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金融take home代写 代做FIN2212 Final Exam

2020-03-28 12:07 星期六 所属: 考试助攻 浏览:14

金融take home代写 This paper consists of TWO (2) sections. Answer ALL questions in Section A and any TWO (2) questions in Section B in the answer booklet provided. Each question carries equal marks.

INTI INTERNATIONAL UNIVERSITY

 

Bachelor of Business (Hons) ACCOUNTING

Bachelor of Business (Hons) FINANCE

Bachelor of Business (Hons) HUMAN RESOURCE MANAGEMENT

Bachelor of Business (Hons) International Business

 

FIN2210 / FIN2212: FINANCIAL MANAGEMENT

 

FINAL EXAMINATION: AUGUST 2018 SESSION

 

 

This paper consists of TWO (2) sections. Answer ALL questions in Section A and any TWO (2) questions in Section B in the answer booklet provided. Each question carries equal marks.

 

 

SECTION A: Answer ALL questions.

 

 

Question 1

 

You are considering two securities, AHB Holdings Berhad and Hup Seng Industries Berhad, and the relevant information is given as below:

 

AHB Holdings Berhad

Hup Seng Industries Berhad

date

closing price

date

closing price

div

1/1/03

0.51

1/1/03

1.67

 

12/31/03

1.42

12/31/03

2.18

 

1/1/04

1.42

1/1/04

2.18

 

12/31/04

0.94

12/31/04

1.99

 

1/3/05

0.87

1/3/05

2

 

12/30/05

0.37

12/30/05

1.85

 

1/2/06

0.37

1/2/06

1.85

 

12/29/06

0.28

12/29/06

1.65

 

1/1/07

0.28

1/3/07

1.7

 

12/31/07

0.12

12/31/07

1.38

 

 

 

 

 

 

 

 

6/16/04

 

0.1

 

 

12/21/04

 

0.1

 

 

12/6/05

 

0.1

 

 

12/14/06

 

0.1

 

 

12/4/07

 

0.05

 

 

You plan to buy 100,000 shares from both companies. The current market price for AHB Holdings Berhad and Hup Seng Industries Berhad are $0.12 and $1.38 respectively. Assume that the correlation coefficient between the two stocks is 0.12, calculate the:

 

<![if !supportLists]>a) <![endif]>Average return of the portfolio

(11 marks)

 

<![if !supportLists]>b) <![endif]>Standard deviation of the portfolio.

(7 marks)

 

<![if !supportLists]>c) <![endif]>You have also gathered the following information on KLCI from your broker:

 

Year

Annual Return

2003

14.163%

2004

10.605%

2005

8.551%

2006

7.146%

2007

21.512%

 

You know that, at the time you want to form the portfolio, the risk-free rate is 3%. If the Capital Asset Pricing Model holds for the portfolio, is it good to create? Assume the beta for AHB Holdings Berhad and Hup Seng Industries Berhad are 1.033 and 0.397 respectively.

(7 marks)

 

 


Question 2

 

<![if !supportLists]>a) <![endif]>Jenny Corporation would like to raise $15 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1,000 and a coupon rate of 7%. The coupon payment is paid annually. The following table summarizes the yields to maturity (YTM) for five-year (annual payment) coupon corporate bonds of various ratings:

 

Rating

AAA

AA

A

BBB

BB

YTM

5%

6%

7%

8%

9%

 

<![if !supportLists]>i) <![endif]>Assuming the bonds will be rated AA, calculate the price of the bonds.

(5 marks)

 

<![if !supportLists]>ii) <![endif]>Calculate total principal amount of these bonds Jenny Corporation must issue to raise $15 million today, assuming the bonds are AA rated (Since it cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number).

(3 marks)

 

<![if !supportLists]>iii) <![endif]>What must the rating of the bonds be for them to sell at par? Explain.

(3 marks)

 

<![if !supportLists]>iv) <![endif]>Suppose that when the bonds are issued, the price of each bond is $922.21. Determine the likely rating of the bonds.

(6 marks)

 

 

<![if !supportLists]>b) <![endif]>Explain the relationship between a bond’s market price and its promised yield to maturity.

(3 marks)

 

<![if !supportLists]>c) <![endif]>Rich Industries has a $1,000 par value bond with an 8% coupon interest rate outstanding. The bond has 12 years remaining to its maturity date. If interest is paid quarterly, calculate the value of the bond when the required return is 10%.

(5 marks)


SECTION B: Answer ANY TWO (2) questions.

 

 

Question 3

 

<![if !supportLists]>a) <![endif]>On December 31, 2002, the share of Amacon Inc. closed at $20. The company subsequently paid a year-end dividend in each of the years 2003 through 2007 as follows:

 

2003

$1.00

2004

$1.00

2005

$1.00

2006

$1.25

2007

$1.25

 

Suppose you had purchased a share of Amacon stock on Dec 31, 2002. Calculate the price at which you must sell your share at 2007 year-end in order to realize an annual compounded total rate of return of 10 percent on your initial investment (before commission and taxes).

