What method should the investor use to consider whether the conceptual investment cost provided is reasonable,...

What method should the investor use to consider whether the conceptual investment cost provided is reasonable, and what factors should be considered in determining that cost?

please answer as in detailed discussion formatting , thanks

Expert Solution

Investors should always be trying to compare its cost of capital with the expected rate of return in order to arrive at whether to invest his funds into the market or not because cost of capital will be always treated as a hurdle rate in terms of investment made and if the cost of capital is lower than the overall expected rate of investment and investor should be trying to invest money into the overall market in order to gain from capital appreciation

He should be trying to compare the cost of various alternative and he should be then arriving at the appropriate results because there should be various kinds of mutual funds and brokerage houses would be charging differently and then the investor should be always trying to compare the quality of the service along with additional specialised services provided in the cost to the investment so it should be always trying to compare the cost of the capital with the overall expected rate of investment in order to arrive at making investment decisions through a particular dealer.

We can use comparable method or we can also use net present value method in order to derive the discounted cash flow of expected return and he should be trying to compare it with the overall cost of those investment made and he should be trying to arrive at a profit in order to invest into the market.

Cost related to to investment should be reasonable and factors which should be considered will be as follows-

A. Pricing by other competitors of the same industry

B.quality of service and reputation of business as well as quality of specialised service with investment advise.

C. Continuous monitoring of the portfolio in order to help the shareholder to make the maximum out of his portfolio.

D.proactive Management by the brokers and dealers on any insider information by helping onto this shareholders.

jeff jeffy answered 2 years ago

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