Corporate Governance and Value Creation: Evidence from Private Equity

Question:

Discuss about the Corporate Governance and Value Creation for Evidence from Private Equity.

Answer:

Case Study A

Land Securities Group Plc:

Land Securities Group Plc has been founded in the year 1944 i.e. about 72 years ago in London (Shiller 2012). It is a Real Estate Investment Trust (REIT) traded as LAND in the London Stock Exchange (LSE). It is headquartered at London in the United Kingdom. The main products of the particular organization include the property investment and property development. It has been found that within the country U.K., the organization Land Securities Group Plc is considered as the largest commercial property for development and investment. The REITs were introduced within the country United Kingdom in the year 2007 and in the month of January. Thus, after the entry of the REITs within the specified country, the particular company transferred into the status of Real Estate Investment Trust (Smith and Wakeman 2011). It has been found from the annual report of the company Land Securities Group Plc for the year 2015 that the total income of the firm was £ 2416.9 million, the operating income of the organization for the year 2015 was £ 2346.7 million (Thompson 2012). Lastly, it has also been found that the total revenue of the organization Land Securities Group Plc was £ 770.4 million as per the annual report of the firm for the year 2015.

The aim of this report is to calculate the daily return of the organization Land Securities Group Plc on the basis of the historical stock prices of the particular firm on one hand and also to make detailed analysis reports on the two case studies A and B. the other objectives of this report are to plot the daily return of case study A and also to prepare a report on the planned investment that uses payback. In this report, for calculating the daily return, the historical stock prices of the organization Land Securities Group Plc has been considered for whole one year i.e. starting from 1^st January of the year 2015 to 31^st December of the same year. As per the requirement, 250 observations have been observed and calculated. Thus, for 250 days, the close prices of the shares of the company Land Securities Group Plc have been noted with the aim to calculate the daily return of the organization. The daily return of the organization Land Securities Group Plc has been calculated based on the formula (P1 – P0) / P0. In this formula, P0 is the close price for the previous day and P1 is the close price of the present day (Berk and DeMarzo 2011). The following calculations help to understand the daily return of the organization Land Securities Group Plc better, where mode, mean, median, variance, standard deviation, frequency distribution and covariance have been calculated for thorough analysis of the financial condition of the particular firm (Drury 2012).

