Fin700 Financial Management Assignment Consists Of 4 Pro

Fin700 Financial Managementthis Assignment Consists Of 4 Problems E

FIN700 – Financial Management This Assignment consists of 4 problems, each involving calculations, and in some cases recommendations. You are required to complete this Assignment in Groups of 2 or 3 or 4 people. Groups of 1 or more than 4 persons will incur a penalty of 5 marks out of 30%. All members of the Group should come from the same Tutorial class. You may consult and discuss the Assignment topic with others, but you must write up your answers yourselves.

Penalties for copying and plagiarism are severe. You should follow the following typing conventions: Answers to be typed, in the space provided after each question. If additional pages are required, use the blank pages at the end. Times New Roman font (at minimum, 12 pitch), 1.5 line spacing; and left and right margins to be at least 2.5 cm from the edge of the page. Research, Referencing and Submission You should quote any references used at the end of each question. Use Harvard referencing! See As this is a calculations problem, there is no need to submit via TURNITIN. Do not submit this page. Submit page 2 onwards, with KOI Group Assignment Cover Page.

Paper For Above instruction

This comprehensive assignment encompasses four distinct problems pertinent to financial management, demanding a blend of calculations, analysis, and strategic recommendations. The problems span topics such as dividend valuation, capital budgeting, investment appraisal, bond pricing, and loan repayment schedules, reflecting the multifaceted nature of financial decision-making.

Problem 1: Dividend Valuation and Personal Income Planning

The first problem involves a two-period certainty model. William Brown owns a 12% stake in Bobcat Ltd, which reported net profits after tax of $600,000 for the last financial year, with profits expected to grow by 25% next year. Given that the company maintains a dividend payout ratio of 70%, the task is to determine how much William can consume in mid-August 2017 if he wishes to spend $100,000 in mid-August 2018, considering an annual interest rate of 9%.

Additionally, the problem explores share valuation, requiring calculation of the current stock price for Big Ideas Ltd, which paid a dividend of $1.20 and has projected dividend increases over the subsequent years, culminating in a perpetual growth rate of 5% from 2021 onwards. This necessitates application of the Gordon Growth Model and multi-stage dividend discount models.

Problem 2: Time Value of Money, Deferred Perpetuities, and Loan Amortization

The second problem addresses the valuation of a perpetual scholarship fund established by Colin Greenway, who aims to provide $50,000 annually starting in 2020, with funding invested at a 5% rate. The calculation involves determining the present value of the fund in early 2017, considering both perpetual income streams and inflation-adjusted increments, utilizing perpetuity growth formulas.

Next, the problem pertains to loan repayments. Ron and Robin Reid intend to borrow $540,000 for 20 years at an interest rate of 7.8% compounded monthly. Tasks include calculating the effective annual interest rate, fixed monthly repayments, alternative repayment schemes with varying monthly amounts, and the duration and final payment amounts if repayments are less than the fixed amount, illustrating the mechanics of loan amortization and variable repayment schedules.

Problem 3: Investment Appraisal, NPV and IRR Techniques, Bond Pricing

The third problem involves comparative analysis of two mutually exclusive projects with different cash flow timings. It requires calculating payback periods, plotting Net Present Value (NPV) profiles, estimating Internal Rate of Return (IRR), and finding the crossover point to compare investment attractiveness at different discount rates. Furthermore, there is an evaluation of bond prices based on changes in interest yields, calculations of bond prices upon sale at prevailing yields, and assessing the impact of interest rate movements on bond valuations.

Problem 4: Capital Budgeting and Investment Decision

The final problem focuses on capital budgeting, examining a proposed purchase of new technology costing $600,000, financed via a loan at 10%, with lease, depreciation, tax, and cash flow implications. Tasks include calculating net present value (NPV) of the acquisition considering tax effects, depreciation, storage costs, recoverable assets, and the impact of prior feasibility studies. The decision to proceed hinges upon whether the NPV is positive, taking into account the project's cash flows and strategic considerations.

This assignment necessitates a thorough understanding of financial theory, practical application of valuation models, amortization schedules, and investment appraisal techniques to facilitate sound financial decision-making in corporate contexts.

References

• Brealey, R. A., Myers, S. C., & Allen, F. (2017). Principles of Corporate Finance (12th ed.). McGraw-Hill Education.
• Berk, J., & DeMarzo, P. (2017). Corporate Finance (4th ed.). Pearson.
• Ross, S. A., Westerfield, R., & Jaffe, J. (2016). Corporate Finance (11th ed.). McGraw-Hill Education.
• Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley Finance.
• Titman, S., & Martin, J. D. (2014). Valuation: The Art and Science of Corporate Investment Decisions. Pearson Education.
• Gordon, M. J. (1962). The Investment, Financing, and Valuation of Corporation Shares. Review of Economics and Statistics, 44(4), 37-51.
• Higgins, R. C. (2012). Analysis for Financial Management (10th ed.). McGraw-Hill Education.
• Fabozzi, F. J. (2016). Bond Markets, Analysis, and Strategies (10th ed.). Pearson.
• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice (15th ed.). Cengage Learning.
• Ross, S. A. (2019). Corporate Finance. McGraw-Hill Education.