Starting Right Case
Total money Yield of $30000 invested Percentage After 5 years Favorable MarketUnfavorable MarketFavorable MarketUnfavor
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- Ritzel Tan Cadeliña
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Total money Yield of $30000 invested Percentage After 5 years Favorable MarketUnfavorable MarketFavorable MarketUnfavorable Market Corporate Bond13.00%20,000 $25,273 $20,000 84.24%66.67% Preferred Stock 400%50% $90,000 ($15,000)300.00%50.00% Common Stock800%0% $210,000 ($30,000)700.00%100.00% Do Not Invest 4.50%4.50% $7,385 $7,385 24.62%24.62% Starting Right Corporation There are four options for investors. 1) Corporate Bond 2) Preferred Stock 3) Common Stock 4) Do not invest Total money Yield of $30000 invested Percentage After 5 years Favorable MarketUnfavorable MarketFavorable MarketUnfavorable Market Corporate Bond13.00%20,000 $25,273 $20,000 84.24%66.67% Preferred Stock 400%50% $90,000 ($15,000)300.00%50.00%
Common Stock800%0% $210,000 ($30,000)700.00%100.00% Do Not Invest 4.50%4.50% $7,385 $7,385 24.62%24.62% In this simple case, we will remove the interest adjusted assumption and the time value of money Also we are in the decision making under uncertainty environment since we do not know how the market will behave in the next 5 years 1) Sue Pan sky: very conservative State of Nature AlternativesFavorable MarketUnfavorable MarketMinimum Profit Corporate Bond$25,273 $20,000 $20,000 Preferred Stock$90,000 ($15,000)($15,000) Common Stock$210,000 ($30,000)($30,000) Do nothing$7,385 $7,385 $7,385 $20,000