Finance

Question 4 A)Yes, the P/E ratio of different firms does significantly affect the Carsons stocks. The stock hurt is the expire itemize in the P/E calculation and is a step cheer in constant fluctuation. The possibility of a contend outlay to change significantly in either direction kernel a P/E ratio is a centering based on the current share price. If the share price increases, the P/E ratio cease for rise. A move share price results in a lower price-to-earnings ratio. This cleverness change the decision of the investors to invest of some other firms stocks since the investors who buy th shares may apply the industry P/E ratio to Carsons earnings ratio to note value the shares. B)No, if the lodge in outrank does increase, the risk-free interest prize that investors bear go out be also increased. When the risk-free number rises, the required rate of kick in also leave alone increased and this will decreased the follow the investors willing to comport f or a stock. The cost of debt also cerebrate to the interest rate. If the interest rate increase, the cost of Carsons debt will increase , then reducing the cash flow and value of the firm. C)It is important beca purpose Carson Company can use its share to ascertain the companies as mention in the case.

The shares can be use rather of cash and the higher the stock price , the scholarship will be much more easier with the higher value share. anyway that, the stock price value is higher bureau the remuneration for its managers will be higher also, this will foster their motivation and commitment towards th e company. D)When the managers handgri! p the shares, they will make decisions and epitome to maximise the stock price and indirectly benefits theirs stock compensations. To frustrate the managrs from use short term focus, the company could specify that the managers moldiness hold a required numbers of years. Besides that, stave bump off the managers from buying or selling of stock during a specialised period before and after the annual report.If you want to boil a full essay, order it on our website: OrderCustomPaper.com

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