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  1. Concepts related to stocks

     

    QUESTION

    Explain core concepts related to stocks and to analyze the ethical implications of decisions and promote ethical standards within organizations.

 

Subject Business Pages 5 Style APA

Answer

Ethical Issues

 

Report on potential ethical issues

Most enterprises face ethical challenges in their everyday operations, most especially most of these issues containing either integrity-related problems or rust. The act of doing your business in a good and reasonable way that does not harm the practices of other companies or your employees and stakeholders is to start with honesty. Integrity focuses extensively on the fairness and authenticity of the important organizations surrounding the company. When employers acquire a business, it is important to consider applying equal means in their overall transactions and being committed to unwavering ethical business practices. Diversifying the available problems is another significant moral concern that the organization is likely to face. This will mean using equal opportunities in training programs and optimizing the benefit of each employee’s contribution while venturing into a new field that we have never been in before. We will need to familiarize ourselves with the kind of diversity by hiring a diverse workforce. In this situation, the decision-making problem is another ethical question that we are likely to face. Ethical dilemmas and problems can easily be defined using structure instruments that can help examine issues relevant to the decisions taken. The goal of all ethical decision-making should be to put stakeholders together and treat them equally to prevent favors.

To conclude, I propose that our organization take up a corporate business culture to bring workers together and empower them to work openly without fear or favor. To add to this, the Fargo Company is also encouraged to be very transparent, especially to its investors, in its financial operations. This would contribute dramatically to a rise in investment and thus to high final profit margins.

 

 

 

a). The common stockholders are the business owners and, as described below, are entitled to certain rights and privileges.

 

  1. They have the rights to vote and elect their leaders and also have control over the company
  2. They have the right to buy any additional shares that the company sells, called the preemptive right,
  3. All shareholders have the right to appoint the company’s directors, who in turn help elect the officers to manage the company.
  4. The last important point is those common shareholders also have the right to share the company’s earnings equally on a per-share basis, and common shareholders are residual claimants of the company’s revenue and all assets during the liquidation.

 

  1. b) A company’s free cash flow contains the company’s cash when carrying on its activities minus the total expenditure received on the company’s assets. Free cash flow plays an important role in the business by enabling the company to seek opportunities that promote shareholders’ value.
  2. b) The weighted average cost of capital, the WACC of any given company, is taken as the rate at which the company is supposed to pay on average to all its security holders to fund its properties, which is another significant factor. This also includes estimating the cost of capital of companies in which each capital group is weighted proportionately.

 

The free cash flow assessment model is a business evaluation methodology in which business value is equal to the existing values of its free cash flows. It includes projecting into the future free cash flows and then discounting them at the required capital expenditures.

c)

 

In this case, the debt is fixed, and the fixed interest is to be paid to the holders regardless of the profits and losses made. In preference shares, the dividend is designated and supposed to be paid to the preference shareholders, which is only paid when there is a profit made.

Equity has residue claim on the income earned

  1. d) The required return rate=rRF+b (rm-rRF)

 

7 % +1.22 % + (12 percent -7 percent)

 

= 13%

The businesses were projecting intrinsic stock values

 

Po=Do (1+g)/Ke-g

Replacing $2(1+006)/values (0.13-0.06)

= 30. 29 $

  1. e) The current B&M free cash flow =$24 millions

Growth rate =5%

WACC=11%

 Value of operation =FcFo* growth rate/ (WACC-growth rate) =24*1.05)/ (0.11-0.05)

=$420 millions

1) Short term investments=$100 millions

Debts =$200millions

Preferred stock =$50 million

2) Estimated total corporate value =v.o +s.t.i-debts –

420+100

=520

3) Estimated intrinsic value of equity

420+100-200-50

=$270

Equity shares=5+5=10 million

4) Estimated intrinsic price per share = 270/10

$27

 

References

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