Question

Johnny Depp has just invested in a group of companies that are young and that he feels are going to have a large increase in price of the next few years. Since of these companies are young and reinvesting much of their earnings back in the company none of these companies are paying a dividend at the current time. Which investment factor is Johnny focusing on

Answer 1

Johnny Depp is focusing on capital gains from young companies expecting their stock prices to rise significantly in the future, rather than earning through dividends.

Step-by-step explanation:

Johnny Depp is focusing on capital gains as an investment factor by investing in a group of companies that are young and have the potential to increase significantly in price over the next few years. These companies are not paying dividends currently, as they are reinvesting their earnings into the company's growth. This is a common scenario for venture capitalists and investors looking to grow their wealth through an increase in stock value rather than through immediate earnings from dividends.

Companies that are in their growth phase may choose to issue stock over bonds to avoid the obligation of making regular interest payments, allowing them to reinvest profits back into the company. Investors like Johnny Depp may not receive dividends in the short term, but they stand to benefit from the appreciation in stock value if the company succeeds. Essentially, the investment strategy here relies on the expectation that the companies' stock prices will climb as they grow and become more profitable or popular in the future.

Answer 2

Answer: c. Investment Growth

Step-by-step explanation:

Johnny Depp is most likely focusing growing his investment as opposed to receiving a stable dividend.

The company described is Growth company. These companies want to grow and so they reinvest their profits into expanding their capacity. This will lead to their value increasing as time goes on.

The investment that Johnny Depp made will therefore keep increasing in value as the company does so which will mean that the profit Mr. Depp makes will be from his investment increasing in value (capital gain).