Accounting and Finance Assignment

Added on - 18 Dec 2019

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ACCOUNTING ANDFINANCE
Table of ContentsINTRODUCTION................................................................................................................................3PART A................................................................................................................................................3a) If interest and principle are all repaid at the end of the three-month loan term, what is theannual percentage rate on the loan offer make by the bank?.......................................................3b) If the bank were to offer to lower the rate to the Reserve Bank of Australia cash rate ifinterest is discounted, should you accept this alternative............................................................3PART B................................................................................................................................................3(a)Expected return on the portfolio..............................................................................................3(b) Calculation of portfolio beta..................................................................................................4c) Security market line.................................................................................................................4(d) Winners and losers in security market line............................................................................5(e) Consideration of conclusion to be less certain.......................................................................5Part C....................................................................................................................................................5Required rate of return on CAPM model.....................................................................................5Valuation by using constant dividend growth model..................................................................6Performance of Orica and New crest...........................................................................................6CONCLUSION....................................................................................................................................7REFERENCES.....................................................................................................................................8
INTRODUCTIONRole of finance has increases with the increasing complexities of the business which willbe managed through the application of various techniques. This project is all about analyzingcurrent business performance in order to predict future performance of an entity in relation tovarious parameters used by an entity.PART Aa) If interest and principle are all repaid at the end of the three-month loan term, what is theannual percentage rate on the loan offer make by the bank?Interest on loan is in total 4% by considering 3% standard limit along with the additionalrate of 1% charged especially by the commercial banks for providing loan to an entity inaccomplishing all the desired aims and the objectives.b) If the bank were to offer to lower the rate to the Reserve Bank of Australia cash rate if interestis discounted, should you accept this alternativeThe cash flows taken in the present value is taken as 4% of total 240000 which isadditional need of an entity for a period of three-months. It can be seen that present value of theadditional requirements of an entity is higher in 2% as compared to the 4% so, this particularinterest will be rejected as paying higher interest will not generate higher returns in the nearfuture.PART B(a)Expected return on the portfolioAs per the data given in the file the total expected portfolio return on all the airlines is15.80% that is strong enough in order to generate higher business outcomes in the near future byimproving its overall performance over the period (Kang, de Gracia and Ratti, 2017). The
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