I’m studying and need help with a Engineering question to help me learn.
1)Swetha sigaPart 1: There are various macroeconomic factors that influence interest rates are such as unemployment, house prices, exchange rate, wage inflation, commodity prices, spare capacity, and inflation. The long-time unemployment in the country makes it hard for people to pay rent and purchase goods and increases interest rates. It automatically leads to a decrease in the growth of a nation. Another factor that influences interest rates more is that commodity prices. The increment in commodity prices leads to inflationary pressures since it makes imports to other countries expensive, increase the demand for exports. It results in depreciation in the exchange rate and increases interest rates. The actions were taken by the federal government also show a significant impact on interest rates because it contains the highest credit rating (Chyruk, 2020).Macroeconomic factors most sensitive in selected industryThe industry in which I am working is the information technology (IT) industry. IT the industry is sensitive and affects the change in macroeconomic factors often. The macroeconomic factors that affect the IT industry are such as inflation, unemployment, savings, and investments. Inflation is a more sensitive factor that shows a significant impact on the industry because IT is high-paying industry and higher inflation lead to decrease profits in the IT industry, decrease the capability to invest in other businesses, and savings of industry. The longer unemployment leads to wage inflation and down salaries and decreases the employment rate. Contemporary factors affect the chosen industryThe two contemporary factors that show a significant impact on the IT industry presently are such as international conflict and globalization. The international conflicts lead to increase barriers in importing and exporting goods between the nations. It also affects trades and changes the trade made between the nations that result from the change in currency exchange between the nations and change currency. So, international conflict is a sensitive factor that affects the IT industry. Another factor is globalization that directly affects interest rates paying by the industry. Because globalization involves more countries and allows firms to outsource services to firms in other countries (Ongena, 2018).Part 2:Stock valuation to finance firms’ operationsBased on the knowledge gained from provided materials on stock valuation, risks and returns, it is understood that stock valuation is a tool that helps the firm to collect information from various sources, evaluate stock, and create informed decisions that help to enhance the performance of a business and achieve desired growth of an organization. The firm uses it as a technique to determine the theoretical value of a stock that helps to determine the value of stocks and the price of the stock is over and under the value of the market price. Yes, financing the operations of an organization using stock is good than using bonds because stock valuation supports a firm to determine the stock value and its value in the current market and make decisions based on price. It helps to increase profits and finance operations well.Importance of risk and return in financial decision-makingBased on the knowledge gained from materials, it is understood that risk is an unexpected problem to the business that leads to increase interest rates and decrease the amount received by a business invested in a specific project. Return is the amount received on a specific project. if the return on a project is greater than the amount invested in the project then business runs in profits otherwise lead to loss of finance. It is important for the organization to consider the factors such as risk and return in financial decision-making since making decisions without estimating risks and returns do not support the business to receive expected profits and run the business successfully (Utami, 2020).Reference:Ajello, A., Benzoni, L., & Chyruk, O. (2020). Core and ‘crust’: Consumer prices and the term structure of interest rates. The Review of Financial Studies, 33(8), 3719-3765.Arce, O., García-Posada, M., Mayordomo, S., & Ongena, S. (2018). Adapting lending policies when negative interest rates hit banks’ profits.Utami, N. (2020). Analysis Of The Influences Of Dividend Payout Ratio, Return On Equity, Growth And Firm Size On Stock Value With Leverage As Mediating Variable. Jurnal Akademi Akuntansi (JAA), 3(1), 44-59.2)Prathap ananthaPart 1The organization will have to expand and grow its business so that the profitability is achieved, the organization have to build the facility to operate its new production and this includes the capital, income from the current production and leverage for the banks or financial institutions. The banks levy rate of interest on the leverages, the rate of interest can be changed based on the economic conditions in the country or the region. The inflation in the country results in the raise of prices of the