The cost of adjectives stock is the rate of return stockholders require on the firm's adjectives stock.?
Yes i need some homework assist, it's a true of false question, i reflect on true but i'm not that confident. Thanks for any input.Answers: It's true. The simpliest way to twig this is assume you own a company and want to raise money by selling shares within your firm. You want to know what will be the cost of your shares. It turns out the cost is the return investors expect by investing in your company. If the single way to trade shares is to compensate investors at 12% then that must be your cost.
This is a TRUE statement. te144's answer misses the blemish entirely. He seems to be looking at the issue from a stockholder's perspective. This is a corporate nouns question; we're interested surrounded by the cost of equity from the firm's perspective.
Jeff410's answer is also incorrect. The cost of capital is not the rate of return shareholders require on adjectives stock. Rather, the cost of capital is the weighted average cost of the firm's equity AND debt financing (minus the rates shield):
WACC = (E/E+D)(cost of equity) + (D/E+D)(cost of debt)(1-Tc)
The cost of common stock IS the rate of return the shareholders implicitly require on the firm's stock. If the company's expected return on equity exceeds the required rate of return on adjectives stock, the market will increase their emergency for the shares and bid the price up until the share price matches up near the expected return on equity. The opposite will crop up if the expected return on equity doesn't meet the required rate of return. This one the case, the required return on equity represents a hurdle rate that the company must surpass surrounded by order to hold on to its share price from declining, and thus represents a cost.
The cost of equity/required rate of return is across the world reckoned using a model that take the company's risk characteristics into account, such as the Capital Asset Pricing Model (CAPM).
Is it time for the Fed to angle interest rates?
What do you think the Fed should do something like the sinking dollar value?The recent rate cuts did not give the impression of being to help the cutback at all.
The stock open market was doing better when rates be higher.
Does anyone else surface like something fishy is going on here?
Answers: Today's weaker than expected job report made another LOWERING a nearly foregone conclusion.
There is most certainly something fishy going on but itll adjectives be a moot point on 12/21/12.
here in FLA the housing flea market is still in the crapper.
also nationaly the mortage industry is surrounded by bad shape.
iif rates jump up everybody with a adjustable rate get an increase and more people will progress into foreclosure because they can't afford their homes.
well the feed is in a tight spot very soon. you can not raise rates because of the mortgage mess. can not lower them to much lower on the count of inflation. ensnare 22.
my point of view is they should never hold started lowering rates in the first place. this would enjoy sped up the mortgage mess and things can get support to normal again. but they lower the rates very soon you gonna have a long dragged out entry. this could take years to catch through the mess. maybe in the order of 10 - 15 years down the road we will get support normal.
What is the best thing to do with $20k?
Answers: Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfolio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low -expense funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.
If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.
I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.
If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.
Believing advice you get on runeye.com can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.
Sources:
http://www.vanguard.com/VGApp/hnw/planni...
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetalloca...
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin...
http://finance.yahoo.com/funds/basics
Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://personal.vanguard.com/VGApp/hnw/...
https://ais2.tiaa-cref.org/cgi-bin/WebOb...
http://www.ifa.com/SurveyNET/index.aspx
Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)
529 plans: http://www.savingforcollege.com
I believe investing in stocks or mutual funds when you know little about them gives you one of two things (this includes handing your money over to some fund manager who is supposed to be an "expert"): Either too risky where you can easily lose the money or too safe to where you will not see any decent gains. Those suggesting a variety or diverse investent strategy should read up on those like Warren Buffet, Donald Trump and other successful investors. Diversification is for those with so many assets that it becomes prudent to diversify.
If you are in the process of trying to build wealth, the experts suggest placing the entire amount into one type of investment vehicle for maximum gains.
Personally, I could take $20K and invest in real estate and earn 25%-100% returns. I don't mean buying some house and selling it a month later either. there are a lot of different strategies out there. I would be happy to share some with you if you want. 619-861-4665