Date	Open	High	Low	Close	Volume	Adj Close	Daily Return
12/31/2015	1189	1193	1177	1177	600200	1147.064	-0.009259259
12/30/2015	1200	1204	1182	1188	1203600	1157.784	-0.011647255
12/29/2015	1193	1203	1187.04	1202	1349600	1171.428	0.013490725
12/28/2015	1186	1186	1186	1186	0	1155.835	0.000000001
12/25/2015	1186	1186	1186	1186	0	1155.835	0.0000001
12/24/2015	1186	1187	1178.9	1186	162700	1155.835	0.003384095
12/23/2015	1173	1182	1159.86	1182	1076000	1151.937	0.016337059
12/22/2015	1172	1178	1159	1163	1287900	1133.42	0.001722653
12/21/2015	1172	1190	1161	1161	1013300	1131.471	-0.00853971
12/18/2015	1185	1191	1171	1171	2385000	1141.216	-0.012647555
12/17/2015	1200	1208.85	1182	1186	1516300	1155.835	-0.00084246
12/16/2015	1160	1189	1157	1187	2429600	1156.809	0.023275862
12/15/2015	1148	1165	1140	1160	3010800	1130.496	0.01754386
12/14/2015	1157	1179.6	1140	1140	1828400	1111.005	-0.014693172
12/11/2015	1185	1188	1157	1157	2438000	1127.572	-0.024451939
12/10/2015	1190	1202.9	1185	1186	2090700	1155.835	-0.010016694
12/9/2015	1203	1212	1198	1198	2876300	1167.53	-0.004983389
12/8/2015	1216	1221	1204	1204	1446900	1173.377	-0.011494253
12/7/2015	1214	1234	1209	1218	1463700	1187.021	0.009950249
12/4/2015	1196	1210	1186.85	1206	3071700	1175.326	0.007518797
12/3/2015	1232	1243	1197	1197	2793700	1166.555	-0.037007241
12/2/2015	1248	1253	1241	1243	2016700	1203.442	0.001611604
12/1/2015	1232	1244	1228	1241	1769000	1201.506	0.008123477
11/30/2015	1234	1239	1225	1231	1893400	1191.824	-0.00162206
11/27/2015	1221	1234	1216.3	1233	1037200	1193.761	0.006530612
11/26/2015	1235	1235	1220	1225	1131300	1186.015	-0.005681818
11/25/2015	1215	1241	1215	1232	1605500	1192.792	0.015663644
11/24/2015	1222	1222	1201.3	1213	2243600	1174.397	-0.008986928
11/23/2015	1240	1244	1223	1224	1460000	1185.047	-0.019230769
11/20/2015	1258	1258	1243	1248	2192900	1208.283	-0.0016
11/19/2015	1248	1256	1241	1250	1989400	1210.22	0.008878128
11/18/2015	1245	1249	1234	1239	1501400	1199.57	-0.005617978
11/17/2015	1243	1255	1238	1246	2626100	1206.347	0.01300813
11/16/2015	1215	1230	1208	1230	1590900	1190.856	0.008196721
11/13/2015	1217	1223	1207	1220	2886600	1181.174	-0.000819001
11/12/2015	1239	1250	1221	1221	2231900	1182.143	-0.016116035
11/11/2015	1249	1249	1223	1241	4224600	1201.506	-0.00160901
11/10/2015	1270	1273	1228	1243	3545700	1203.442	-0.027386541
11/9/2015	1308	1312	1278	1278	2771500	1237.329	-0.02293578
11/6/2015	1328	1329	1305	1308	1694100	1266.374	-0.011337868
11/5/2015	1305	1324	1299	1323	2037300	1280.896	0.017692308
11/4/2015	1323	1327	1299	1300	2671200	1258.628	-0.017384732
11/3/2015	1340	1340	1320	1323	1676500	1280.896	-0.010471204
11/2/2015	1330	1343	1330	1337	1341400	1294.451	-0.001493652
10/30/2015	1341	1349	1336.3	1339	2146300	1296.387	-0.002235469
10/29/2015	1350	1352	1336	1342	1595100	1299.292	-0.00739645
10/28/2015	1334	1355	1334	1352	1162000	1308.974	0.013493253
10/27/2015	1330	1339	1329	1334	1128800	1291.546	-0.000749064
10/26/2015	1336	1343	1327	1335	1698600	1292.515	-0.002987304
