Finance assignment Example | Topics and Well Written Essays - 2500 words

Finance - Assignment Example The expected return figures obtained for these four companies are justified as they reflect in part the general trend observed in the various sectors. Watson and Head (2007) suggests that Biotech companies are expected to incur high cost of initial investment in research but with time they record high returns owing to the sale of their innovative products. The findings concur with those of Brown et al, (2012) who further proposes that the high returns for pharmaceutical companies increase exponentially as the new product’s market reach increases. On the other hand, Construction companies can be termed as safe investments as they have less risk, since most of the capital for such companies is held up in assets (Boritz, 2006) and (Megginson, 1996). This sector has high returns on investment owing to the booming real estate industry in Australia. The banking sector is dependent on the country’s economy and income levels of the people as discussed by Mishkin and Eakins (200 6). They state that since Australia is a developed country, over 90% of the people above 18 years of age operate bank accounts. With more people saving money with the banks, there is enough money to offer loans to businesses and individual thus making it a profitable sector. In contrast to this, the travel and leisure industry is highly affected with seasonal tourism experienced in Australia as reported in â€Å"An Introduction to Technical Analysis† (1999). Although most people may have disposable income to use in leisure, they prefer international destinations during seasons such as winter when the temperatures are very low. In addition, the competition in the sector, makes it a less profitable sector especially for small and medium companies. There are three major methodological setbacks associated with the Gordon’s growth model. Firstly, it is assumed that the growth rate is constant which might not necessarily be the case. Secondly, for stocks of growing