Corporate Finance: Time Horizon, Expected Rate of Return, Risk Assessment, and Portfolio Recommendations

Corporate Finance

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Explain the time horizon, measurement intervals, Market Index and risk free rate................3
2. Calculate Annualised Expected Rate of Return and standard deviation of the price of the
stock.............................................................................................................................................4
3. Identify the risk of the client if its portfolio consists of 70% shares of Apple Inc. and 30%
Woolworths group ltd..................................................................................................................5
4. According to the past performance company determine the whether the idea of the client is
good or bad..................................................................................................................................5
5. Recommend the clients portfolio and explain about the market turmoil which was suggested
by Brad Damon............................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The corporate finance id defined as the subfield of the finance which addresses the different
aspect that how the business organisation deals in the various funding sources, accounting,
capital structuring, and the other investment decisions. The corporate finance is related to the
various aspect of the maximizing shareholder, and value of the various long term and short term
investment within the business organisation. The corporate finance includes the various
considerations which is related to the management of the financial aspect which need to be
considered by the organisation in order to increase their efficiency of the company to manage
their financial resource. The capital financing is responsible for the sourcing capital in the form
of the debt or equity. The company can borrow the funds from the commercial banks in order to
increase the efficiency. This report will include various topic such as explanation of time
horizon, intervals, market index, risk free rate, calculation of expected rate of return, risk for the
clients, past performance of the company and recommendations.
MAIN BODY
1. Explain the time horizon, measurement intervals, Market Index and risk free rate.
In the following there are two companies namely Apple INC and Woolworths Group Ltd.
The data is collected from 01/04/2017 to 31/12/2019 which represents the adjusted price of the
share of the company and the change in the returns. The data is collected on the weekly basis and
it also constitute of the Market Index of during the same period. The data is collected to
determine the beta of the share which defines the fluctuation in the price of share in comparison
with the market index. Beta is calculated to determine if the market will change that what is the
probability that the it there will be change in the price of the share (Al-ahdal and et.al., (2020).
The Capital Assets Pricing Model describe the relationship between expected return from
assets, systematic risk and particularly stocks. CAPM model is widely used model which helps in
finance in determining the price of the securities and helps in determining the expected return
after considering the risk associated with the assets and cost of capital.
Capital Asset Pricing Model is Calculated by using the following formula,
ERi = Rf + Beta (ERm – Rf)
Where:
ERi = Expected rate of return