10/23/2015	1339	1346	1334	1339	1623000	1296.387	0.002245509
10/22/2015	1318	1338	1312	1336	1487200	1293.483	0.015197568
10/21/2015	1320	1327	1313	1316	1483400	1274.119	0.000760456
10/20/2015	1315	1322	1312	1315	1394300	1273.151	0.003051106
10/19/2015	1293	1315.5	1293	1311	1572100	1269.278	0.011574074
10/16/2015	1300	1303	1291	1296	1759600	1254.756	-0.00077101
10/15/2015	1292	1300	1286	1297	1346400	1255.724	0.006987578
10/14/2015	1286	1291	1277	1288	1923800	1247.01	-0.001550388
10/13/2015	1281	1290	1276	1290	1209500	1248.947	0.0078125
10/12/2015	1284	1288	1276	1280	911000	1239.265	-0.001560062
10/9/2015	1290	1298	1274.28	1282	1891100	1241.201	-0.000779423
10/8/2015	1261	1294	1261	1283	2305400	1242.169	0.016640254
10/7/2015	1294	1301	1257	1262	1916200	1221.838	-0.023975251
10/6/2015	1309	1311	1292	1293	1700900	1251.851	-0.009954058
10/5/2015	1288	1306	1285	1306	2200200	1264.437	0.030781373
10/2/2015	1261	1277	1248	1267	2193000	1226.679	0.011980831
10/1/2015	1270	1280	1252	1252	1310000	1212.156	-0.005559968
9/30/2015	1257	1264	1248	1259	2522900	1218.933	0.020259319
9/29/2015	1239	1255	1230	1234	1722000	1194.729	-0.015948963
9/28/2015	1278	1286	1254	1254	1478900	1214.092	-0.0203125
9/25/2015	1265	1283	1258.31	1280	1978600	1239.265	0.021548284
9/24/2015	1248	1263	1241	1253	2235400	1213.124	0.004811548
9/23/2015	1220	1255	1212.62	1247	1878000	1207.315	0.022131148
9/22/2015	1237	1242	1219	1220	2612500	1181.174	-0.013742926
9/21/2015	1229	1245	1229	1237	1660200	1197.633	0.000000001
9/18/2015	1225	1250.36	1222	1237	3863600	1197.633	0.00732899
9/17/2015	1219	1233	1218	1228	1957800	1188.92	0.006557377
9/16/2015	1211	1223	1208	1220	1807500	1181.174	0.012448133
9/15/2015	1211	1213	1198	1205	1667600	1166.652	-0.004954583
9/14/2015	1225	1232	1208	1211	2430200	1172.461	-0.007377049
9/11/2015	1248	1248	1220	1220	1292900	1181.174	-0.01850362
9/10/2015	1241	1251	1232	1243	1293300	1203.442	-0.00400641
9/9/2015	1254	1264	1244	1248	1354800	1200.393	0.009708738
9/8/2015	1231	1243.54	1225	1236	1338200	1188.85	0.010629599
9/7/2015	1230	1234	1220	1223	705500	1176.346	0.001638002
9/4/2015	1235	1235	1217.64	1221	1965000	1174.423	-0.02085004
9/3/2015	1259	1263	1247	1247	2148600	1199.431	0.000000001
9/2/2015	1231	1260	1229	1247	1836900	1199.431	0.01879085
9/1/2015	1236	1243	1219	1224	3026100	1177.308	-0.022364217
8/31/2015	1252	1252	1252	1252	0	1204.24	0.00000001
8/28/2015	1262	1262	1241	1252	1687300	1204.24	-0.007137193
8/27/2015	1252	1265	1239	1261	2222200	1212.897	0.026872964
8/26/2015	1248	1263	1228	1228	2610400	1181.156	-0.025396825
8/25/2015	1235	1267	1225	1260	3246200	1211.935	0.035332786
8/24/2015	1244	1252	1195.74	1217	4354200	1170.575	-0.04921875
8/21/2015	1284	1305	1280	1280	2853100	1231.172	-0.014626636
8/20/2015	1308	1312	1297	1299	1899400	1249.447	-0.006880734
8/19/2015	1323	1326	1308	1308	1647600	1258.104	-0.013574661
8/18/2015	1320	1331	1318	1326	1536300	1275.417	0.003025719
8/17/2015	1325	1325	1311.5	1322	1229400	1271.57	0.003034901
8/14/2015	1317	1330	1313	1318	1757600	1267.722	0.001519757
