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Henry64840

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Feb 29, 2016
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Q) If company 1's market value dropped by 6.5% and company 2's share price increased by 2.8%, what would be the different in market value?


Company 1:
Current share price = £0.67
Outstanding shares = 3,530,601


Company 2:
Current share price = $1.03
Outstanding shares = 3,571,428


Company 3:
Current share price = $0.95
Outstanding shares = 3,507,941


Company 4:
Current share price = £0.78
Outstanding shares = 3,482,355


*1 USD ($) = 0.59 GBP (£)
*Market Value = Current Share Price x Outstanding Shares


MULTIPLE CHOICE ANSWERS:
A) £195145.90
B) £19381.80
C) £189876.94
D) £409673.40
E) £40207.36


It's probably very obvious but i'm not sure what I'm doing wrong. I have worked out company 1's mv as £2,211,744 and company 2's mv as £2,233,750, so the difference is 21,826 which is not included in the multiple choice answers
 
Henry64840 said:
Q) If company 1's market value dropped by 6.5% and company 2's share price increased by 2.8%, what would be the difference in their market values?

Company 1:
Current share price = £0.67
Outstanding shares = 3,530,601

Company 2:
Current share price = $1.03
Outstanding shares = 3,571,428

Company 3:
Current share price = $0.95
Outstanding shares = 3,507,941

Company 4:
Current share price = £0.78
Outstanding shares = 3,482,355

*1 USD ($) = 0.59 GBP (£)
*Market Value = Current Share Price x Outstanding Shares

MULTIPLE CHOICE ANSWERS:
A) £195145.90
B) £19381.80
C) £189876.94
D) £409673.40
E) £40207.36

It's probably very obvious but i'm not sure what I'm doing wrong. I have worked out company 1's mv as £2,211,744 and company 2's mv as £2,233,750, so the difference is 21,826 which is not included in the multiple choice answers
Click to expand...
Are you finding the difference now or (as specified) after they've changed from the "current" values? ;)
 
stapel said:
Are you finding the difference now or (as specified) after they've changed from the "current" values? ;)
Click to expand...

This is all the information provided in the question.

I too was confused by the wording here. If we are finding the difference now then the answer is A, but is I assume they have included the £ to $ conversion as we need to work out the difference after the values have been changed
 
Denis said:
Co.1: 3,530,600 * .67 * .935 = 2,211,744 :
you're correct!
C.2: 3,571,428 * 1.03 * 1.028 = 3,781,571 :
how in heck did you get 2,233,750 :confused:

There is something VERY wrong in your problem statement.

And: WHY show Co.3 ans Co.4:confused:
Click to expand...

No, you have worked out the answer in dollars. I converted it to £ (GBP).

And I included Co.3 and 4 because they were in the question
 
I'm guessing that the other two Companies are included for other portions of this exercise...?

Henry64840 said:
If we are finding the difference now then the answer is A, but is I assume they have included the £ to $ conversion as we need to work out the difference after the values have been changed
Click to expand...
Yes, the difference would have to be in the same currency. Since all the answer options are in pounds, then the dollarized value for Company 2 should be converted to pounds, also.

But what do you mean when you say, "f we are finding the difference now then the answer is A, but is I assume they have included the £ to $ conversion..."? I don't understand what you're meaning by this.

Henry64840 said:
I have worked out company 1's mv as £2,211,744 and company 2's mv as £2,233,750
Click to expand...
How? By what steps? The dollar per-share value is converted to pounds by multiplying by the conversion rate. Then the pound-based market value is found by multiplying the converted per-share value by the number of shares. I'm not getting a value of £2,233,750; I'm getting £2,170,357-ish. I would get something close to your value if I typoed in my calculator, hitting the "6" instead of the "3" in "$1.03"....

Or maybe are these your after-the-market-change valuations? The after-the-market-correction values will of course be different from the current valuations, even in non-dollarized terms. I'm getting £2,211,745-ish for the new value of Company 1 and £2,231,137-ish for Company 2. If I hadn't rounded (and I suspect that you were supposed to not round), then I'd likely be spot-on for one of the answer options.

