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HI5002: Finance For Business

tag 0 Download 14 Pages / 3,432 Words tag 06-11-2020
  • Course Code: HI5002
  • University: Holmes Institute
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  • Country: Australia

Question:

i) What is their calculated beta (β) for your company?

ii) If the risk free rate is 4% and the market risk premium is 6%, use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return for the companies’ shares.

iii) Is the company you have chosen a “conservative” investment? Explain your answer.

  1. i) Using information from the latest company report for the company (i.e. interest rate on their major source of long-term loans) and the estimated cost of equity capital calculated (in part 6ii above), calculate the WACC for your company.
  1. ii) Explain the implications that a higher WACC has on management’s evaluation on prospective investment projects.
  1. Consider the debt ratio for your company over the past two years:
  1. i) Does it appear to be working towards the maintenance of a preferred optimal capital structure? (i.e., does it appear to be “stable”?). Explain your answer.
  1. ii) What have they done to adjust/amend their gearing ratio? Increase or repay  borrowings? Issue or buy back shares? Has the Director’s Report given any information as to why they have made any adjustments?

Discuss what dividend policy of the management of the company appears to be implemented. Explain any reason related to that particular dividend policy.

Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include this company in his/her investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.

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Total 14 pages

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My Assignment Help (2020) Finance For Business [Online]. Available from: https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/evaluation-on-prospective-investment.html
[Accessed 12 August 2022].

My Assignment Help. 'Finance For Business' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/evaluation-on-prospective-investment.html> accessed 12 August 2022.

My Assignment Help. Finance For Business [Internet]. My Assignment Help. 2020 [cited 12 August 2022]. Available from: https://myassignmenthelp.com/free-samples/hi5002-finance-for-business/evaluation-on-prospective-investment.html.


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