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Case Problem 2.1Dara’s Dilemma: What to Buy?
Dara Simmons, a 40-year-old financial analyst and divorced mother of
two teenage children, considers herself a savvy investor. She has
increased her investment portfolio considerably over the past five years.
Although she has been fairly conservative with her investments, she now
feels more confident in her investment knowledge and would like to
branch out into some new areas that could bring higher returns. She has
between $20,000 and $25,000 to invest.
Attracted to the hot market for technology stocks, Dara was interested in
purchasing a tech IPO stock and identified NewestHighTech.com, a
company that makes sophisticated computer chips for wireless Internet
connections, as a likely prospect. The 1-year-old company had received
some favorable press when it got early-stage financing and again when
its chip was accepted by a major cell phone manufacturer.
Dara also was considering an investment in 400 shares of Casinos
International common stock, currently selling for $54 per share. After a
discussion with a friend who is an economist with a major commercial
bank, Dara believes that the long-running bull market is due to cool off
and that economic activity will slow down. With the aid of her
stockbroker, Dara researches Casinos International’s current financial
situation and finds that the future success of the company may hinge on
the outcome of pending court proceedings on the firm’s application to