8/13/2015	1320	1327	1310	1316	1878900	1265.799	0.006885998
8/12/2015	1313	1323.46	1300	1307	2226400	1257.142	-0.008345979
8/11/2015	1329	1338.25	1316	1318	2203900	1267.722	-0.012734082
8/10/2015	1334	1338	1322	1335	1543600	1284.074	0.005271084
8/7/2015	1328	1338	1322.72	1328	1255900	1277.341	-0.001503759
8/6/2015	1313	1332	1306	1330	2055200	1279.265	0.009870919
8/5/2015	1312	1317.1	1306	1317	1612700	1266.761	0.003810976
8/4/2015	1300	1313	1291	1312	1378200	1261.951	0.009230769
8/3/2015	1292	1309	1292	1300	1290700	1250.409	0.001540832
7/31/2015	1284	1305.55	1279.88	1298	2498000	1248.485	0.011691348
7/30/2015	1295	1302	1273	1283	1401200	1234.058	-0.007733952
7/29/2015	1296	1303	1282	1293	2938000	1243.676	0.003103181
7/28/2015	1287	1297	1280	1289	1730600	1239.829	0.005460218
7/27/2015	1292	1309	1281	1282	2281000	1233.096	-0.01156515
7/24/2015	1284	1312.36	1282	1297	2485100	1247.523	0.009338521
7/23/2015	1310	1310	1281	1285	2529400	1235.981	-0.013056836
7/22/2015	1301	1312.79	1296	1302	2379500	1252.333	-0.002298851
7/21/2015	1324	1325	1305	1305	3289300	1255.218	-0.011363636
7/20/2015	1315	1332	1311	1320	1236400	1269.646	-0.008264463
7/17/2015	1330	1334	1313	1331	1704600	1280.226	0.003014318
7/16/2015	1316	1329	1313	1327	1311200	1276.379	0.014525994
7/15/2015	1306	1314	1299	1308	1120400	1258.104	0.003837299
7/14/2015	1308	1309	1287	1303	1635400	1253.295	0.000000001
7/13/2015	1300	1308.27	1287	1303	1918000	1253.295	0.012432012
7/10/2015	1290	1291	1281	1287	1420200	1237.905	0.009411765
7/9/2015	1252	1275	1250	1275	1858500	1226.363	0.019184652
7/8/2015	1250	1260	1244	1251	1578500	1203.278	0.0008
7/7/2015	1260	1269	1241	1250	3072900	1202.316	0.016260163
7/6/2015	1244	1251	1229	1230	1654300	1183.079	-0.01521217
7/3/2015	1233	1253	1230	1249	2056900	1201.355	0.013798701
7/2/2015	1237	1243	1230.64	1232	1793600	1185.003	-0.001620746
7/1/2015	1218	1236	1216	1234	3232900	1186.927	0.024916944
6/30/2015	1218	1219	1204	1204	2009300	1158.071	-0.011494253
6/29/2015	1209	1232.59	1205.45	1218	1903500	1171.537	-0.017741935
6/26/2015	1244	1247	1236	1240	889900	1192.698	-0.003215434
6/25/2015	1245	1255	1238	1244	1904000	1196.545	-0.000803213
6/24/2015	1255	1257	1243	1245	1654400	1197.507	-0.010333863
6/23/2015	1259	1266	1246	1258	1440800	1210.011	0.001592357
6/22/2015	1248	1259	1244	1256	1986300	1208.087	0.019480519
6/19/2015	1228	1245	1227	1232	3637000	1185.003	0.000812348
6/18/2015	1229	1233	1213	1231	3327400	1184.041	-0.004045307
6/17/2015	1271	1277	1236	1236	2012700	1181.011	-0.025236593
6/16/2015	1268	1275	1256	1268	2123000	1211.588	-0.001574803
6/15/2015	1266	1280	1261	1270	2160900	1213.499	0.00000001
6/12/2015	1289	1297	1268	1270	2733100	1213.499	-0.020061728
6/11/2015	1263	1308	1261	1296	2343300	1238.342	0.021276596
6/10/2015	1252	1271	1245	1269	1914100	1212.543	0.013578275
6/9/2015	1245	1264	1242	1252	1885200	1196.299	0.004815409
6/8/2015	1253	1258	1243.25	1246	1156800	1190.566	-0.002401922
6/5/2015	1269	1271	1249	1249	1846700	1193.433	-0.018853103
6/4/2015	1271	1287	1255	1273	2302500	1216.365	0.000786164
