Equity Investments MCQ - Equity Investments Section 2

66 When women entered the work force in the US, the restaurant, child care, and women’s clothing industries were dramatically affected. This example can be best classified as a:

The given example can be best classified as a social influence.

67 A company is presented with two capital investment projects:
i. To replace existing machinery with productivity-improving capital equipment.
ii. To establish strong market research teams to match customer needs with product development. Both projects require the same initial outlay. If the company chooses the first project it most likely pursues a competitive strategy of:

Cost leadership entails minimizing costs and transferring the benefits of these reduced costs to consumers. In this manner, the company maintains slim margins, but generates its profitability through high volume. Since the company has preferred the strategy of improving productivity rather than marketability, the likelihood is that the company pursues a cost-leadership strategy.

68 Which of the following statements about company analysis is least accurate?

The corporate profile would include a description of the company’s business, investment activities, governance and strengths and weaknesses.

69 A given stock is trading at $36.81. An analyst estimates its intrinsic value as $38.25. According to the analyst the stock is most likely:

Since the market value is less than intrinsic value the stock is undervalued.

70 You are evaluating a security which is actively traded and followed by many analysts. Based on your model you arrive at an intrinsic value which is much lower the then current market prices. The sensible course of action will be to:

For a security that is actively traded and followed it is unlikely that the intrinsic value differs substantially from the market value.