Banking and Finance: Share Price, Capital Budgeting and Risk Analysis

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. Understanding the share price of CBA and AMP, whereas detecting their trend for past
five years:...................................................................................................................................2
2. Understanding the implications that Royal Commission enquiry has on systematic and
unsystematic risk of financial institutions, while detecting the share price movement of both
AMP and CBA with the reports of Royal Commission:............................................................4
Part B: Capital Budgeting..........................................................................................................6
1. Detecting the differences between the internal rate of return and required rate of return:....6
2. Understanding and calculating the current NPV value of Project X and Project Y:.............6
3. Calculating and detecting the internal rate of return of Project X and Project Y:.................7
4. Calculating the changes in NPV with the decline in required rate of return by 10%, while
determining any changes in the current decision:......................................................................8
5. Depicting the conditions under which Net Present Value and Internal Rate of Return offers
alternative recommendations:....................................................................................................9
References and Bibliography:..................................................................................................11

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Part A: AMP and CBA Share Price
1. Understanding the share price of CBA and AMP, whereas detecting their trend for
past five years:
Figure 1: Share price trend of AMP for last five years
(Source: Au.finance.yahoo.com 2018)
The share price movement of AMP Limited is relevant depicted in the above figure,
where the changes in values can be seen. In addition, the current share price of the
organisation is mainly at the levels of 3.17 as of 19-09-2018, which depicts their declining
trend. Therefore, from the evaluation it is also understood that the shar price of the company
was mainly rising during the financial year of 2014, while the decline started after the
augmentation of 2015 (Viney and Phillips 2015). This decline in the current operations of the
organisation was the main reasons behind the deterioration of the share price. The pricing
also indicate that the current share price movement of the company is mainly in down trend,
as now higher highs has been achieved since 2015, while lower lows has been attained. This
is an indication where the current shar price valuation of the organisation is declining due to
its overall performance. However, the decline since 2017 is steeper, which has incurred due

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to the augmentation of the Royal Commission that was assigned to view the current unethical
practices conducted in financial sectors. The new related to the current operations of AMP
has mainly declined its share values, as the company has been engulfed in unethical practices,
which was partially disclosed by the Royal Commission. On the contrary, Chandra (2017)
argued that investor using the technical analysis is not able to comprehend the investment
opportunity, which is detected from fundamental analysis.
Figure 1: Share price trend of CBA for last five years
(Source: Au.finance.yahoo.com 2018)
The current share price value of Commonwealth Bank is mainly at the levels of 72.09,
which has relevantly fallen from the highs of 96.08 achieved in 2015. However, increment in
valuation of the company was mainly at the levels of 73.08 during the start of 2014, while it
achieved the highs of 96.08 in 2015. This increment in share price was only witnessed once,
while rapid decline in the share price can be seen during the financial year of 2015. Since
2015 the share price of Commonwealth Bank has mainly declined exponentially, where the
support is seen within the levels of 70. The share price of the organisation has relevantly
increased during the financial year of 2017, while the disclosures conducted by the Royal
Commission directly have negative impact on valuation of the organisation. The share price