W5: Case Study - Corporate Financial Mgmt

ASSET CLASSES ANALYSIS 4

Asset Classes Analysis

Jessica Trundle

Upper Iowa University

2/14/2021

Analysis of the asset classes' prospects and justification

The three asset classes have different earnings, and at the same time, they are affected by different factors. The main aim, in this case, is to maximize earnings in the next twelve months, and that means that the allocation of the $1,000,000 will be purely based on the ability of an asset to increase earnings (Campos, Sharma, Gabiria, Jantunen, & Baglee, 2017). Assets that have the minimal potential of increasing the earnings will receive the smallest share. U.S. Equities will receive 50% of the amount of money, which will sum up to $500,000. Different reasons have motivated the allocation of a significant amount to U.S. Equities. First, the maximum time they take to mature is 12 months, which is within the goal set. In the case of an increased price of shares, one can sell the equities and make a considerable profit. Second, investing in a profitable U.S. organization will increase returns. Profitable organizations pay high dividends, and that means that there are chances of making high returns.

Out of the $1,000,000 that has been presented, 10% will be allocated to U.S. Treasury bonds. The reason for allocating such a minimal amount is associated with the returns that will be made out of the investment. A bond will mature in the next 10 to 30 years (Campos et al., 2017). The plan is to increase revenue in the next 12 months. This case means that the money will not have any return in the next 12 months. A treasury bond has a fixed earning or returns, making money dormant (Campos et al., 2017). Cash assets will receive 40% of the money, which translates to $400,000. Cash has no fixed or set returns, and this is why some organizations and investors disregard investing so much in cash assets. However, it is important to know and understand the power of cash. In between the 12 months, an investment opportunity might avail itself (Campos et al., 2017). For example, purchasing an asset at a low price and selling it at a higher price is how cash assets could significantly increase the earnings in only a short period.

Reference

Campos, J., Sharma, P., Gabiria, U. G., Jantunen, E., & Baglee, D. (2017). A big data analytical architecture for the Asset Management. Procedia CIRP, 64, 369-374.