Prospective Analysis Assignment Example | Topics and Well Written Essays - 750 words

Prospective Analysis - Assignment ExampleThe random walk standard outlines that the stock price or earnings change have same distributions and are independent of each(prenominal) other thus past movements of stock price or earnings cannot be used to prophesy the time to come stock price movement. I disagree with Johns forecast strategy since the effrontery of unchanging mean and variance is debatable.b. A merger or acquisition is get out increase the future net income due to higher sales growth and to a greater extent revenue generation from the acquisition. The merger or acquisition entrust reduce competition thus enhance the future net income.The best precedent that describes a better pattern of the earnings per share is the mean-reversion model since competition in the grocery will drive abnormal levels of profits to mean while reinvestment of the earnings will likely earn more levels of earnings.According to many analysts, the Earnings Factory is a darling of the ASX. Its current market price $ 15 per share and its book value is $ 5 per share. Analysts forecast that the organisations book value will grow by 10 per cent per year indefinitely and the cost of equity is 15 per cent. The markets expectation of the organisations long-term average ROE is calculated as followsCompanies with a high ROE can have a low PE ratio when the investors expect the firm will continue generate positive abnormal ROEs. The PE ratio is the market price per share divided by the earnings per