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Essay / Research Paper Abstract
This 23 page paper examines a range of different financial theories which are used in terms of investment and corporate financial decision-making. The paper looks at investment decisions under certainty, utility theory given uncertainty, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), Efficient Market Hypothesis (EMH), dividend policies and the way that issues can be applied in corporate finance including equity arbitrage theory. The bibliography cites 19 sources.
Page Count:
23 pages (~225 words per page)
File: TS14_TEfintheory.rtf
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Unformatted sample text from the term paper:
1. Introduction In the world of investment and corporate finance decisions have to be made on a daily
basis. The decision is made concern wide range of issues within a broad number of contexts, which the decision maker (DM) needs to be able to place into a broader
context. Although situations and decisions may vary there are a number of theories and hypotheses which have been presented over the years that can help with the decision-makers analysis. This
paper will consider a range of these theories that have a direct and relevant application to the business world. 2. Investment Decision - The Certainty Case. There are few investments or
corporate finance decisions which will lead to a certain outcome. However, there will be some occasions arrived where there is certainty. The consideration of the way the investment and corporate
finance decisions are made the starting point should be a decisions that are made under conditions of certainty. When looking at any investment decision there will be certain common elements
whatever the situation, the analysis that listed decision will involve considering the alternatives and the determination of the criteria of how the choice will be made between the alternatives (Elton
et al, 2002). There may be situations where there is certainty of outcome. This is best illustrated with a fictitious example to demonstrate the way in which certainty case can
be contextualised. By looking at a simple problem as an example the same process can be applied to more complex problems. Consider an investor who will receive an income of
$10,000 over the next two years. Furthermore, that the only investment they can make is one which will yield 5% per annum. These are conditions of certainty. It may also
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