Report on Corporate Financial Management (Doc)

Running head: CORPORATE FINANCIAL MANAGEMENT
Corporate Financial Management
Name of the Student:
Name of the University:
Authors Note:

CORPORATE FINANCIAL MANAGEMENT
1
Executive Summary:
The report aims in providing viable condition for using the overall investment option by
Riverlea. In addition, the financial viability of the project is mainly identified with the help of
different situation, where the overall highest and lowest cash flow could be identified. The
use of investment appraisal techniques such as payback period, NPV, discounted payback
period and IRR is mainly used in detecting viability of the project. From the overall valuation
of the sensitivity analysis and investment appraisal techniques adequate viability of the
investment project could be identified. The sensitivity analysis mainly portrays an overall
range of return that will be provided by the investment under different circumstance.
Moreover, the investment appraisal techniques have provide a positive value, which make the
project viable for the company. Hence it is recommended for Riverlea to start the production
of confectionaries, as it will provide higher returns from investment.
The report is mainly presented to detect whether the overall share of Riverlea is under strong
market efficiency. Moreover, adequate trading scheme is also disused, which could be used
by the investor to increase their overall profit. Therefore, adequate calculations and graphs
are used for portraying and identifying viability of the share price movement after
announcement. The overall valuation of the share price mainly help in understanding that
shares of Riverlea are adequately under efficient market form, where any announcement
could increase or decrease its share value. Therefore, the current situation depicts an inflated
share price, where investor could be short selling the stock to increase their return until the
share price corrects and depicts an adequate valuation of $3.11 from $4.35.

CORPORATE FINANCIAL MANAGEMENT
2
Table of Contents
Part 1:.........................................................................................................................................3
1. Introduction:...........................................................................................................................3
2. Findings:.................................................................................................................................3
2.1 Discounted rate calculation used as cost of capital:.............................................................3
2.2 Portraying the normal condition cash flow from the project:..............................................4
2.3 Sensitivity Analysis:.............................................................................................................6
2.3.1 Portraying the cash for adverse situation:.........................................................................6
2.3.2 Portraying the cash flow under favourable circumstances:...............................................8
3. Concussion and Recommendations:....................................................................................10
Part 2:.......................................................................................................................................10
1. Introduction:.........................................................................................................................10
2. Findings:...............................................................................................................................11
2.1 Finding out whether the stock has semi-strong market efficiency:....................................11
2.2 Mentioning the trading strategy that could be used:..........................................................13
3. Concussion and Recommendations:....................................................................................13
Reference:................................................................................................................................14

CORPORATE FINANCIAL MANAGEMENT
3
Part 1:
1. Introduction:
The report mainly indicates the use of adequate investment appraisal techniques in
evaluating the significance of the new project for Riverlea, which might help in generating
higher revenue. In addition, the financial viability of the project is mainly identified with the
help of different situation, where the overall highest and lowest cash flow could be identified.
The use of investment appraisal techniques such as payback period, NPV, discounted
payback period and IRR is mainly used in detecting viability of the project.
2. Findings:
2.1 Discounted rate calculation used as cost of capital:
The overall CAPM evaluation mainly identifies the cost of capital, which
might help in evaluating different projects. In addition, the CAPM valuation is mainly
derived by using market return, risk free rate return and stock beta. This could eventually
help in deriving the overall profitability that might be generated from the operations. Upton et
al. (2015) stated that use of cost of capital is mainly conducted to compensate the rising
inflation rate and derive adequate valuation of the future cash inflows.