6/3/2015	1294	1298	1271	1272	2715800	1215.41	-0.017001546
6/2/2015	1331	1331	1294	1294	2199200	1236.431	-0.021919879
6/1/2015	1312	1333	1308	1323	2241100	1264.141	0.007616146
5/29/2015	1328	1337	1310	1313	2614700	1254.586	-0.013523666
5/28/2015	1321	1333.4	1318	1331	1529000	1271.785	0.003014318
5/27/2015	1309	1335	1309	1327	1944200	1267.963	0.014525994
5/26/2015	1320	1329	1303	1308	2601400	1249.808	-0.009090909
5/25/2015	1320	1320	1320	1320	0	1261.274	0.000000001
5/22/2015	1323	1330	1317	1320	3178300	1261.274	-0.003021148
5/21/2015	1339	1339	1321	1324	2199400	1265.096	-0.010463378
5/20/2015	1362	1362	1332	1338	2951400	1278.473	-0.018341893
5/19/2015	1325	1363	1325	1363	3266600	1302.361	0.039664378
5/18/2015	1306	1321	1300	1311	2295700	1252.675	0.001527884
5/15/2015	1300	1317	1300	1309	3119700	1250.764	0.010030864
5/14/2015	1280	1300	1265	1296	1533800	1238.342	0.011709602
5/13/2015	1259	1284	1256.25	1281	1893400	1224.009	0.018282989
5/12/2015	1258	1262	1231	1258	2642400	1202.033	-0.001587302
5/11/2015	1263	1279	1259	1260	1804500	1203.944	-0.002375297
5/8/2015	1279	1284	1244	1263	4833000	1206.81	0.042079208
5/7/2015	1208	1217	1191	1212	3912300	1158.079	0.00000001
5/6/2015	1220	1220.5	1205	1212	2949500	1158.079	-0.007371007
5/5/2015	1236	1250.24	1221	1221	2482700	1166.679	-0.006509357
5/4/2015	1229	1229	1229	1229	0	1174.323	0.000000001
5/1/2015	1245	1245	1224	1229	1222200	1174.323	-0.01601281
4/30/2015	1251	1256	1232	1249	2568600	1193.433	-0.001598721
4/29/2015	1268	1280	1251	1251	2473300	1195.344	-0.008716323
4/28/2015	1276	1292	1250	1262	2018900	1205.855	-0.007081039
4/27/2015	1270	1281	1249	1271	1651400	1214.454	0.001576044
4/24/2015	1274	1278	1255	1269	1785900	1212.543	-0.004705882
4/23/2015	1282	1282	1265	1275	1344000	1218.276	-0.001566171
4/22/2015	1288	1292	1259	1277	1649300	1220.187	-0.00312256
4/21/2015	1285	1289	1276	1281	1242100	1224.009	-0.000780031
4/20/2015	1273	1282	1268	1282	1641800	1224.965	0.01183899
4/17/2015	1279	1291	1264	1267	2140000	1210.632	-0.008607199
4/16/2015	1296	1296	1268	1278	1689400	1221.143	-0.010069713
4/15/2015	1309	1310	1286	1291	1458500	1233.564	-0.009969325
4/14/2015	1288	1305	1288	1304	1820300	1245.986	0.009287926
4/13/2015	1301	1306	1288	1292	2164500	1234.52	-0.005388761
4/10/2015	1292	1300.02	1290	1299	2034000	1241.208	0.007757952
4/9/2015	1280	1293	1277.9	1289	1082700	1231.653	0.010188088
4/8/2015	1276	1278	1267	1276	1147500	1219.232	0.000000001
4/7/2015	1265	1282	1264	1276	1484600	1219.232	0.01350278
4/6/2015	1259	1259	1259	1259	0	1202.988	0.0000001
4/3/2015	1259	1259	1259	1259	0	1202.988	0.00000001
4/2/2015	1257	1260	1249	1259	1284500	1202.988	0.003187251
4/1/2015	1253	1263.25	1248	1255	2214800	1199.166	0.001596169
3/31/2015	1265	1273	1250.5	1253	3182100	1197.255	-0.008702532
3/30/2015	1280	1280	1257	1264	1695600	1207.766	-0.003154574
3/27/2015	1265	1272	1253	1268	1906000	1211.588	0.006349206
3/26/2015	1263	1270	1251	1260	3540800	1203.944	-0.010212097
3/25/2015	1288	1298	1270	1273	1344800	1216.365	-0.010108865
