Corporate Finance

This document provides study material and solved assignments on Corporate Finance. It covers topics such as risk and return analysis, beta calculation, and market analysis. The document also includes information on a specific company and its operations in the Asia-Pacific region.

Running head: CORPORATE FINANCE
Corporate Finance
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Table of Contents
Question 1........................................................................................................................................2
References........................................................................................................................................6

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Question 1
a) The market price index for the All-Ordinaries Index and RHP Company was taken for a
different time periods. The two sub-periods taken into consideration was from the Period
1: June 2012 to July 2014; Period 2: February 2016 to January 2018. The data undertaken
will be considered for the purpose of calculating the risk and return generated along with
the monthly risk free data period for two different set of data period taken into
consideration for the purpose of analysis.
b) The return for share prices and market return (from market price index) was
calculated for both the sub Period 1: June 2012 to July 2014; Period 2: February 2016 to
January 2018. The return for the share prices was calculated with the help of new price –
old price divided by the old share price of the company. The return evaluated for the
stock was as follows:
Particulars June12-July14 Feb16-Jan18
Return on Market Index (rm) 1.23% 0.84%
Return on Share Price (rj) 11.08% 0.12%
Risk Free Rate 0.53% 5.44%
(rj-rm) 9.85% -0.72%
(rm-rf) 0.70% -4.60%
c) The mean, standard deviation, variance and correlation coefficient for and
separately for the two sub-period was calculated as follows for the period June
2012 to July 2014; Period 2: February 2016 to January 2018. The mean was calculated

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with the help of the average function in the excel function implying the average return
generated by the set of data period analyzed. On the other hand, standard deviation
implies the overall change in the data or the volatility associated with the undertaken
data. On the other hand, the variance implies the expectation of the squared standard
deviation of the variable from the mean. On the other hand, the correlation coefficient
was calculated for the purpose of determining the overall relationship between the two
variables. The correlation coefficient for the data period 2012-2014 was calculated to be
very low. On the other hand, the correlation coefficient for the data period 2016-2018
was found to be considerably high in the Rj-Rf that was around 0.4444 times and the data
for Rm-Rf was around -0.0631 times in the same period (Au.finance.yahoo.com 2019).
The high correlation coefficient between the two data set will be well analyzed for the
purpose of consideration and proper analysis.
Period: June 2012 to July 2014
Particulars Rj-Rf Rm-Rf
Mean 10.16% 0.65%
Standard Deviation 26.36% 2.68%
Variance 6.95% 0.07%
Correlation Coefficient 0.063 0.108
Beta -0.013
Period: Feb16 to Jan18
Particulars Rj-Rf Rm-Rf
Mean -5.24% -4.54%
Standard Deviation 15.13% 4.08%
Variance 2.29% 0.17%
Correlation Coefficient 0.4444 -0.0631

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Beta -0.010
d) The beta for your selected company in the period June 2012 to July 2014 was around -
0.013 and the beta for the period February 2016 to January 2018 was calculated to be
around -0.010. The beta for both the time period was calculated with the help of
regressing the return of share price on the market index for the time period taken into
consideration. The excel function that has been applied for the purpose of calculating the
stock beta was the slope function for the purpose of determining the undertaken beta for
both the time period analyzed. The application of the beta will be done for analyzing and
estimating the sensitivity of the stock with respect to the market data index under the time
period taken into consideration (Editorial, 2019).
e) The beta calculated for the two sub-period shows the amount of sensitivity for the stocks
with respect to the market index where the changes in the stock prices can be well
predicted with the help of the changes in the market index. The beta in the time period of
June 2012 to July 2014 was around -0.013, implying that if market changes by 1% then
the stock price is expected to change by -0.013% on the opposite side. On the other the
beta calculated for the time period of February 2016 to January 2018 was calculated to be
around -0.010 implying that if the market changes by 1% then the stock is expected to
move in the opposite direction by around -0.010 times. The beta for each of the time
period shows the sensitivity of the stock when market index changes by 1%
(Markets.theaustralian.com.au 2019).
f) RHP Company formerly known for providing wholesale subscription software license to
a growing number of IT Services provider in the Asia Pacific Region. The software
subscription services for the products are primarily from the world leading software such

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as Microsoft, VMware and Citrix. The RHP Group Company provides various consulting
and support to the vendors and IT service Providers transitioning their own clients to
cloud and various other subscription centre business environment. The operations of the
company is widespread diversified into the global regions in the Asia-Pacific Region
allowing the company to cater various business needs and increase the overall operations
of the company in the defined time-period for the company (Asx.com.au, 2019).
g) The estimated value of beta compared for the two sub-period has been materially
different due to changes in the data period taken into consideration. The beta value for the
first periods was around -0.013 and on the other hand, the beta for the second period was
around -0.010 for the undertaken analysis. The changes and the estimated value of beta
for the two period has changed due to the changes in the market rate and associated share
price of the company where relevant changes in the factor data would be affecting the
overall return generated.

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References
Asx.com.au. (2019). [online] Available at:
https://www.asx.com.au/asx/share-price-research/company/RHP [Accessed 2 Sep. 2019].
Au.finance.yahoo.com. (2019). Yahoo is now a part of Oath. [online] Available at:
https://au.finance.yahoo.com/quote/RHP.AX/history?
period1=1330540200&period2=1406745000&interval=1mo&filter=history&frequency=1mo
[Accessed 2 Sep. 2019].
Editorial, R. (2019). ${Instrument_CompanyName} ${Instrument_Ric} Company Profile |
Reuters.com. [online] U.S. Available at:
https://www.reuters.com/finance/stocks/companyProfile/RHP.AX [Accessed 2 Sep. 2019].
Markets.theaustralian.com.au. (2019). The Australian - RHP Profile. [online] Available at:
https://markets.theaustralian.com.au/shares/RHP/rhipe-limited [Accessed 2 Sep. 2019].