Annual returns

Your client wants to invest $250,000 in a food industry company’s common stock. Their goal is to keep the investment for five years with the expectation that the stock price will increase in order to make a minimum average of 9% return annually over the five-year period. In other words, there could be a projected return of less than 9% one year, but could be offset by a return of greater than 9% in another year. So take the overall predicted returns and divide by five to arrive at the average annual return you predict.

Identify the current price per share and how many shares your client will purchase for $250,000.

B.) Using the company’s five-year stock market price graph, make a prediction of their stock price for the next five years.

C.) Include any dividends they will potentially receive during the five-year investment. You can find the company’s dividend policy in their annual report. Include this policy in your answer.

D.) Do you recommend that the company you have analyzed is worthy of consideration for your client’s investment portfolio? Include justification for your recommendation using the information gathered above and also using what you learned in SWOT and industry trends.




Sample Solution