3/24/2015	1272	1291	1268	1286	1748200	1228.787	0.008627451
3/23/2015	1277	1281	1268	1275	1755100	1218.276	-0.000783699
3/20/2015	1273	1277	1264.24	1276	3515300	1219.232	0.003144654
3/19/2015	1267	1284	1265	1272	4328600	1215.41	0.00952381
3/18/2015	1231	1262	1231	1260	1651600	1203.944	0.02189781
3/17/2015	1229	1240	1225	1233	1888700	1178.145	0.00000001
3/16/2015	1222	1235.96	1220	1233	2045600	1178.145	0.010655738
3/13/2015	1201	1222	1201	1220	2664500	1165.723	0.01836394
3/12/2015	1206	1218	1198	1198	2672100	1144.702	-0.01073493
3/11/2015	1212	1220.32	1207	1211	1926900	1149.575	-0.003292181
3/10/2015	1238	1254	1213	1215	2588300	1153.372	-0.01937046
3/9/2015	1263	1265	1229	1239	2375400	1176.155	-0.02055336
3/6/2015	1294	1295	1261	1265	2873300	1200.836	-0.020139427
3/5/2015	1277	1293.36	1277	1291	1628800	1225.517	0.010963195
3/4/2015	1285	1285	1271	1277	2298900	1212.227	-0.00234375
3/3/2015	1285	1291	1278	1280	3089400	1215.075	0.001564945
3/2/2015	1263	1280	1258	1278	3032900	1213.177	0.017515924
2/27/2015	1246	1261	1238	1256	3208700	1192.292	0.010458568
2/26/2015	1228	1244	1224	1243	2049400	1179.952	0.009748172
2/25/2015	1241	1242	1225	1231	1971300	1168.561	-0.005654281
2/24/2015	1236	1250	1233	1238	2200500	1175.205	0.000808407
2/23/2015	1237	1241	1227	1237	2368900	1174.256	0.005691057
2/20/2015	1234	1234	1219	1230	2102500	1167.611	-0.003241491
2/19/2015	1230	1238.67	1223	1234	2204300	1171.408	0.008994276
2/18/2015	1242	1250	1217	1223	2705500	1160.966	-0.018459069
2/17/2015	1241	1248	1231	1246	1735800	1182.8	0.002413516
2/16/2015	1248	1254	1241	1243	1640300	1179.952	-0.0056
2/13/2015	1258	1263	1244	1250	3003100	1186.597	-0.002394254
2/12/2015	1262	1271	1248	1253	2783800	1189.445	-0.010268562
2/11/2015	1269	1274	1261	1266	1474900	1201.785	-0.002364066
2/10/2015	1272	1278	1262	1269	3007100	1204.633	-0.002358491
2/9/2015	1302	1303	1267	1272	1735800	1207.481	-0.023041475
2/6/2015	1300	1312	1295	1302	2514500	1235.959	-0.002298851
2/5/2015	1290	1305	1288	1305	2541600	1238.807	0.007722008
2/4/2015	1288	1295.27	1273	1295	2436100	1229.314	0.007782101
2/3/2015	1293	1300	1285	1285	2924200	1219.822	-0.006955178
2/2/2015	1283	1294.08	1269	1294	1619500	1228.365	0.015698587
1/30/2015	1297	1301	1270	1274	2793700	1209.379	-0.018489985
1/29/2015	1284	1300	1275	1298	1556600	1232.162	0.006982157
1/28/2015	1277	1289	1259	1289	2659000	1223.619	0.01496063
1/27/2015	1282	1292	1265	1270	1676900	1205.582	-0.01244168
1/26/2015	1283	1290	1277	1286	1839100	1220.771	0.001557632
1/23/2015	1279	1289	1277	1284	2040200	1218.872	0.007058824
1/22/2015	1262	1282	1256	1275	2232200	1210.329	0.009501188
1/21/2015	1253	1272	1250	1263	2339900	1198.937	0.007980846
1/20/2015	1245	1256	1240	1253	1962700	1189.445	0.011299435
1/19/2015	1232	1246	1225	1239	1450500	1176.155	0.004051864
1/16/2015	1219	1234	1209	1234	2898800	1171.408	0.006525285
1/15/2015	1207	1226	1196	1226	2597800	1163.814
						Mean	-0.000108507
						Mode	0.000000001
						Median	0.000000001
						Standard Deviation	0.012762451
						Variance	0.00016288

