Using the Yahoo Finance take a look at the five year chart for your reference company (Swift Transportation Company). Using this chart and other information you can find on this company, write a paper answering the following question: What do you think would the futures price of 100 shares of your reference company to be delivered to you in one year be right now? SLP Assignment Expectations The paper is to be two pages long. You DO NOT need to use complex mathematical formulas for this assignment. Instead, think about how much do you think the market value of 100 shares of your company will be in one year? In considering the possible answer please reflect also on the following: Do you expect the price of the shares in one year to be much higher? Or lower? Or only a little bit higher? How risky the stock is. Is its price prone to wild swings up and down? Or has the price been relatively stable the last few years? What alternative investments you have access to. What rate does your bank give you on a savings account or certificate of deposit? The greater return you can get on other investments, the less you would be willing to pay for an equity future.

 

Market value

 

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Market value

Market value is the estimated price that an asset would fetch when traded in a market place. The price entails an amount that a buyer is willing to pay and is accepted by the seller in a competitive market that is open. The market value is achieved by multiplying the outstanding shares by the present share price.  Market value enables investors to make decisions on which shares to purchase. Organizations also are able to determine their exchange rates by assessing and analyzing the market. The market value determines the share prices which defines the price of one share in a saleable stock belonging to a particular company. Share prices keep on changing in regard to the market (Kasznik, 2002)

Swift Transportation Company has an outstanding share balance of 83.32 million shares. The current share price at the company is $24.77. This has been an increase from the previous years and has brought 23.73% change. Over the next one year the market value of 100 shares at Swift be $2477. The rise in price is because of demand in transportation services. The company performance and news will increase the share price. High performances entail that the company’s productivity is high achieving high revenues.

Investors are attracted to companies that are productive for them to earn high dividends. Introducing a new services at Swift will increase the level of income at the company. The move by Swift to merger with Knight Transportation will attract investors hence increasing its market value. Exist of fellow competitors from the industry will increase Swift customer base. Low concentration on the truckload industry offers Swift Transportation the chance to offer services to many customers (Hall 2005)

 sentiment whereby they show their interest in the transport industry will increase the market value. Having a bull market in the transport industry will boost the share prices at Swift. A bull market indicates that the stock prices are constantly rising and investors have confidence in it. Investors’ confidence will stimulate them to buy more shares increasing share demand. An economic outlook which indicates it expansion will facilitate the rise in prices. Low interest rates from Swift financial providers will lead to provision of services at a lower cost. Low costs increases demand hence high share prices. 

Stock risks

Stock at Swift Transportation Company is risky and has been unstable over the past years.  The stock is risky because there is no guarantee on returns. Swift performance is unpredictable and has been seen to rise and fall in the past. The unpredictable nature does not give investors an assurance to earn dividends. Investors who buy and sell shares stand to lose their money in case the share price changes from time to time. Presence of many competitors increases the chances of a stock being risky. This is because some competitors are likely to put Swift out of business by providing better and cheaper services. Swift customers will decrease, leading to low income and later the company may collapse. Collapse of the company means that investor’s money is lost (Le Roy 1973)

Alternative investments

Other than investing in purchase of shares investing in private equity which is not listed for exchange or publically traded. Investing in real estate business by buying land and buildings. Investing with borrowed money is an alternative investment know as hedge funds and brings in huge profits. These alternatives required minimum investments and their fee structures are relatively low. Real estate investment has low liquidity compared to shares. There are difficulties faced in valuing the alternative investments which enhance growth of investment rather than sale. The rates given on savings account depend on the minimum balance that one maintains with the bank. Also the bank that one belongs to is a factor that affect the rates depending on the bank policy.  The higher then amount of saving the higher the rates. 

Reference

Basu, S. (1983). The relationship between earnings’ yield, market value and return for NYSE common stocks: Further evidence. Journal of financial economics, 12(1), 129-156.

Hall, B. H., Jaffe, A., & Trajtenberg, M. (2005). Market value and patent citations. RAND Journal of economics, 16-38.

Kasznik, R., & McNichols, M. F. (2002). Does meeting earnings expectations matter? Evidence from analyst forecast revisions and share prices. Journal of Accounting research, 40(3), 727-759.

LeRoy, S. F. (1973). Risk aversion and the martingale property of stock prices. International Economic Review, 436-446.