金融基础代写 FuNdamentals of finance代写 risk代写 NPV代写

FINC12-200 FuNdamentals of finance

金融基础代写 PART A: SHORT ANSWER QUESTIONS (Four short answer questions worth 3 marks each – use dot points if necessary) Question 1: Rank in descending order

• Assessment Format: iLearn Test Tool.
• Assessment Duration: 180 minutes.

PART A: SHORT ANSWER QUESTIONS

(Four short answer questions worth 3 marks each – use dot points if necessary)

Question 1:

Rank in descending order (highest to lowest) the relative risk associated with holding the preferred stock, corporate bonds, and common stock of a firm. Briefly describe two reasons for the difference in risks between these three asset classes.

Question 2:

Explain the process of stock splits. Briefly describe a rational as to why firms may enact these actions and potential outcomes that may result.

Question 3:

Describe the differences between independent, mutually exclusive, and contingent projects and provide an example of each.

Question 4:

When are multiple rates of return, or no rates of return, likely to occur in an Internal Rate of Return computation? What should be done when either of these problems arise?

PART B: LONG ANSWER QUESTIONS 金融基础代写

(Two long answer questions worth 10 marks each)

Question 1:

Please answer the following questions relating to long-term debt (corporate bonds) financing:

a）Define what is a call feature. Also explain two reasons why a firm would decide to call their debt issue.

b）List and explain two advantages and two disadvantages of long-term debt (corporate bonds) financing.

c）Explain one reason why preferred stock is similar to long-term debt (corporate bonds).

Question 2:

Net Present Value (NPV) and Profitability Index (PI) are commonly referred to as the most optimal primary decision rules when completing the capital budgeting process. Explain the benefits, and common uses of these two decision rules. In your answer, please ensure you explain in which context each decision rule should be applied. When assessing mutually exclusive projects, will these decision rules ever provide contradicting recommendations? Briefly explain why.

PART C: CALCULATION & ANALYSIS QUESTIONS 金融基础代写

(Four calculation and analysis questions worth 10 marks each)

Question 1:

There are three fixed income securities, issued by Commonwealth Bank Limited, currently outstanding on the Australian Securities Exchange; a semi-annual coupon bearing bond, a zero-coupon bond, and a perpetual bond. The coupon bearing bond has a coupon rate of 10% per annum, with semi-annual coupons, and a par value of $1,000. The zero-coupon bond has a par value of $1,000, with interest compounding annually. The perpetual bond has no maturity value and pays bondholders an annual coupon of $45. These three securities were originally issued on 28 November 2014, with the coupon bearing bond and zero-coupon bond scheduled to mature on 28 November 2024.

Required:

a）Determine the value of the semi-annual coupon bearing bond, as of when it was first issued, assuming investors at the time required a return of 8% per annum, compounding semi-annually, for securities issued of similar risk. [4 marks]

b）Determine the value of the zero-coupon bond and the perpetual bond, as of when they were first issued, assuming investors at the time required a return of 8% per annum, compounding annually, for these two securities. [4 Marks]

c）Four years after issuance, the coupon bearing bond is currently trading at $1,020, the zero-coupon bond is trading at $590, and the perpetual bond is trading at $470. If you now require a return of 10% per annum on all corporate bonds issued by Commonwealth Bank Limited, assess only one of the three available bonds and determine whether you should buy it as of 28 November 2018. [2 marks]

Question 2: 金融基础代写

The common stock of National Australia Bank Limited is currently trading at $26.40. The firm is expected to pay an annual dividend of $1.98 per share next year. Investors currently require a rate of return equal to 14% on common stock investments of this perceived risk level.

Required:

a）Assuming the market expects dividends of National Australia Bank Limited to grow at a constant rate for the foreseeable future, what is the implied growth rate as expected by the market? [3 marks]

b）If investors now expect the dividend to be received next year of $1.98 per share will grow at an annual rate of 7% for each of the following 2 years, then 5% in the subsequent year, and then 3% per year thereafter, what is the maximum price investors would be willing to pay for this stock today? Assume investors require a 14% rate of return on this investment. [5 marks]

c）Briefly explain the limitations of the Dividend Discount Model (DDM). [2 marks]

Question 3:

Gold Coast Cabs is considering the replacement of their existing taxi fleet with newer vehicles to regain lost market share. The replacement of existing taxis is expected to substantially increase annual revenues, and only slightly increase annual operating expenses. The existing taxi fleet was purchased 2 years ago at a cost of $800,000 and was expected to be fully depreciated over a useful life of 8 years. As of today, Gold Coast Cabs expects they would be able to sell their existing taxi fleet for $550,000 to a large second-hand car wholesaler. The firm’s marginal tax rate is 30%.

The new taxi fleet would cost Gold Coast Cabs $1.5 million (inclusive of shipping and modification costs) and will require Gold Coast Cabs to initially increase their net working capital by $40,000. The new taxi fleet will be fully depreciated over a useful life of 6 years.

The firm’s current annual revenues and operating expenses are $6.9 million and $4.4 million per annum respectively. If the firm proceeds with this asset replacement project, their annual revenues and operating expenses are expected to increase to $7.6 million and $4.7 million per annum respectively. At the end of the projects 6 year life, Gold Coast Cabs anticipates they will be unable to sell the new taxi fleet and will be forced to scrap all cars for free.

Required:

a）Calculate the after-tax proceeds from selling the existing taxi fleet as of today. [1 mark]

b）Calculate the project’s net investment as of today. [1 mark]

c）Calculate the projects annual after-tax net operating cash flows for years 1 through 6, and any termination cash flow occurring in the last year of the project. [5 marks]

d）Assuming Gold Coast Cabs’ cost of capital is 9%, should they accept this asset replacement project? Why or why not? Please support your answer with appropriate calculations, and briefly explain your answer. [3 marks]

Question 4: 金融基础代写

As a result of new development areas in Western Australia, Coles Group Limited is planning to open a range of new Coles supermarkets. The firm expects they will be able to raise the additional capital required to fund this expansion in the proportions outlined below by their target capital structure. Coles Group Limited’s marginal tax rate is 30%.

As of today, Coles Group Limited has 8% coupon debentures outstanding, with a par value of $1,000 each and 13 years till maturity. These debentures are currently trading at $1,060. The firm also has $2 dividend preferred stocks outstanding, each with a par value of $22. The current market price of these preferred stocks is $17. Coles Group Limited’s common stock has a current market price of $52. The common stock paid a dividend of $3.40 this year, with dividends expected to grow at an annual rate of 8%.

In order to raise the additional capital, Coles Group Limited will need to sell new debentures, at a par value of $1,000 each. The issuance costs for each new debenture sold will be $15 per bond. The firm will also issue new $22 par value preferred stocks into the marketplace, which will cost the firm $2.50 per share. Coles Group Limited will also need to sell new common equity, with issuance costs expected to be $3.50 per share issued.

Coles Group Limited has the following target capital structure:

Source of funds	Weight
Debt	30%
Preferred stock	15%
Common equity	55%
Total	100%

Required:

a）What is Coles Group Limited’s weighted average cost of capital? Assume new capital is raised in the proportions outlined by their target capital structure. [8 marks]

b）Determine which of the developments outlined in the following investment opportunity schedule should be accepted by Coles Group Limited. Please consider the firms WACC as calculated in Part a) and explain why any project/s should be accepted.  [2 marks]

Development	Net Investment	Expected Return (p.a.)
Vasse Estate	$3,929,500	17%
Placid Waters	$2,839,000	13%
Ravenswood Green	$5,230,000	10%
Sienna Wood	$4,735,000	7%

 

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