Assignment 2A_ Code 75289

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School

Swinburne University of Technology *

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Course

FIN30021

Subject

Finance

Date

May 9, 2024

Type

docx

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15

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FIN20014 Assignment 2A: Worked solution questions Assignment details Supply your name, student ID, and the question code provided when you accessed your questions for this assignment. Student name: Namo Jela Student ID: 103332654 Question code: 75289.01 Provide your answer to all questions 1–5 for each question provided. All workings need to be provided in this document. Note that each question provides details on how you should respond – it will note decimal places, whether dollar sign or percentages are required. If a question requires a text response, it will provide a guide on word count for your response.
Question 1i Question 1i Answer IRR for proposal K Answer in %, rounded to two decimal places. E.g, for 1.23%, write only 1.23 24.75 Selection for proposal K Respond either Yes or No. Yes IRR for proposal L Answer in %, rounded to two decimal places. E.g, for 1.23%, write only 1.23 25.32 Selection for proposal L Respond either Yes or No. Yes IRR for proposal M Answer in %, rounded to two decimal places. E.g, for 1.23%, write only 1.23 19.6 Selection for proposal M Respond either Yes or No. Yes IRR for proposal N Answer in %, rounded to two decimal places. E.g, for 1.23%, write only 1.23 9.36 Selection for proposal N Respond either Yes or No. No IRR for proposal R Answer in %, rounded to two decimal places. E.g, for 1.23%, write only 1.23 11.32 Selection for proposal R Respond either Yes or No. No Provide your workings. K. ((11.24-9.01)/9.01) = 0.2475 = 24.75 L. ((12.57-10.03)/10.03) = 0.2532 = 25.32 M. ((15.62-13.06)/13.06) = 0.1960 =19.6 N. ((13.90-12.71)/12.71) = 0.0936= 9.36 R. ((21.64-19.44)/19.44) = 0.1132 =11.32
Question 1ii Question 1ii Answer Investment in Period-0 (now) Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 32.10 Provide your workings. Investment in projects K, L and M 9.01 + 10.03 + 13.06m = 32.10m Question 1iii Question 1iii Answer Question 1iii: Borrowing needed in Period-0? Respond either Yes or No. No Question 1iii: If borrowing is needed, how much? Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. If not, write 0. 0 Give your reasons as to if or how much borrowing is needed in Period-0 No borrowing is required in period – 0 (initial endowment of $75m is enough for investment and dividend). Provide your workings. $75m > $32.1m
Question 1iv Question 1iv Answer Question 1iv: Period-0 dividend. Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 42.9 Provide your workings. Period – 0 (now) dividend = initial endowment – investment = ($75.00m - $32.10m) = $42.9m Question 1v Question 1v Answer Question 1v: Period-1 (next) dividend. Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 39.43 Provide your workings. Period – 1 dividend would be the total return from investment = ($11.24m + $12.57m + 15.62m) = $ 39.43m
Question 1vi Question 1vi Answer Question 1vi: PV of Period-1 returns. Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 34.77 Provide your workings. Period - 1 total return from investment = $ 39.43m, Market rate of return = 13.4% = $39.43/ (1+0.134) = $34.77m Question 1vii Question 1vii Answer Question 1vii: NPV of Optimum Investment. Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 2.67 Provide your workings. NPV = PV of the Future Cash Flows – Investment = ($34.77m - $32.10m) = $2.67m
Question 1viii Question 1viii Answer Question 1viii: Firm’s Value after investment announcement. Answer in millions, rounded to two decimal places. E.g, for one million dollars ($1,000,000), write only 1.00. 77.67 Provide your workings. Firm ‘s value will increase by the amount of NPV = (current Value + NPV) = $75m + $2.67m = $77.67m
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