Business Finance INTRODUCTION 3 Question 1. Bank of Sydney 3 Question 2 Assessment of financial health and performance of Bradley stores 5 Question 3 Bond valuation 5 Question 4 Bond valuation 5 Quest
Added on 2019-12-28
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Business Finance
Table of ContentsINTRODUCTION...........................................................................................................................3Question 1. Analyzing financial performance of Bank of Sydney..............................................3Question 2 Assessment of the financial health and performance of Bradley stores....................5Question 3 Bond valuation..........................................................................................................51. Finding yield to maturity of Horsham Industries bond...........................................................52. Stating the coupon yield of bond over the next years.............................................................53. Value of bond when risk class is 6.2%....................................................................................54. Assessing whether required rate of return such as 6.2% is suitable from investment purpose.....................................................................................................................................................65. Finding the value of gain or loss in monetary terms...............................................................6Question 4....................................................................................................................................81...................................................................................................................................................82...................................................................................................................................................83...................................................................................................................................................84.................................................................................................................................................10Question 5 Portfolio evaluation.................................................................................................101. Calculating expected rate of return using probabilistic approach.........................................102. Finding standard deviations of the estimated rate of returns.................................................103. Assessing better measurement for the valuation of risk........................................................114. Identifying expected rate of return on the basis of beta.........................................................115. Portfolio beta and ERR..........................................................................................................116. Assessing beta of portfolio and ERR in the case of varied investment.................................127. Stating the portfolio which firm should prefer......................................................................12Question 6 Evaluating the viability of proposed investment.....................................................13
1. Computing payback period and NPV....................................................................................133. Calculating IRR.....................................................................................................................144. Profitability index..................................................................................................................145. Recommendations..................................................................................................................156 and 7 Recommending project when NPV is 15%..................................................................158. Assessing NPV when WACC is 25%....................................................................................159. assessing the factors need to consider while making selection of project.............................16CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTION In business, owner is required to take suitable decision that aid in the profit margin andgrowth aspect of firm. The present report is based on different case situations which will shedlight on the concepts of bond or share valuation. Besides this, it will also develop understandingregarding the concept of investment appraisal. Question 1. Analyzing financial performance of Bank of Sydney Ratio analysis Profitability ratios ParticularsFormulaFiguresGross profit50000Net profit6000Net sales300000GP ratioGP / net sales *10017%NP ratioNP / Net sales *1002%Liquidity ratio analysis Particulars FormulaFigures Industrystandard Performancelevel Current assets 65000Inventory 40000Current liabilities 35000Current ratio Current assets /currentliabilities1.862:1SoundQuick ratio (current assets -Inventory) /currentliabilities 0.71.5:1Sound Activity ratios
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