Corporate Finance Assignment Report

Running head: CORPORATE FINANCE ASSIGNMENT
Corporate Finance Assignment
Name of the Student:
Name of the University:
Authors Note:

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CORPORATE FINANCE ASSIGNMENT
Executive Summary:
The overall report mainly focuses on identifying proposed production of
confectionery that needs to be conducted by Riverlea. Furthermore, there are different types
of situations that is used in the report, which could be helpful in identifying the viability of
the new project. Adequate sensitivity analysis is conducted to detect whether the project's
viability could be attained even after the revenue decline or increases in future. There are
different types of calculation that are conducted for the project starting from detection of cost
of capital, which was used for calculating relevant NPV of the project. After which adequate
valuation of investment appraisal techniques such as discounted payback period, payback
period and internal rate of return are conducted to detect viability of the project. Moreover,
the calculation is conducted on different scenarios to detect viability of the project, which is
identified to be a viable approach. Therefore, it is recommended for the organisation to
adequately start the production of confectioneries for generating higher revenue in future, as
evaluated by the investment appraisal techniques.
Adequate findings are been conducted to detect the overall impact of the future cash
flows that would be generated from the project. In addition, with the help of relevant graphs
projected increment and actual increment are mainly evaluated to detect the relevant increase
of share price. Furthermore, share price valuation on both adverse and positive circumstances
is relatively evaluated to determine actual change in share price of the organisation.
Therefore, the shares reflect semi strong efficiency market, which could be used by investors
to adequately improve their return from investment. Moreover, the use of short selling
strategy could eventually help in increasing relevant revenue for the investor from the price
movement of Reverlea.

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CORPORATE FINANCE ASSIGNMENT
Table of Contents
Part 1:.........................................................................................................................................3
1. Introduction:...........................................................................................................................3
2. Findings:.................................................................................................................................3
2.1 The Discounted Rate:...........................................................................................................3
2.2 Evaluation of the expected cash flows:................................................................................5
2.3 Sensitivity Analysis:.............................................................................................................7
2.3.1 Evaluation of the expected cash flow with 40% probability of 40% lowers incremental
revenues:....................................................................................................................................7
2.3.2 Evaluation of the expected cash flow with 10% probability of 20% higher incremental
revenues:....................................................................................................................................9
3. Concussion and Recommendations:....................................................................................11
Part 2:.......................................................................................................................................11
1. Introduction:.........................................................................................................................11
2. Findings:...............................................................................................................................12
2.1 Detecting whether the stock is semi-strong efficiency:.....................................................12
2.2 Depicting the trading strategy:...........................................................................................14
3. Concussion and Recommendations:....................................................................................14
Reference and Bibliography:....................................................................................................16

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CORPORATE FINANCE ASSIGNMENT
Part 1:
1. Introduction:
The overall report mainly focuses on identifying proposed production of
confectionery that needs to be conducted by Riverlea. Furthermore, there are different types
of situations that is used in the report, which could be helpful in identifying the viability of
the new project. Adequate sensitivity analysis is conducted to detect whether the project's
viability could be attained even after the revenue decline or increases in future. This could
eventually help and depicting viability of the project.
2. Findings:
2.1 The Discounted Rate:
Particulars Value
Rf 5.05%
Beta 1.56
Rm 9.22%
CAPM 11.55%
The above table mainly helps in identifying the overall discounting rate that needs to
be calculated to derive calculation of the calculations of NPV. The relevance CA p.m.
evaluation is mainly conducted to identify the discounting rate, where risk free rate is
identified at 5.05%, while the market return is calculated at 9.22% and beta is detected at
1.56. This overall valuation mainly helps in identifying the discounting rate of 11.55%,