						Frequency Distribution	250

For better understanding, the following graphs on the Daily Return and the Closing Stock Price have been performed below:

From the above Closing Stock Price graph, it can be said that with the passage of the time within the time period 1^st January 2015 to 31^st December 2015, the closing stock price of the organization Land Securities Group Plc varies. Though from the graph, it can be interpreted that the closing stock price of the firm Land Securities Group Plc generally lies between the ranges £ 1100 to £ 1400 within the particular time period.

Daily Return

From the above Daily Return graph, it can be said that the daily return might be a positive value or it might be a negative value. Here, the daily return for the time period 1^st January 2015 to 31^st December 2015 have been represented in order to analyze the daily return of the company Land Securities Group Plc in detail. It can be said from the graph that the daily return of the company Land Securities Group Plc varies between the ranges – 0.05 to + 0.04 within the particular time period.

All the calculations and the workings of the descriptive statistics have been shown in the attached excel sheet of the case study A. For better understanding, it can be said that the formulae that have been used for calculating mean, median, mode, standard deviation, frequency distribution and variance are all suitable for calculating in the excel sheet (Flannery and Hankins 2013). Therefore, in the formula bar of the excel sheet, all the required formulae have been provided for each of the statistical calculations. The above graphs on the closing stock price and daily return of the company Land Securities Group Plc and the calculations indicate that the mode is 0.000000001, the mean is 0.000108507, standard deviation is 0.012762451, median is 0.000000001, frequency distribution is 250 and lastly variance is 0.00016288. From these values, it can be said that the financial position of the particular organization is constant and stable as mode, mean, median and standard deviation are positive and on the other hand, the value of the variance is comparatively lower (Graham 2013). This relatively lower value of the variance indicates that the firm Land Securities Group Plc had a stable value of stock throughout the year 2015 (Booth and Cleary 2013). Moreover, the positive value of the covariance implies that the variables of Land Securities Group Plc are positively related (Acharya et al. 2013). Thus, it can be advised that the investors can invest freely in this organization Land Securities Group Plc with the aim to earn high return.

Case Study B

PKB Limited:

The firm PKB Limited planned to expand its business by expanding its product range and a possible campaign of marketing. Thus, on the basis of the present financial position of the organization, the Net Present Value (NPV) of the new investment project, payback period (PBP) and the Internal Rate of Return (IRR) of the new project have been calculated in order to analyze the financial position of the firm in detail (Clayman et al. 2012). All the calculations are shown below:

Net Present Value:

	Cash flow	Scrap Value	Final Cash Flow
year 0	-5000000		-5000000
year1	1360800		1360800
year 2	1443240		1443240
year 3	1410980		1410980
year 4	1377753	750000	2127753
		NPV	$55,115.52

Workings
	Year 1		Year 2	Year 3		Year 4
Sales	8500000		9520000	9520000		9520000
Less: Variable Cost	5100000		5712000	5712000		5712000
Contribution	3400000		3808000	3808000		3808000
Less: Fixed Cost	1200000		1493500	1538305		1584454
EBIT	2200000		2314500	2269695		2223546
Less: Interest	310000		310000	310000		310000
EBT	1890000		2004500	1959695		1913546
Less: Tax (@ 28%)	529200		561260	548714.6		535792.9
PAT (Profit After Tax)	1360800		1443240	1410980		1377753
Workings
		Increased Sales
sales increased by 12%		9520000
12%

variable cost of year 1		5100000
60% of sales value

variable cost of other years		5712000
60% of sales value

increased fixed cost		250000			1450000		43500
					1493500
Risk free rate		4.70%
rate of interest		6.20%
1.50%

tax rate		28%

initial investment		5000000

Internal Rate of Return:

15%
5000000
Rate	IRR	10%
9%

Payback Period:

year	Cash Flow	Cumulative Cash Flow
0	-5000000	-5000000
1	1360800	-3639200
2	1443240	-2195960
3	1410980	-784980
4	2127753	1342773

Payback Period	2.631075599	years

The report analysis for the case study B has been prepared based on various calculations i.e. NPV, IRR and payback period of the investment that has been made for the new project of the company PKB Limited. It can be said from the above calculation that the new project of investment should be accepted (Ziegler 2012). The reason behind this is that the Net Present Value (NPV) of the specified project is positive i.e. $55,115.52, the Internal Rate of Return (IRR) is also relatively lesser that is only 10 % and lastly the payback period (PBP) of the new mentioned project has also been calculated that is equivalent 2.63 years. This implies that investment in the new project and the marketing campaign will result into higher return (Gitman and Zutter 2012). In other words, it can also be said that the marketing campaign would affect the viability of the new project positively. The reason behind this is that, the marketing campaign would help to advertise about the products of the company PKB limited and this will also help to communicate among the company and its customers about the products and services provided by the firm. Thus, it can be said that with the successful marketing campaign, the sales revenue of the firm can be increased as advertisement or marketing campaign is a process of communicating between the company and its customers.

