Financial Analysis and Portfolio Management, Exams of Financial Accounting

Download Financial Analysis and Portfolio Management and more Exams Financial Accounting in PDF only on Docsity! FIN2601 ASSIGNMENT Accounting And Law Assignments Final Assignment 2 Semester 2 Questions and Answers 2024 Workings Expected return = (0.60 x 35) + (0.25 x 15) + (0.15 x 7) = 25.8% Workings CV = Standard deviation Expected return Average return = 35+28+(−10) = 17.67% 3 Ri R (Ri – R) (Ri − R)2 2021 35 17.67 17.33 300.3289 2020 28 17.67 10.33 106.7089 2019 -10 17.67 -27.67 765.6289 Total 1172.666700 Standard deviation = √ 1172.6667 = 24.21% to 2 dp 3−1 Therefore, CV = 24.21 = 1.37 17.67 Working Holding period return = (2 800 000−2 500 000)+150 000 = 18% 2 500 000 Workings Average return: Market returns = (0.3 x -10) + (0.1 x 14) + (0.2 x 15) + (0.40 x 18) = 8.6% Average returns on Amelia and Holdings: = ( 60 000 x 25 ) + ( 30 000 x 13) + ( 30 000 x 20) = 20.75% 120 000 CAPM 120 000 120 000 20.75% = 5.5% + B (8.6 – 5.5) Therefore solving for Beta (B) = 4.919 Workings Returns on the market: = (0.35 x 25) + (0.60 x 13) + (0.20 x -7) = 15.15% Therefore market risk premium = 15.15 – 5 = 10.15% Workings FV = 1 000 PV = -995 N = 7 x 2 I/Y = 8/2 Comp PMT? = 39.52665513 Percentage received every six-months: 39.52665513 1 000 x 100 = 3.95% Workings PV = -120 FV = 100 PMT = 2.5 I/Y = 8/4 Comp N = 81.27395867 / 4 = 20.32 years Workings 1st Issue 2nd Issue PV = -1 140 PV = -1 140 FV = 1 000 FV = 1 000 PMT = 72 N = 10 N = 15 I/Y = 5.779241219% Comp I/Y = 5.779241219% Comp PMT = 76.62 Workings Expected dividends D0 = 2.10 D1 = 2.10(1+0.05) = 2.205 D2 = 2.205(1+0.05) = 2.31525 D3 = 2.31525(1+0.05) = 2.4310125 D4 = 2.4310125 (1+0.05) = 2.552563125 Value of a share after the initial 3 years = Expected dividends(D4) = 2.552563125 = R25.52563125 (required return−growth rate) (0.15−0.05) Workings Expected dividends D0 = 0 D1 = 0.22 D2 = 0.25 D3 = 0.30 D4 = 0.60 D5 = 0.70 D6 = 0.70 (1+0.0750) = 0.7525 Terminal value (T5) = 0.7525 = 18.8125 (0.1150−0.075) Share value: CF0 = 0 CF1 = 0.22 CF2 = 0.25 CF3 = 0.30 CF4 = 0.60 CF5 = 0.70 + 18.8125 CFi = 11.50% Comp NPV = 12.32 NB: This question had an issue. On the payment of dividends as you can note the Lecturer gave rand values of dividends for the next 5 years and said for the next 5 years. That was a grey are which makes question 16 questionable. Workings Value of operations = 135 000(1+0.065) = R2 396 250 (0.1250−0.0650) Workings Current price of a share = 2(1+0.05) = 15 (0.19−0.05) Where you get required return through CAPM. = 7 + 1.5(15 – 7) = 19% Required return when the beta coefficient is 1.75 = 7 + 1.75(15 – 7) = 21% To keep the price per share being R15 then the growth rate should be: 15 = 2(1+g) (0.21−g) 15(0.21-g) = 2(1+g) 3.150 – 15g = 2 + 2g 1.15 = 17g