(15 marks)

 

<![if !supportLists]>b) <![endif]>Calculate the price for a stock given that the beta of the stock is 1.32, the risk-free rate is 6% per year, and the expected rate of return on the market portfolio is 14% per year. The current dividend is $4.34 per share, dividends are expected to grow at a rate of 2% during year 1, dividends are expected to grow at a rate of 8% during year 2, dividends are expected to grow at a rate of 16% during year 3, dividends are expected to grow at a rate of 15% during year 4, and dividends are expected to grow at a rate of 3% per year from that point on.

(10 marks)

 


Question 4

 

<![if !supportLists]>a) <![endif]>Today is your birthday, and you decide to start saving for your college education. You will begin college on your 18th birthday and will need $4,000 per year at the end of each of the following 4 years.  You will make a deposit 1 year from today in an account paying 12 percent annually and continue to make an identical deposit each year up to and including the year you begin college.  If a deposit amount of $2,542.072 will allow you to reach your goal, what birthday are you celebrating today? Show your calculation.

(5 marks)

 

<![if !supportLists]>b) <![endif]>Suppose Betty Brad drinks a cup of Starbuck coffee ($3.00 a cup) on the way to work every morning for 30 years. If she puts the money in the bank for the same period, calculate how much she would have, assuming her accounts earns a 5% interest compounded daily. Assume she drinks a cup of coffee every day including weekends.

(5 marks)

 

<![if !supportLists]>c) <![endif]>Millionaire Babies: How to Save Our Social Security System. It sounds a little wild, but that is probably the point. Former Senator Bob Kerrey, D-Nebraska, had proposed giving every newborn babies a $1,000 government savings account at birth, followed by five annual contributions of $500 each. If the money is then left untouched in an investment account, what will be the amount in the account by the time the baby reaches age 65? Assume the interest rate for the investment account is 9 percent per annum. Show your calculation.

(7 marks)

 

<![if !supportLists]>d) <![endif]>Jennifer has already saved $10,000 in a mutual fund account and expected to save additional $9,000 at the end of the next two years. She expects to take out her money of $12,000 each at the end of Year 2 and Year 3 from the mutual fund account, for her son’s college education. How much she afford to spend now on vacation if she expects to earn 7% interest rate from her investments?

(8 marks)

 


Question 5

 

<![if !supportLists]>a) <![endif]>Data relating to three investment projects are given below:

 

 

A

B

C

Initial investment

$30,000

$20,000

$50,000

Useful life

10 years

4 years

20 years

Annual cash savings

$6,207

$7,725

$9,341


Rank the project according to their attractiveness using the internal rate of return method.

(12 marks)

 

<![if !supportLists]>b) <![endif]>Assume that LMH Corporation plans to invest in a project during a particular year. Additional information on the project is as follows:

 

Year

After-tax cash flows

 

Project H

1

$20,000

2

$25,000

3

$80,000

4

$22,000

 

Using the cost of capital of 9% and a net present value (NPV) of $1,700, calculate the payback period for the project.

(13 marks)

 

 

 


Question 6

 

KWB Co. faces increasing needs for capital. Fortunately it has an AA credit rating. The corporate tax rate is 40 percent. The firm’s financial manager is trying to determine the firm’s weighted average cost of capital as at 31st December 2018, in order to assess the profitability of capital budgeting projects.

 

The company’s common stock has a price of $98.44 and an expected dividend of $3.15 per share. The par value of the common stock is $100 and the historical growth pattern for dividends is as follows:

 

Year

Dividend per share ($)

2017

2.87

2016

2.74

2015

2.68

2014

2.56

2013

2.44

2012

2.28

2011

2.15

2010

1.90

2009

1.75

2008

1.45

2007

1.36

 

The preferred stock is selling at $90 per share and pays a dividend of $8.50 per share. The flotation cost is 2 percent of the selling price for preferred stock. The par value of the preferred stock is $72.

 

The table below shows the different bond issues of comparative market prices of equal risk to KWB Co.:

 

Data on Bond Issues

Issues

S&P’s Rating

Price $

Rogers Corp. 8⅜ 31/12/2025

AAA

975.25

Zendesk Inc. 8¼ 31/12/2029

AA

916.91

Kellogg Co. 9.62 31/12/2025

A

960.50

 

KWB Co. uses the information in the Balance Sheet, as shown in the following table, which are based on target capital structure proportions, to calculate its weighted average cost of capital.

 

 

Assets

Liabilities and Equity

Cash

$120,000

Long-term debt

$691,200

Accounts Receivable

$240,000

Common Equity

$1,728,000

Inventories

$360,000

Preferred Stock

$460,800

Plant and Equipment, net

$2,160,000

 

 

Total Assets

$2,880,000

Total Liabilities and Equity

$2,880,000

 

Calculate the weighted average cost of capital for KWB Co. using a market value weight, based on the information given.