daily commodities and this will impact the production costs and the repayment of the leverage, this effect the rate of interest from the banks. The unemployment, exchange rate fluctuation somewhat affects the cash flow and the value of money. The managers have to think of these future possibilities and the fluctuation in the economic aspects so that the perfect plan is to be executed which covers from the increasing interest rates. The food processing industry will be severely hit by this rate of interests and the economic fluctuations because the production has to be continuously run as the food to be distributed or produced in the meantime (Zetek et al, 2013). Part 2The stocks and the dividends of the organizations were placed in the stock markets as they play an important role so that the loss is distributed over the stocks and the stock purchase yields the money to them. The risk and return from the stock market is due to the volatility of the market, this volatility of the market is due to the global situations. The dividend discount model stock exchange forecasts the rate and price of the stocks and the return from them based on the dividend placed on the market. The organization has to review all the possible measures to safe guard the better yield from the stocks (notendur.hi.is, 2020).Referencesnotendur.hi.is. (2020). STOCK VALUATION AND INVESTMENT DECISIONS. Retrieved from,https://notendur.hi.is/ajonsson/kennsla2008/stock_valuation.pdfZetek et al. (2013). Macroeconomic factors influencing interest rates of microfinance institutions in Latin America. Retrieved from, https://core.ac.uk/reader/2139494903)Vijay KunusothMicroeconomics speaks regarding mathematics features inside and global economic structure statistics and analyzes. This will assist you to know the functioning component of both the environment and model the financial policies. Revenue and liquidity components and supplies into the scheme. It addresses all aspects of the yield curve, unemployment, productivity, and currency issues. There are some goals that need to be addressed, such as low inflation, economic development, development of transactions, and also GDP. Here I recognize three considerations e.g. rate of inflation, joblessness, and economic expansion. These environmental variables affect the mortgage rate to an extreme and alter the revenue projection general schematic (Nisha, 2020).Inflation rate: inflation rate affects the government’s general domestic production. Based on the trade of goods at that moment in time, the institution’s house prices that are quite big in existence having to pay for either the private and the public sector will be affected. If the annual inflation rate was very large, the facilities will strengthen as well as the cash flow will decrease and repayments should be harassment.Unemployment: is a big factor that has to be regarded as influencing the rates of unemployment. It seeks at the country’s lengthy-term economic development and exchange rates in the absence of funds would be greater to recompense. Economic growth: It relies on the input costs of the goods, which is equivalent to the government’s GDP in a scenario such as the continuous stock rate. It provides you total requirement on the world economy’s initial products and services and has an impact on lending rates to a certain extent (Turnes, 2018).Part 2: Stock Valuation: Stock valuation depends entirely on capital appreciation on dividends and capital gains. There are very few measures in assessing the future market earnings and marketing predicting, estimating future commodity prices, and assessing dividend pay-outs and EPS. Financing a stock-based business is often a safer alternative than funding the securities. Since we have the predicted potential commodity prices, it is simple for us to compare the present product prices and combine the applicants with excellent ones.Example if last year sales are 100M $ in the market.The revenue growth is expected as 8% andThe expected net profit is around 6%Earnings after-tax = (100 + 8) * 6/100 = $ 6.5 MillionFinancial returns are assessed on the basis of returns on capital, which may be insignificant or depending on the expected understanding. And in bucks and proportion range this will be evaluated. The risk will be greater if the expected returns were too far from the anticipated yields. It provides you a clear knowledge of the likelihood of earnings and much fewer returns when anticipated (Farhangdoust, 2018).ReferencesDoktoralina, C. M., & Nisha, F. M. (2020). Mudharabah Deposits Among Conventional Bank Interest Rates, Profit-Sharing Rates, Liquidity and Inflation Rates. International Journal of Financial Research, 11(1), 25-33.Salehi, M., Tagribi, M., & Farhangdoust, S. (2018). The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange. International Journal of Productivity and Performance Management.Ziegler-Hasiba, E., & Turnes, E. (2018). Negative Interest Rate Policy in Switzerland. Entrepreneurial Business and Economics Review, 6(3), 103-128.
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