Imagine that you have $100,000 to invest. You are going to invest it all in one investment for the next five years, at least, at which point you will re-evaluate both your investment and personal situations.

You will invest it all in one of the following investments – these are your only two options:

A bank account earning 5% per year.

Common stock of __________.

You will be performing the analysis from the perspective of an investor who is 25 years from retirement, and the investor’s income is greater than living expenses. The investor has a liquid net worth of $1,000,000 of which 40% invested in the S&P 500 index, 40% in a medium-duration, high-quality bond fund and 20% in a savings account earning 5% interest per year. You are to determine if the investor should take $100,000 from the savings account and purchase $100,000 of this company’s common stock.

Where are you going to invest your $100,000? Why?

Your recommendation should comprehensively but succinctly provide sufficient information for the investor to approve your recommendation by being able to address the investor’s reasonable questions including the following:

What is the problem? What are you trying to figure out?  

What historical financial information helped you make your decision – ratios, growth rates, margins, projections, competition?  

What role does risk play and how do you account for it in your analysis?

What industry information helped you make your decision – such as competition, overall markets, and state of the economy?  

What are you assuming about the future?  

What are the critical factors that led you to choose the option you chose?

I started with this:

 

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Let's start with a simple analysis to see what our earnings would be if we invested $100,000 into a saving account that would pay us 5% earnings per year for the following 5 years. After working on the analysis, we came up that we would make around $27,628.16 in 5 years on our saving account. Plus, the future value of $100,000, the total would be $127,628.16. n Investment Research Assignment į PV Total 5 5% -100,000 $127,628.16 Stericycle is a company that provides essential services for companies of all sizes that help protect communities from harmful wastes, promote access to healthcare services, and lead to great consumer safety and satisfaction. (Stericycle) Let's start with a simple analysis to see what our earnings would be if we invested $100,000 into a saving account that would pay us 5% earnings per year for the following 5 years. After working on the analysis, we came up that we would make around $27,628.16 in 5 years on our saving account. Plus, the future value of $100,000, the total would be $127,628.16. n Investment Research Assignment į PV Total 5 5% -100,000 $127,628.16 Stericycle is a company that provides essential services for companies of all sizes that help protect communities from harmful wastes, promote access to healthcare services, and lead to great consumer safety and satisfaction. (Stericycle)

Answer rating: 100% (QA)

Question In this scenario you have 2 options one to invest in risk... View the full answer