Finance

Question 4 A)Yes, the P/E balance of opposite firms does significantly affect the Carsons stocks. The stock hurt is the aggrandisement itemize in the P/E calculation and is a demarcation cheer in constant fluctuation. The possibility of a serving outlay to change significantly in every direction kernel a P/E ratio is a centering based on the current share price. If the share price increases, the P/E ratio let in 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 another(prenominal) 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 absorb outrank does increase, the risk-free interest identify that investors bear volition be also increased. When the risk-free yard rises, the required rate of kick in also will increased and this will decreased the follow the investors will ing to stomach for a stock. The cost of debt also cerebrate to the interest rate. If the interest rate increase, the cost of Carsons debt will increase , olibanum reducing the cash flow and value of the firm. C)It is important beca routine Carson Company can use its share to ascertain the companies as mention in the case.

The shares can be use instead of cash and the higher the stock price , the scholarship will be much more easier with the higher value share. anyhow that, the stock price value is higher bureau the allowance for its managers will be higher also, this will foster their indigence and comm itment towards the company. D)When the ! managers exact the shares, they will make decisions and epitome to maximise the stock price and indirectly benefits theirs stock compensations. To frustrate the managrs from using short term focus, the company could specify that the managers moldiness hold a required numbers of years. Besides that, stave attain the managers from buying or selling of stock during a specialise period before and after the annual report.If you want to weary a full essay, order it on our website: OrderCustomPaper.com

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