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Money Management Midterm-1 - Essay Example

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Money Management Midterm-1

It is imperative to note that, the insurance companies are obliged to make regular and lifelong payments until the holder dies (Brealey & Myers, 1997). Consider the formula of calculating life annuity returns Payout= P*R*(1+R) exponent N/ (1+R) Whereby P is the principal, R interest rate and payout refers to the periodic payment. Take a percentage interest of 6% and use the annuity calculator for easy calculation. For a single life annuity, fixed amount to be paid is 3,333 per month. This adds up to EUR 39,996 annually. Therefore, annual periodic payment would be: A = EUR 39,996 Now I believe that I would need more money than EUR 39,996 annually. There would be different factors that would reduce the value of EUR 39,996 at that time like inflation. Therefore, when I retire and I think EUR 45,000 should be a valuable amount that I would need every year to spend my life happily. In order to have this amount every year, the interest rate should be 7% as calculated using Goal Seek option in Microsoft Excel. The life expectancy and retirement age considered in this context is 70 and 55 years respectively. PART II- SHARE ANALYSIS This part intends to examine and analyze two companies from the investment analysis. Various financial ratios will be applied to analyze the performances of the company. The implication created by the ratios will be used to recommend a suitable company for investors to invest. The two companies intended for analysis for this report are Lockheed Martin Corporation and Altera Corporation. Lockheed Martin Corporation Background information about the company Lockheed Martin is a global leader in providing aeronautics and defense security services. The company is the world’s largest federal contractor of the agency with unique product portfolio. Headquarter of the company is situated in Bethesda, Maryland in Washington Metropolitan Area. The company is present in more than 75 countries. The company has partnership with more than 300 industry players across the globe. It employs around 120,000 employees worldwide who include 80,000 scientists, engineers and IT professionals. This research establishes that, Lockheed reported $46.5 billion revenue in 2011 through its portfolio that includes aeronautics, electronics system, IT and global services, and space system. Net Income of the company is $2.65 billion in 2011. Presently, its share price is $93. Financial Ratios of Lockheed Martin Earnings per Share The Earnings per share shows how much return a shareholder is earning for each share (Friedlob and Plewa, 1996). The earnings per share of the Lockheed Martin were 7.81 in 2011. However, the average 3-year EPS growth rate of the stock is zero. Price Earnings Ratio Price Earnings ratio is the calculated by the following formula. Price earnings ratio = the market price per share/ annual earnings per share. A higher P/E of the stock implies that, investors are paying more for earning every dollar consequently; the share becomes more expensive compared to the ...Show more

Summary

Money and Management Midterm By [Name of Student] Finance and Accounting [Name of University] [Date] Contents Contents 1 PART I – Pension 4 Lockheed Martin Corporation 5 Background information about the company 5 Financial Ratios of Lockheed Martin 5 Earnings per Share 5 Price Earnings Ratio 6 Price per Book 6 Price per Sales 6 Return on Equity 7 Payout Ratio 7 Price per Cash Flow 7 Dividend Yield 7 Altera Corporation 8 Background information about the Company 8 Financial Ratios of Altera Corporations 8 Earnings per Share 8 Price Earnings Ratio 8 Price per Book 9 Price per Sales 9 Return on Equity 9 Payout Ratio 9 Price per Cash Flow 9 Dividend Yield 10 Conclusion 10 List of References 11 P…
Author : bstroman
Money Management Midterm-1 essay example
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