ACC508 Corporate Finance Assignment
Added on 2020-04-01
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Corporate Finance Assignment
EXECUTIVE SUMMARYTo assess the viability of an investment such as the purchase or replacement of plant orequipment, or a new product line, a company will need to perform capital budgeting[ CITATION Acc171 \l 1033 ].There are various techniques that may be used for capital budgeting. These include thepayback period, discounted payback period, internal rate of return, the net present valueand profitability index. These techniques can either be used alone or in a combinationfor better results. The hurdle rate or discount rate is the minimum return that a business expects to earnon an investment. The cost of capital may be taken as a good initial point to assess thecompany’s hurdle rate [CITATION Tuc \l 1033 ].Informational efficiency measures how the market reacts and responds to newinformation. For example, when a company announces plans to invest in a new productline or similar project, this news may have an effect on the company’s share price. Thesemi-strong form of efficiency states all publicly available information will be reflected inthe firm’s share prices [ CITATION Inv172 \l 1033 ]..i
TABLE OF CONTENTSEXECUTIVE SUMMARY..........................................................................................................................iTABLE OF CONTENTS...........................................................................................................................iiLIST OF TABLES.....................................................................................................................................iiiLIST OF FIGURES..................................................................................................................................ivCHAPTER 1 : SECTION ONE- CAPITAL BUDGETING.....................................................................11.1 Introduction.....................................................................................................................................11.2 Discount or Hurdle Rate................................................................................................................11.3 Base Scenario- After Tax Cash Flows........................................................................................11.4 Sensitivity Analysis- - After Tax Cash Flows..............................................................................31.5 Conclusion.......................................................................................................................................6CHAPTER 2 : SECTION TWO- SEMI-STRONG FORM MARKET EFFICIENCY...........................72.1 Introduction.....................................................................................................................................72.2 Semi-Strong Form Market Hypothesis........................................................................................72.3 Test for Semi-Strong Form Market Hypothesis..........................................................................72.4 Conclusion.......................................................................................................................................8REFERENCES..........................................................................................................................................9APPENDIX...............................................................................................................................................10ii
LIST OF TABLESTable 1-1: After Tax Cash Flow Operations......................................................................2Table 1-2: Cash Flows Investment....................................................................................2Table 1-3: After Tax Cash Flows -Base Scenario.............................................................3Table 1-4: NPV, IRR, PBP, PI- Base Scenario.................................................................3Table 1-5: After Tax Cash Flows - Scenario 1..................................................................4Table 1-6: NPV, IRR, PBP, PI- Scenario One...................................................................5Table 1-7: After Tax Cash Flows - Scenario 2..................................................................5Table 1-8: NPV, IRR, PBP, PI- Scenario Two...................................................................6iii
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