If You Are A CFO Who Is Responsible For Your Company's Incom

Question

If you are a CFO who is responsible for your company’s in Question 1 (60 marks): Please read the following case study, think from Financial Management perspectives and broadly cover what we discussed in the class and structure your short answers in below format; A) Please list your expected return for the following investment in different scenarios; B) Please list the risks and discuss the impacts; C) Why you go ahead with that investment by listing your recommendations; Case Scenario: If you are a CFO who is responsible for your company’s investment. World leading C Bank relationship manager came to you and offered you the following investment product; some key features are illustrated in below: Auto callable Contingent Coupon Equity Linked Securities Linked to an Equally Weighted Basket of Four Underlying Due 07 December 2023; Issuer: C Bank Group Global Markets Holding Inc. Guarantee: All payments due on the securities are fully and unconditionally guaranteed by C Bank Group which is AAA Grade rating; Underlying Company Stock Weight Advanced Micro Devices, Inc 25% Square, Inc 25% Tesla, Inc 25% Zoom Video Communications, Inc 25% Stated Principal amount: $1,000 per security; Issue Date: 07 December 2020 Pricing Date: 07 December 2020 Valuation dates: the 5th Business day of each calendar month Maturity date: 07 December 2023 unless earlier redeemed Coupon Payment: Monthly Dividend at 0.8333% p.m. roughly 10% unless the market value of any underlying company stock is not below 60% of the initial pricing as of 07 December 2020; Payment at Maturity: If the securities are not automatically redeemed prior to maturity, callable when any of underlying stock price is below 60% of the initial pricing; If that is the case, your principal payment will be 60% of the initial purchase price + any of previous paid coupon; Otherwise, your return will be the ending sales price – previous coupon payment - management fee as of 2%; However capped at 20% capital gain; Q2(40 marks: wit

Dr. Jack HW Helper · Accepted Answer

As a Chief Financial Officer (CFO), the decision to invest in Auto Callable Contingent Coupon Equity Linked Securities (CCELS) from C Bank presents an intriguing opportunity for investment. When analyzing the value of this investment, I will outline the expected returns, associated risks, and strategic recommendations. A) Expected Returns in Different Scenarios The securities are linked to an equally weighted basket of four companies—Advanced Micro Devices, Square, Tesla, and Zoom. The expected return will depend on the performance of these underlying stocks. 1. Best-Case Scenario: If all stock prices remain above 60% of their initial values over the life of the bonds, the investor will receive monthly coupon payments of 0.8333%, resulting in an annualized return of about 10%. Additionally, if the stocks perform exceptionally and the capital gains are realized at maturity without hitting the cap of 20%, total returns could be substantially higher. 2. Moderate Scenario: If the stock values fluctuate but stay above the 60% threshold, the investor will continue to receive the monthly dividend payments without any losses, leading to a return of approximately 10% with a possibility of minimal capital gains. 3. Worst-Case Scenario: In the event that one or more stock prices fall below 60% of their initial pricing, the principal payment upon maturity would only be 60% of the initial investment, plus any paid coupons that had accumulated. This would significantly reduce the overall return, limiting it to a maximum of 60% of the principal amount. B) Risks and Impacts The investment in CCELS is fraught with various risks: 1. Market Risk: The primary risk stems from the underlying stock prices of AMD, Square, Tesla, and Zoom. Market fluctuations could lead to significant portions of the principal being lost if stocks drop below the 60% threshold. 2. Credit Risk: While C Bank has a AAA grade rating ensuring the investments’ safety, any downgrade of the issuer's creditworthiness

If You Are A CFO Who Is Responsible For Your Company's Incom ✓ Solved

If you are a CFO who is responsible for your company’s in

Paper For Above Instructions

A) Expected Returns in Different Scenarios

B) Risks and Impacts

C) Recommendations

WACC Calculation for ABC Property Development Company

Conclusion

References