But until we can see your steps, we can't help you find where things are going sideways. So please do post that info. Thank you! ;)
 
stapel said:
I'm guessing that the other two Companies are included for other portions of this exercise...?


Yes, the difference would have to be in the same currency. Since all the answer options are in pounds, then the dollarized value for Company 2 should be converted to pounds, also.

But what do you mean when you say, "f we are finding the difference now then the answer is A, but is I assume they have included the £ to $ conversion..."? I don't understand what you're meaning by this.


How? By what steps? The dollar per-share value is converted to pounds by multiplying by the conversion rate. Then the pound-based market value is found by multiplying the converted per-share value by the number of shares. I'm not getting a value of £2,233,750; I'm getting £2,170,357-ish. I would get something close to your value if I typoed in my calculator, hitting the "6" instead of the "3" in "$1.03"....

Or maybe are these your after-the-market-change valuations? The after-the-market-correction values will of course be different from the current valuations, even in non-dollarized terms. I'm getting £2,211,745-ish for the new value of Company 1 and £2,231,137-ish for Company 2. If I hadn't rounded (and I suspect that you were supposed to not round), then I'd likely be spot-on for one of the answer options.

But until we can see your steps, we can't help you find where things are going sideways. So please do post that info. Thank you! ;)
Click to expand...



By now, I mean if we are to calculate the difference before calculating the percentage changes.
C1 = 0.67 x 3,530,601 = £2,365,502
C2 = $1.03 x 3,571,428 = $3,678,570 (= £2,170,356)
Difference = £195,146 (Answer A)


Yes I think I'm making a mistake somewhere in C2. Not sure how I got £2,233,50, but here is my current working:
C2) $1.03 + 2.8% = $1.06 (£0.63)
£0.63 x 3,571,428 = £2,249,999
 
Henry64840 said:
...because that's the question. Why would I leave it out?? :rolleyes:
Click to expand...
Hey,
Are you psycho or something:p. In my browser, you answered Denis's question before he asked it!

Seriously, I find the question poorly worded. "Q) If company 1's market value dropped by 6.5% and company 2's share price increased by 2.8%, what would be the difference in their market values?" implies to me that an answer is wanted for both company 1 and company 2. I see three possible answers in the multiple choice answers according to the questions below. Which do they want? Do you get to chose more than one?

Company 1 2Difference
(2-1)
PV (£)*0.670.60770.06
Shares3530601357142840827
MV-P23655032170357-195146
Change(%)-6.50%2.80%9.30%
Change(£)-15375860770214528
MV-F2211745223112719382
Difference[MV-F] -Difference[MV-P]
409674
*$1.00=£0.59
MULTIPLE CHOICE ANSWERS:
A) £195145.90
B) £19381.80
C) £189876.94
D) £409673.40
E) £40207.36
 
Last edited:
Ishuda said:
Hey,
Are you psycho or something:p. In my browser, you answered Denis's question before he asked it!

Seriously, I find the question poorly worded. "Q) If company 1's market value dropped by 6.5% and company 2's share price increased by 2.8%, what would be the difference in their market values?" implies to me that an answer is wanted for both company 1 and company 2. I see three possible answers in the multiple choice answers according to the questions below. Which do they want? Do you get to chose more than one?

Company 1 2Difference
(2-1)
PV (£)*0.670.60770.06
Shares3530601357142840827
MV-P23655032170357-195146
Change(%)-6.50%2.80%9.30%
Change(£)-15375860770214528
MV-F2211745223112719382
Difference[MV-F] -Difference[MV-P]409674
*$1.00=£0.59
MULTIPLE CHOICE ANSWERS:
A) £195145.90
B) £19381.80
C) £189876.94
D) £409673.40
E) £40207.36
Click to expand...

Thanks for showing your workings Ishuda.

I agree the question is poorly worded. Only 1 answer can be selected :confused:
 
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