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Essay / Research Paper Abstract
This 3-page paper discusses how a firm's action can increase its value, thereby having an impact on shareholder wealth. Bibliography lists 1 source.
Page Count:
3 pages (~225 words per page)
File: AS43_MTfirvalsh.doc
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Unformatted sample text from the term paper:
organization or company. The more amateur investors examine the rise and fall of the stock market prices. Experienced investors, however, examine the actions of the firm over the long-term. These
investors also examine positive actions taken by the firm, which include investing in, or financing, other projects. Under such conditions, restrictive assumptions point to the fact that a firms positive
investment will ultimately increase that firms value. An increase in the firms value means it will be of more interest to current and potential stockholders, who will want more of
the stock. Another restrictive assumption - that of supply and demand - then comes into play in this case. The higher the demand, the higher the price of a the
firms stock. This, in turn, will lead to more demand by shareholders, which will drive the stock price even higher. This particular
scenario was observed during the rise of the technological and dot-com eras beginning in the mid-1990s. At that time, thanks to the growing Internet boom, high-technology, Internet-based companies issued initial
public offerings, flooding the stock market with all kinds of new stocks from which investors could choose. There is nothing new about this: Firms regularly issue shares of stock to
raise capital. But what was interesting about these particular offerings is they were introduced to the market with no real numbers to back up their offering prices.
During those days, it seemed as though initial offerings were priced at what the market could bring, versus the firms actual value - which was
zero (we have to remember that most of these tech firms were new launches). The ideas, and the firms personnel, were the "value" portion of these IPOs. That, along with
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