We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Comparison between EDF group (lectricit de France) and E.ON S E from an investor's perspective point of view - Assignment Example

Comments (0)
Summary
Introduction Many companies exist in the present and not all companies perform as well as others. The performance of companies is a critical area for some, mainly the investors who have invested capital amounts into the company. Investors can use a wide variety of tools to measure performance, but mainly focus on financial analysis, including ratio analysis, as well as other finance tools such as the Capital Asset Pricing Model (CAPM)…
Download full paper
GRAB THE BEST PAPER
Comparison between EDF group (lectricit de France) and E.ON S E from an investors perspective point of view
Read TextPreview

Extract of sample
Comparison between EDF group (lectricit de France) and E.ON S E from an investor's perspective point of view

Download file to see previous pages... It is assumed that the reader has basic knowledge of these tools of analysis. Capital Asset Pricing Model (CAPM) According to Rai University: “The CAPM was developed to explain how risky securities are priced…CAPM aims at a more practical approach to stock valuation.” The assumptions of CAPM include: 1. Investors hold diversified portfolios 2. Single-period transaction horizon 3. Investors can borrow and lend at the risk-free rate 4. Perfect capital market (Rai University, 2013) Capm reflects that investors need to be compensated in two ways Time Value Of Money Risk (Investopedia, n.d.) The risk-free (rf) rate in the formula represents the time value of money invested at a minimum rate while the other half of the formula represents market risk applicable to the company. CAPM is in the view that the expected return of a stock is equal to the rate on a risk-free stock plus a risk premium. If the expected return does not match or meet the required return then any such investment is termed to be not feasible and is not to be carried out. The betas calculated in the attached working represent the risk of the specific company in relation to the market. When coupled with the market equity risk premium and the risk free rate, we can establish a minimum rate of return that would be required by the shareholders in relation to risk and returns in the market The calculated ROE of both companies is in the 5%-7% range showing that the companies’ shareholders require a minimum return of 5% as compared to the risk and return level they face in their investment in the company’s stock. CAPM is not an absolute model as it faces many limitations. It assumes markets are information efficient and all investors preferences are the same. These assumptions may not hold true in the actual market place and so, there are other models to calculate required return on equity, such as the gorden growth model or the earnings multiplier model. The major assumption in CAPM relates to perfect capital market and the assumption of all perfect information being available to investors. This introduces the concept of efficient market hypothesis. Efficient Market Hypothesis - EMH Many different theories state that it is simply impossible to beat the market. This is mainly due to the fact that market efficiency leads share prices to reflect all relevant information at any given time. The Efficient Market Hypothesis believes that all the stock traded always hold their fair value hence it is impossible for the buyer to purchase undervalued stocks or for the seller to sell at an overvalued price as stated by Malkiel, 2003. Due to this the only way that any investor may get a higher return is by getting hold of high risk stocks or a balanced portfolio (Pesaran 2010) On the other hand people against the hypothesis highlight the example of Warren Buffet beating the market consistently over fairly long periods (CBS, 2012). “Beating the market” is considered impossible under the efficient market hypothesis. Another aspect highlighted by those against the theory is events of 1987 during which the Dow Jones Industrial Average fell by more than one fifth in a day. This gives proof that the prices of stock may show a deviation from their fair values. Efficient Marke ...Download file to see next pagesRead More
Comments (0)
Click to create a comment
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
EU crises from microeconomic point of view and future of EU
Economic integration of up to twenty seven independent states has given rise to the European Union (EU). These states have come together to establish a community that is politically and economically united through the provisions of an economic integration.
14 Pages(3500 words)Assignment
Dixons Retail Group e-commerce
The firm that is analyzed in the paper is Dixons Retail Group which is among Europe’s leading specialist electric retailer and services company that sells consumer electronics, photographic equipment, domestic appliances, personal computers, communication products and related services. As at the June 2011, the company was trading through over 1,200 stores and online in 28 European countries.
17 Pages(4250 words)Assignment
Investigating The International Strategy Of A Chosen MNE. The lectricit de France
The Électricité de France can be considered as the leader in the energy sector and it has also been dynamic in all the aspects of the electricity value chain. The company has an excellent business model where a proper balance has been maintained between the regulated and the non regulated activities (EDF, 2009).
16 Pages(4000 words)Essay
Are the documentary filmmakers trying to persuade you of a certain point of view
The world of filmmaking is dictated by two types of films. One is the fiction type and the other is the documentary type. Both the types has one common factor, that of convincing the audience. Both the forms are good enough for the purpose, but the latter one is one step ahead than its counterpart in one thing, the power to persuade.
3 Pages(750 words)Assignment
Book critiques from health point of view
It is rightly said by the doctors that cancer originates due to an excessive growth of a single cell. Cancer can be avoided if diagnosed at the first stage with the help of surgery and chemotherapy. Cancer affects not only the life of an individual and increases the mortality rate but it largely affects its family members mentally, socially and economically.
6 Pages(1500 words)Assignment
Locke's point on view about empiristics
Question: Locke claims (contra Descartes) that empiricists can demonstrate the independent existence of the material world by means of two main ideas/theories: (a) the distinction between primary and secondary properties of objects, and (b) the causal theory of perception.
2 Pages(500 words)Assignment
Marie De France Era
The author focuses on Marie de France's views that segmented into two clear distinctions, one carried in the part of the writing, which is in advocacy of the marital rules and moral obligations. However, in the second part, we get to see that in a certain and subtle way she has defended it by stating that this is a common practice in the courts.
3 Pages(750 words)Essay
Explain the differences between a group and a team
On the other hand groups strength is the ability of the leader and its willingness to carryout the commands, emanating from one source. A teams philosophy is—two heads are better than one. Each one is eager to share the viewpoints of the other for
3 Pages(750 words)Assignment
Analyzing Point of View
This is what happening in “The Gift of Magi” where we do not see what Jim is doing during the story but still he chooses Jim to tell the part of the story. As for me narrator’s point of view in the whole short story adopts to be
1 Pages(250 words)Assignment
Comparison Between Two Films
Rather, we witness hilarious actors who fight and still love together. When Maria Tura and her husband become overly angry at one another, we still cannot help, but laugh (Hake 18). The Great Dictator,
7 Pages(1750 words)Assignment
Let us find you another Assignment on topic Comparison between EDF group (lectricit de France) and E.ON S E from an investor's perspective point of view for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us