FIN 650 Grand Canyon Week 5 Complete Work


FIN 650 Grand Canyon Week 5 Discussion 1

Share repurchases have grown significantly over the past decade or two. In fact, a recent radio commentator suggested that the current rise in share prices (both the S&P 500 and the Dow Jones averages are trading at historic highs as of this writing) is due not to superior company performance, but to the increased volume of money flowing into the stock market from corporate share repurchases. Does this sound like a valid explanation for an increase in share prices? Why or why not?

FIN 650 Grand Canyon Week 5 Discussion 2

This discussion thread will be used to discuss the practice problems completed in this module. After completing the problems, submit your answers to the instructor. Your instructor will specify which problems will be reviewed for discussion. Post your answers to the posted problem to this discussion thread and discuss any challenges you had with completing the problems, tips that helped you arrive at the correct answers, and/or questions you may still have.

FIN 650 Grand Canyon Week 5 Case Study

Risk and Return

You have recently graduated with a major in finance and landed a financial planner job with Barney Smith Inc., a large financial services corporation. Your first assignment is to invest $100,000 for a client. Because the funds will be invested in a new business the client plans to start at the end of the year, you have been instructed to plan for a 1-year holding period. Further, your boss has restricted you to the investment alternatives shown in Table 1 on the attached resource, "Topic 5 Assignment Graphic Tables." (Disregard for now the items at the bottom of the data; you will fill in the blanks later.)

Note that the FIN 650 GCU Week 5 Complete estimated returns of American Foam (Am. Foam), a bedding company, do not always move in the same direction as the overall economy. For example, when the economy is below average, consumers purchase fewer mattresses than they would if the economy were stronger. However, if the economy is in a flat-out recession, a large number of consumers who were planning to purchase a more expensive inner-spring mattress may purchase a cheaper foam mattress instead. Under these circumstances, we would expect American Foam’s stock price to be higher if there is a recession than if the economy was just below average.

Barney Smith’s FIN650Week5 economic forecasting staff has developed probability estimates for the state of the economy, and its security analysts have developed a sophisticated computer program that was used to estimate the rate of return on each alternative under several state of the economy scenarios. Alta Industries (Alta Inds) is an electronics firm; website Repo Men collects past-due debts; and American Foam, as per above, manufactures mattresses and various other foam products. Barney Smith also maintains an "index fund" which owns a market-weighted fraction of all publicly traded stocks; you can invest in that fund, and thus obtain average stock market results.

Given the situation as described, answer the following questions.

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