The United States’ economy has been in a slow, uneasy recovery since a late 2000s recession. Between October 4th and November 7th, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ, as well as the unemployment rate and the Consumer Price Index reflected this slow and uneasy recovery with mixed and mediocre performances. The trend lines for the Dow, S&P 500, and NASDAQ look similar for the period of stock ownership. They all declined slightly, with their lowest point being in mid-November. The Dow fell by 565.83 points, from 13575.36 to 13009.53. The S&P 500 fell from 1461.40 to 1409.15, while the NASDAQ fell from 3149.46 to 2966.85. Despite this, all three have recovered to the point that they are now higher than just before they bottomed out in 2009. The rise out of the near catastrophe in 2009 to their current mediocre-but-steady numbers is indicative of the slow economic recovery. During the period of stock ownership, President Barack Obama was reelected for a second term, on 6 November. On November 7th, the S&P 500 and the NASDAQ fell 2.4%, and the Dow fell below 13000 points for the first time since early August. Investors had preferred opposing candidate Mitt Romney, believing he would take a softer stance on business practices, as well as a more hands-off approach to the economy. They lacked confidence in the Obama administration’s economic policies. A problem that plagued President Obama for most of his first term is my second chosen indicator: the unemployment rate. The unemployment rate fell from 7.9% in October to 7.8% in November, with 146,000 jobs being created. The number of unemployed fell from 12.3 million to 12 million. Jobs were gained in the retail and healthcare industries, but losses were had in the construction industry, which makes sense because there is less construction in a struggling economy - people do not invest in new projects and real estate is cheap. Though a 0.1% gain in the unemployment rate seems rather trivial, it is really a good sign in the perspective of the last few years; unemployment was at 10% in October of 2009. Hopefully, this percentage will continue to decrease in the coming months and years. The Consumer Price Index is a monthly measure of the change in prices consumers pay for goods and services. The percent change in the CPI from year to year is the measure of inflation. In November, the index for urban consumers fell 0.3 percent, meaning those consumers paid less for goods and services on average. The report stated that the gasoline and energy indexes fell, while the food index rose. While Hurricane Sandy had bumped some gas prices up in the Northeast, countrywide prices fell in November according to consumerreports.org. Americans spent more on food at home and at restaurants in November, but spent less on apparel. Low gas prices puts more money in the pockets of the average American, which benefits the economy because they can go invest it, or go out to eat and help that section of the economy. There were a couple of odd circumstances during the period studied besides Barack Obama’s reelection. The aforementioned Hurricane Sandy made landfall in the northeast and shut down the stock market for two days, but the main indices showed that it had very little effect on the economy. According to Goldman Sachs, the storm might actually help the economy by giving an employment boost to the construction and industrial sectors, which are responsible for rebuilding damaged structures. There was also the dreaded “fiscal cliff,” a package of spending cuts and tax increases that would have gone into effect had Congress not reached an “11th hour” deal to avert the crisis. Last minute partisan politics do create economic uncertainty; businesses will be hesitant to invest and hire new workers if there is a chance their taxes will increase. The agreement avoided an imminent recession, and there was no measurable effect on the economy.
December 6 2014
Stock Market Research Paper
The stock that I have kept for the whole five weeks of the stock market project was
Google. During the five weeks that I had Google as a stock Google ended up losing me money,
but overall the stock did great. The stock had its ups and downs, but most of the time ups. In this
research report I will go through the background and history of the company and try to explain
why the stock either did good or bad.
The history and…
Microsoft, Dell, Sina Corp, and Sohu Media’s common stock performance were tracked and followed. These companies were picked on individual preferences and will be compared to the S&P 500’s performance for the same time period. This was done to see if the performances of randomly picked stocks deviate far from the performance of the market as a whole. This month had two events that had substantial effect on the market, . Hurricane sandy closed the stock market for three days and the results of the election…
Evaluating Project Risk
It’s Better to Be Safe Than Sorry!
1. What seems to be wrong with the way the NPV of each project has been calculated? Indicate without any calculations, how Pete and John should go about recalculating the projects’ NPVs.
The NPV of each project has been calculated by discounting the cash flows at the 8% before-tax cost of debt. This is incorrect. Since the company has debt, preferred stock and common stock in its capital…
invest in some
For example, should a firm buy a
new production line?
Discount rate = required return
From the project, we need to earn at least
the required return to compensate our
investors for the financing they have
The required return is the same as the
appropriate discount rate and is based on
the risk of the cash flows from the project.
How to decide the appropriate discount rate
(to discount future FCFs from the project)?
Required rate of return…
The company had cash of $1,206, inventory of $14,290, and accounts receivables
of $6,589. The company’s net fixed assets were $42,412, and other assets were $2,822.
It had accounts payable of $11,580, notes payable of $2,886, common stock of $21,800,
and retained earnings of $14,368. How much long-term debt did the firm have?
______ 4. The Millennium Chemical Corporation announced that for the period ending December 31, 2015, it…
Tesco & Gillette
Shrinkage Reduction Project
- Zsolt Partos, Trading Director, Tesco Hungary
- Bill Cody, Country Manager, Gillette Group Hungary
• Global retailer: UK, Central Europe and Asia.
• Tesco Hungary: 21 hyperstores and 27 superstores.
• Business growth through long term customer loyalty
by meeting constantly changing customer needs.
• Low levels of shelf out of stocks and customer friendly
merchandising are key pillars of the Tesco strategy.
Chapter 22 has a very thorough explanation how equity can be considered as a call or put.
Using the asset value of $27,500 (the $26,300 current value of the assets plus the $1,200 project NPV) as the stock price, and the face value of debt of $25,000 as the exercise price, the value of the firm if it accepts project A is:
d1 = [ln($27,500/$25,000) + (.05 + .552/2) 1] / (.55 ) = .5392
d2 = .5392 – (.55 ) = –.0108
N(d1) = .7051
N(d2) = .4957
Putting these values into the Black-Scholes…
Pay. STOCKHL EQ: Com stock+Ret. Earn. ERNGS PER SHARE: Net Inc/numb of stock shares. DIVIDENS PAID: Net inc-(Ret.ear-old yr ret. Ear) CASH FL FR OP: old year’s Ret Ear+acc pay-taxes. NET CAP SPEND: NEW YR Net fix ass-old yr nFass+dep. CHANGE IN NET WRK CAP: (new yr cash+acc rec+invent-acc pay) – (old yr cash+acc rec+invent-acc pay) CASH FLOW CREDITORS: Interest-(new yr long t debt- old LT debt). CASH FLOW STCKHOLDERS: Net inc-(this yr ret ear-old yr ret earn) – (comm stock new-old com stck).…