Finance Assignment Example | Topics and Well Written Essays - 250 words - 3

Finance - Assignment Example 6. Â  If you calculate the growth prospects of a firm and from this forecast you project the amount of and timing of dividends and then you discount this dividend stream back to the present you are applying the Firm Foundation Theory. 8. Â  I do not currently own shares of FB. I think that the business model of FB is going to fail. I decide to borrow shares of FB and then sell these borrowed shares. This is an example of a short sale. 9. Â  It was individual investors who made huge mistakes that led to the dot.com and housing bubbles and the collapse of these markets. If individuals had allowed professionals to manage their money the destruction of value that took place when the dot.com and housing bubbles burst could have been avoided. 10. Investors are rational and this places constraints on asset prices. For example if Company X owns 90% of company Y and 10% of Company Y is traded on a stock exchange then the value of company X will always be the value of 90% of company Y plus the value of Company X. 11. IPOs are a way for insiders to liquidate their ownership interests of a company. IPOs tend to increase in frequency during a stock market bubble because the public is demanding to participate in the market for a new technology. This demand increases the value of shares offered and fuels the demand for more share