Banking and Finance: Share Price Analysis and Capital Budgeting

Running head: BANKING AND FINANCE
Banking and Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Part A: AMP and CBA Share Price...........................................................................................2
1. Indicating the current share price of AMP and CBA, while detecting the evolvement
conducted in the past five years:................................................................................................2
2. Indicating how the Royal Commission inquiring into the activities of financial institutions
in Australia affect systematic (market) risk and unsystematic (firm-specific) risk and
explaining how the news reported from the Royal Commission have moved the share price of
AMP and CBA:..........................................................................................................................4
Part B: Capital Budgeting..........................................................................................................6
1. Distinguishing between the required rate of return and internal rate of return (IRR):..........6
2. Determining the net present value of both the projects, which indicating whether they
should be accepted:....................................................................................................................7
3. Determining the IRR for each of the project and detecting whether it should be accepted:..8
4. Indicating whether change in conclusion will be conducted if the overall required rate of
return decreases to 10%:..........................................................................................................10
5. Indicating under what circumstance the IRR and NPV will offer different
recommendations:....................................................................................................................11
References and Bibliography:..................................................................................................13

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Part A: AMP and CBA Share Price
1. Indicating the current share price of AMP and CBA, while detecting the evolvement
conducted in the past five years:
Figure 1: Depicting the share price of AMP for last five years
(Source: Au.finance.yahoo.com 2018)
The current share price of AMP is mainly at the levels of 3.14, where the company’s
overall share price has changed over the period of five fiscal year. The decline in share price
has been witnessed due to the reduction in valuation of the company. The reduction in
financial performance of AMP has mainly initiated the decline in share price of the
organisation, where financial condition has reduced exponentially leading to the reduction in
their current share valuation. The overall share price of the company has mainly increased
from 2014 to 2015, while the decline has been initiated after 2015 March. The share value of
the organisation has been declining since 2015, where the values have declined from the
levels of 6.5 to 3.14 (Au.finance.yahoo.com 2018). The decline in the overall share value
directly indicated a down trend for the organisation, which is continuously motivating the
shareholders to sell it shares. The overall high made by the organisation during the financial

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year of 2015 has not been broken, while lower lows has been obtained by the stock. Tougher,
Hanson and Goodman (2017) indicated that investor use the stock charts for understanding
the current trend of the organisation and determine whether they can generate high level of
returns from investment.
Figure 1: Depicting the share price of CBA for last five years
(Source: Au.finance.yahoo.com 2018)
The share price movement of Commonwealth Bank of Australia is relevantly depicted
in the above figure, which indicates the overall shar price movement of the company. In
addition, the company’s share price has been witnessing volatility, where no specific trend is
been detected from the evaluation. The share price of the company is relevantly having a
support line within the price range of 71.50 to 70, as the pricing structure has bounced the
value back up since past 5 years. the fiscal year of 2014 mainly witnessed a sudden increment
in the overall share value, where the price increased from the level of 72 to 98, which was
initiated with the high financial performance of the organisation. However, after reaching the
high of 98 the share price declined rapidly towards 71 during the financial year of 2015. This
decline in the current share price valuation directly indicates the low financial performance of
the company. During the period of 2016 the share price valuation of the company mainly