7-1 Final Project Milestone Four: Macroeconomic Items
SNHU
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Macroeconomics Analysis
A) In case of interest rate changes application is taken into consideration according to calculations
performed on PV of free cash flow of Company, when interest rate is 8% , total PV value for last
three years is $162357157.70 , but when it decreases to 4% total PV of cash flows for last three
years stands as $17430005, which is quite a significant improvement f in Comparison to interest
rate of 8% and when it is increases to 12%, the PV of free cash flow goes down to $ 15178194
which is also a significant drop when comparing to rate of 8%. Change in Interest rate plays a very
important role in relation to finding out PV as important evaluations in like investment decision
and other preset standards in relation to ratios.
B) In case of positive or negative news within stock market affects how it affects the price of
shares, for e.g. if volatility index increase to more than 25%, it indicates risk portion in investing
has increased so many investors can dispose of their holding to some extent to compensate the
volatility and speculation of selling pressure increases in the market (Currie et al., 2017). So
increase in volatility index can have lesser demand of shares and share price may go down.
In relation to positive news within stock market goes, if a new contract is obtained by the
concerned company and news spreads in the market, Company’s share price tend to increase in the
market as more investors decides to invest in the company, looking at positive outlook of
Company and cashing in the opportunity to earn in the stock of concerned company. The risk is
entirely dependent on the market trends. For instance if the emotions about a company is high in
the market, it is highly likely that the company would be a great success. The value of its stocks is
most likely to go high. However, there are some factors in the market that might turn out to be
responsible for crashing of the market. Sometimes some events occur that might not be related
directly with the emotions of the market such as wars or natural disasters (NIEPELT, 2020). Such
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events are called black swan events. Such black swan events might turn out to responsible for the
crashing of the market.
C) In terms of an external factor affecting the company, suppose tax rate on companies f is
increased by the government, it will discourage the company in large scale production in the
country and company may divert some of its production to a country which is more tax favorable
to it , company may have to lay off some of its employees as production level goes down , it will
also impact cash flow from revenue from operations and its operating profit will also go down in
result its share prices will also go down in the market, as overall financial position will have a
negative impact.
One other example is if rating agencies downgrades the economy of a country, it can have huge
ramifications on Company's investment decision in that country if Company is a MNC, the
company can cut down its investment significantly. In the same way, if any credit agency upgrades
any country’s economy, the concerned company can increase its investment portion significantly
to avail the opportunity presented by improved economic scenario.
References
Currie, D. A., Nobay, A. R., & Peel, D. (2017). Macroeconomic analysis: Essays in
macroeconomics and econometrics. Routledge.
NIEPELT, D. I. R. K. (2020). Macroeconomic analysis. MIT Press.
