Mike a financial analyst for starbucks wishes to estimate, Ask an Expert

Finance

Mike, a financial analyst for Starbucks, wishes to estimate the rate of return for two similar-risk investments, "A" and "B". Mike's research indicates that the immediate past returns will serve as reasonable estimates of future returns. 1 year earlier, investment "A" had a market value of $20,000; investment "B" had a market value of $55,000. During the year, investment "A" generated cash flow of $1,500 and investment "B" generated cash flow of $6,800. The current market values of investments "A" and "B" are $21,000 and $55,000, respectively.

1)Calculate the expected rate of return on investments "A" and "B" using the most recent year's data.

2)Assuming that the two investments are equally risky, which one should Mike recommend? Why?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9881563

Have any Question?Write your Review or question?

Related Questions in Basic Finance

If you buy a bond for a discount is your yield-to-maturity

If you buy a bond for a discount, is your yield-to-maturity higher, lower or the same as the going market interest rates?

A financial planning licensee striving for excellence in

"A Financial Planning Licensee striving for excellence in their fiduciary duty has decided to set a maximum limit of gearing for all client financial plans they construct." Comment on the merit of taking such an approach ...

1 the consultants estimated the required rate of return was

1. The consultants estimated the required rate of return was 13.635% 2. The Beta of Poorside's equity was 0.7, the market return was 20% and the risk-free rate was 12% 3. The interest rate on debentures was 13% per annum ...

Define and fully explain marketing research and the

Define and fully explain marketing research and the marketing concept and describe the relationship between marketing research and the marketing concept.

Suppose that a 2-year bond has a face value of 1000 and

Suppose that a 2-year bond has a face value of 1000 and pays semi-annual coupons of 50. If the price is 930, compute YTM and EAY.

You are given the following quotesusnbspdollarmexican

You are given the following quotes: U.S. dollar/Mexican Peso = 0.4637 U.S. dollar/Australian Dollar = 0.6921 U.S dollar/Chinese Yuan = 0.1825 What is the Chinese Yuan/Australian Dollar cross rate? How to find net float i ...

The global network has sales of 421945 cost of goods sold

The Global Network has sales of $421945, cost of goods sold of $270002, and inventory of $33598. What is the inventory turnover rate? Round your answer to the nearest hundredth.

Gerritt wants to buy a car that costs 26500 the interest

Gerritt wants to buy a car that costs $26,500. The interest rate on his loan is 5.31 percent compounded monthly and the loan is for 6 years. What are his monthly payments? $416.25 $430.60 $439.40 $428.70 $452.13

Your are the investment advisor for your aunt who would

Your are the investment advisor for your aunt who would like to invest $1,250,000 with a AAA rated insurance company that will pay her a "monthly" fixed-payment annuity for the next 20-years. Calculate the monthly paymen ...

Why is environmental analysis important for an organization

Why is environmental analysis important for an organization? Please be detailed.

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert