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Company Risk Management Analysis And Wealth Maximization

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Conduct a risk assessment of a organization one with which you are familiar with, to show how risk management contributes to stakeholder wealth maximization.

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Running Head: RISK ASSESSMENT

Risk Assessment at IBM

Risk Assessment at IBM
Risk assessment is a significant step of a risk management process (Conrow, 2003). It is the identification of quantitative or qualitative value of risk associated to a real situation and a predictable threat. Here in this paper, a risk assessment will be conducted for IBM.
If we undertake an analysis of IBM from the perspective of potential risks to its business operations, we can identify that the company can confront risks related with its IT infrastructures. These risks that can be confronted by the company is due to the environmental issues caused by natural tragedies to man-made threats and also admit necessities to meet a number of parliamentary and regulatory authorizations. Subsequent are some other examples that ...

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The expert examines company risk management analysis and wealth maximization.

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A. Compute earnings per share for both firms. Assume a 25 percent tax rate.
b. In part a, you should have gotten the same answer for both companies' earnings per share. Assuming a P/E ratio of 20 for each company, what would its stock price be?
c. Now as part of your analysis, assume the P/E ratio would be 16 for the riskier company in terms of heavy debt utilization in the capital structure and 25 for the less risky company. What would the stock prices for the two firms be under these assumptions? (Note: Although interest rates also would likely be different based on risk, we will hold them constant for ease of analysis.)
d. Base on the evidence in part c, should management only be concerned about the impact of financing plans on earnings per share or should stockholders' wealth maximization (stock price) be considered as well?

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