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GSBS6506-Financial Statement Analysis

'As reported' statements Settings Table 1 Balance sheet 'as reported' Number of years in reporting Table 2 Income statement 'as reported' Latest available year ...

Course

GSBS6506

Subject

Accounting

University

The University of Newcastle

Season

fall

39 Pages
GSBS6506-Financial Statement Analysis

Running head: FINANCIAL STATEMENT ANALYSIS Error* Financial statement analysis Name of the student Name of the university Student ID Author note FINANCIAL STATEMENT ANALYSIS 1 Table of Contents ...

Course

GSBS6506

Subject

Accounting

University

The University of Newcastle

Season

fall

BUACC5936 Financial Management

Question

Answered

Task:

Question 1 

a) Should small or high-growth firms have higher betas than larger and more mature firms? Discuss.

b) Due to the distinctive nature of unsystematic risk, it can be reduced or eliminated through diversification. Do you agree with this statement? Explain.

Question 2

Sakura PLC is a leading investment company in Australia and you the below details relating to the capital structure of the company. Information concerning raising new capital

Bonds $1,000 Face value

13% Coupon Rate (Annual Payments)

20 Term (Years)

$25 Discount offered (required) to sell new bonds

$10 Flotation Cost per bond

Preference Shares 11% Required rate to sell new preference shares

$100 Face Value

$3 Flotation cost per share

Ordinary Shares $83.33 Current Market Price

$4.00 Discount on share price to sell new shares

$5.40 Flotation Cost per bond

$5.00 2019 - Proposed Dividend

Dividend History $4.63 2019

$4.29 2018

$3.97 2017

$3.68 2016

$3.40 2015

Current Capital Structure

Extract from Balance

Sheet $1,000,000 Long-Term Debt

$800,000 Preference Shares

$2,000,000 Ordinary Shares

Current Market Values $2,000,000 Long-Term Debt

$750,000 Preference Shares

$4,000,000 Ordinary Shares

Tax Rate

33%

Risk Free Rate 5%

3

a) Calculate the cost associated with each new source of finance. The firm has no retained earnings available.

b) Calculate the WACC given the existing weights.

d) Calculate the Net Present Value, Internal Rate of Return and Payback Period

BUACC5936 Financial Management

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