Question $5$

One really important concept to understand in finance is the difference between simple and compounded interest. This simply concept has many ramifications for how we value different projects including how we discount a project$$s cash flows or how we value companies. Provide an example that highlights and amplifies the difference between simple and compound interest.

Question $6$

According to Berk and DeMarzo $(2020)$ the primary goal of the firm is to maximize shareholder wealth $($i$.$e$.,$ increase the value of the owner$$s shares$).$ Some contend that maximizing stakeholder wealth is a better objective. Indicate whether you believe that maximizing shareholder wealth or maximizing stakeholder wealth is a more appropriate objective and why. Include at least two citations that support your response.

Question $7$

In our segment on stock valuation, you were exposed to the dividend discount model $($DDM$)$ and Free Cash Flow $($FCF$)$ method to estimate a stock$$s price. What about these two methods of equity valuation is different and what about them is the same? Use Figure $9\mathrm{.}2$ to compare and contrast the estimates for Kenneth Cole Productions using various methods to estimate the stock price. Which method do you prefer and why? Include at least two citations that support your response.

Question $8$

In a seminal article on portfolio theory, Markowitz $(1952)$ illustrated that investors are not compensated for taking on firm specific or idiosyncratic risk; however, they are compensated for taking market or systemic risk. Use your understanding of the Capital Asset Pricing Model $($CAPM$),$ statistical concepts such as standard deviation and variance, and our ideas about market efficiency and indicate whether you believe that this is a good theory. Include at least two citations that support your response.