Use evidence to support your discussions. (d) Given the following data, calculate the value for each security The current dividend paid to common stock holders of Telcon Corporation is $5 per share. Dividends are expected to grow at an annual rate of $12%. The market requires a rate of return of 18% per annum. What is the stock's current price? 1. 12 marks) What is the value of preferred stock where the dividend rate is 9% on a $100 par value? The appropriate discount rate for the stock for this level of risk is 15% (2 marks) The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and would mature in 30 years, on December 31, 2008. Coupon payments are made semiannually on June 30 and December 31) What was the price of the bond on January 1, 1984, 5 years later after issue, assuming that the yield to maturity is 10 percent? (3 marks) iv. In EACH case (i, ii and iii) above, explain how an investor would use the value of the security to decide if investing in the firm is worthwhile. (3 marks) Total 40 marks
