157k views
4 votes
From 1926 to 1995, visionary firms earned _____ returns compared to firms that were not visionary firms?

1) Substantially lower
2) Substantially higher
3) Marginally lower
4) Equivalent

User Hkan
by
7.4k points

1 Answer

6 votes

Final answer:

The information given does not directly address the returns of visionary firms versus non-visionary firms for the stated time period. It only provides data on the total annual rate of return for S&P 500 stocks, including dividends and capital gains. To compare visionary and non-visionary firms, additional data would be required.

Step-by-step explanation:

The question pertains to the financial performance of visionary firms compared to non-visionary firms between 1926 and 1995. However, the information provided speaks to the total annual rate of return for the stocks in the S&P 500 index, covering various decades up through 2012. Specifically, it discusses the returns composed of dividends and capital gains. Dividends were around 4% in the 1950s through the 1980s but decreased to 1-2% from the 1990s onward. Capital gains in the 1980s and 1990s were much higher than dividends. Because the provided materials do not give a direct comparison between visionary and non-visionary firms, we cannot conclusively say that visionary firms earned equivalent returns compared to non-visionary firms from 1926 to 1995 based solely on this data. Additional information would be necessary to accurately make that determination.

Regarding the Gizmo Company, there's a clear assertion that investments in the company carry an implied social benefit. An investment yielding a 6% return to the Gizmo Company implies an 11% societal return, and this scales with higher rates of return. For example, if the interest rate is 9% and the company captures the additional 5% societal return, they would invest with an effective rate of return of 4%, leading to an investment of $183 million, according to the provided tables.

User Tomwalsham
by
8.1k points