On the basis of the case study B and NPV calculation, it can be said that the company should invest in the new project as the value of the NPV calculation is positive. As per the thumb rule, any project having positive NPV should be accepted and any project having negative NPV should be rejected. For this case study B, the NPV is positive, thus the new project should be accepted and the investors should invest in the new project for the expansion of the product range.

In this case study B, the present financial condition of the firm has already been provided and it can be better understood from the balance sheet of the firm that has been provided. Therefore, for analyzing the present financial situation of the firm the researcher might not calculate the NPV, IRR and payback. However, in the case study B, various assumptions have been provided and the initial investment amount for the new project, its life for 4 years and the various cash inflows amount for each of the 4 years have also been provided. Based on the data provided and the assumptions like – increase in inflation rate, increase in sales amount from 2^nd year onwards and high tax rate, all the calculations of NPV, IRR and payback for the new project have been done. It has been found that all calculated values are positive and thus by comparing the present financial situation of the firm and the proposed investment plan, it can be said that the investor should opt for the proposed new investment plan and therefore, they should invest in the new proposed project.

Therefore, it can be found from the case study that there are several assumptions but only a few can be considered as the most critical one due to the feasibility of the project. These include – the increase in the variable cost, the increase in the rate of inflation and higher amount of taxation (Esty 2014). Nevertheless, all these critical assumptions can be ignored as from the case study and the above calculations it has been found that the total amount of cash inflow is more than the total amount of cash outflow for the new project of investment (Brealey et al. 2012). This increase in the cash inflow than the cash outflow will continue for spontaneously four years (Roberts and Whited 2012). Thus, it can be suggested that the organization PKB Limited should make this new investment for the expansion of the product range of the organization and possible campaign of marketing.

References

Acharya, V.V., Gottschalg, O.F., Hahn, M. and Kehoe, C., 2013. Corporate governance and value creation: Evidence from private equity. Review of Financial Studies, 26(2), pp.368-402.

Berk, J. and DeMarzo, P. 2011. Corporate finance. Boston, MA: Prentice Hall.

Booth, L. and Cleary, S., 2013. Introduction to corporate finance. Wiley Global Education.

Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P., 2012. Principles of corporate finance. Tata McGraw-Hill Education.

Clayman, M.R., Fridson, M.S. and Troughton, G.H., 2012. Corporate finance: A practical approach (Vol. 42). John Wiley & Sons.

Drury, C. 2012. Management and cost accounting. Andover: Cengage Learning.

Esty, B., 2014. An Overview of Project Finance and Infrastructure Finance-2014 Update. HBS Case, (214083).

Flannery, M.J. and Hankins, K.W., 2013. Estimating dynamic panel models in corporate finance. Journal of Corporate Finance, 19, pp.1-19.

Gitman, L.J. and Zutter, C.J., 2012. Principles of managerial finance. Prentice Hall.

Graham, J.R., Harvey, C.R. and Puri, M., 2013. Managerial attitudes and corporate actions. Journal of Financial Economics, 109(1), pp.103-121.

Roberts, M.R. and Whited, T.M., 2012. Endogeneity in empirical corporate finance.

Shiller, R. 2012. Finance and the good society. Princeton, N.J.: Princeton University Press.

Smith, C.W. and Wakeman, L., 2011. Determinants of corporate leasing policy. The Journal of Finance, 40(3), pp.895-908.

Thompson, T. 2012. Benchmarking the finance function 2012. Morrisotwn, NJ: Financial Executives Research Foundation.

Ziegler, A.C., 2012. A Game Theory Analysis of Options: Corporate Finance and Financial Intermediation in Continuous Time. Springer Science & Business Media.

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