100%(4)4 out of 4 people found this document helpful
This preview shows page 3 - 5 out of 7 pages.
(in millions) from $4,766.43 (in millions) to $4,629.68 (in millions). The decrease in UPS’ present value of $136.75 (in millions) indicates that UPS’ FCF will grow faster due to the increase in the interest rate.Investors utilize a company’s interest rate to determine how fast a company will grow andwhether they should keep investing or should make an initial investment in a company. When looking at UPS, an investor will be more likely to invest or continue to invest when the interest rate is fifteen percent when compared to when the interest rate is five percent. Investors will want to continue to invest or make an initial investment when the interest rate is higher because the interest rate indicates to investors that they will earn more on their investments.Impact of Stock Market on Stock Valuation NumbersThe stock market can have a direct impact on companies and their financial position. The stock market can affect companies in two ways: influencing customer spending and providing the chance for stronger returns on capital costs. The stock market measures the aggregate value of companies and is a tool that is used to gauge the health of the overall economy (Investopedia, 2018).There are two main types of stock markets: a bull market and a bear market. A bull market is when consumers spend more because they are feeling wealthier due to a rise in their portfolios. A bull market occurs due to increased wealth leads to increased spending. Consumers
will purchase an increase in good and services which will result in companies selling goods and services to increase revenue (Investopedia, 2018). A bear market is when consumers spend less because they are feeling the fear of loss of wealth and purchasing power due to a decrease in their portfolios. This causes wealth erosion. Asa consumer sees a decrease in their portfolio, they will spend less money. This will result in companies not generating as much revenue (Investopedia, 2018). Companies prefer for the stock market to remain a bull market as much as possible due tothe potential to see an increase in revenues due to an increase in consumer spending. The stock market impacts the value of a company’s shares as a currency. To raise more capital, companies issue stock. Companies prefer for the stock market to be a bull market when they issue stock