(25 marks)

 

 

 

 

-THE END-

FIN2210/FIN2212 (F) / Aug 2018 / Siti Nurbaayah Daud / 20082018


FORMULA

 

TIME VALUE OF MONEY (TVOM)

 

Future Value of a

Single Cash Flow

 

OR

N

I/YR

PV

FV

 

 

 

?

 

Present Value of a

Single Cash Flow

 

OR

N

I/YR

PV

FV

 

 

?

 

 

Future Value of an

Ordinary Annuity

 

OR

N

I/YR

PMT

FV

 

 

 

?

 

Present Value of an

Ordinary Annuity

& Loan Amortization

 

OR

N

I/YR

PV

PMT

 

 

?

 

 

Future Value of an

Annuity Due

(1 + i)

OR

Set the calculator to the beginning of the period

N

I/YR

PMT

FV

 

 

 

?

 

Present Value of an

Annuity Due

(1 + i)

OR

Set the calculator to the beginning of the period

N

I/YR

PV

PMT

 

 

?

 

 

 

Loan Amortization

Schedule

Period

Beginning

Bal

(1)

Annuity

Payment

(2)

Interest

Payment

(3)

Principal

Payment

(4)

Ending

Balance

(5)

 

 

 

= (1) x interest

rate

= (2) – (3)

= (1) – (4)

 

Present Value of

a Perpetuity

PVP =

Present Value of

a Growing Perpetuity

PVP =

Effective Annual Rate

EAR =

OR

Using financial calculator:

Shift

<number>

PMT

Interest rate

I/YR

 

Shift

PV

 

 

 

 

RISK AND RETURN

 

Expected Return, ER

 

Standard Deviation, SD

 

OR

 

Single Period Return, R

R =

Average Return, AR

AR =

Expected Return of

a Portfolio, ERp

ERp = ƩW x ER

Standard Deviation of

a Portfolio, SDp

SDp =

 

Beta of a Portfolio, Bp

Bp = ƩW x B

Required Return

R = Rf + B (Rm – Rf)

 


BOND VALUATION

 

Coupon Payment,

Annually

CP = Coupon Rate x Par

Coupon Payment,

Semiannually

CP =

Value of a

Redeemable Bond

N

I/YR

PV

PMT

FV

 

 

?

 

 

 

Yield to Maturity,

Redeemable Bond

N

I/YR

PV

PMT

FV

 

?

 

 

 

 

Value of an

Irredeemable Bond

Vb =

Yield to Maturity,

Irredeemable Bond

i =

 

EQUITY VALUATION

 

Value of a

Preferred Stock

 

Value of a

Common Stock

(Constant Growth)

  OR  

Value of a

Common Stock

(Non-Constant Growth)

Step 1:

Calculate the dividends using the respective growth rates

Dividend

N

I/YR

PV

FV

 

 

 

 

?

Step 2:

Calculate the price of the stock at the time when the growth rate becomes constant

e.g. P4 =

Step 3:

Calculate the price of the stock at Year 0

YEAR 0

 

CFj

YEAR 1

 

CFj

YEAR 2

 

CFj

 

I/YR

 

 

SHIFT NPV

?

 

 

THE CAPITAL BUDGETING

Payback Period

(Even Cash Flows)

PP =

Net Present Value

(Even Cash Flows)

N

I/YR

PV

PMT

 

 

?

 

NPV = (Initial Investment) + Sum of All PVs

Net Present Value

(Uneven Cash Flows)

YEAR 0

 

CFj

YEAR 1

 

CFj

YEAR 2

 

CFj

 

I/YR

 

 

SHIFT NPV

?

 

Internal Rate of Return

(Even Cash Flows)

N

I/YR

PV

PMT

 

?

 

 

 

Internal Rate of Return

(Uneven Cash Flows)

YEAR 0

 

CFj

YEAR 1

 

CFj

YEAR 2

 

CFj

 

I/YR

?

 

 

 

THE COST OF CAPITAL

Cost of Common Stock Or

Cost of Retained Earnings, Ke

  OR  

Growth Rate, G

 

Cost of Preferred Stock, Kp

 

Dividend

D = Dividend % x Par Value

Floatation Cost

F = Floatation % x Market Price

Cost of Debt, Kd

Kd = YTM

N

I/YR

PV

PMT

FV

 

?

 

 

 

 

After-Tax Cost of Debt, ATKd

ATKd = Kd (1 – T)

Weighted Average

Cost of Capital, WACC

WACC = (We x Ke) + (Wp x Kp) + (Wd x ATKd)

 


RATIOS

mso-bord

Current Ratio

=

Acid-Test Ratio (Or Quick Ratio)

=

Gross Profit Margin

=

Operating Profit Margin

=

Net Profit Margin

=

Return on Assets

=

Return on Equity

=

Debt-to-Asset Ratio

=

Debt-to-Equity Ratio (Or Gearing Ratio)

=

Times Interest Earned

=

Average Collection Period

=

Inventory Turnover Ratio

=

Account Receivables Turnover Ratio

=

 


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