Risk and Return Analysis for Cochlear Ltd

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:

1BUSINESS CASE STUDIES
Table of Contents
In Response to Question 1...............................................................................................................2
In Response to Question 2...............................................................................................................4
In Response to Question 3...............................................................................................................5
References........................................................................................................................................7

2BUSINESS CASE STUDIES
In Response to Question 1
a) The present value was determined using the formula below:
Present Value Determination
Future value (FV) $0
PMT $16
Number of years (n) 4
Annual interest rate (r) 7.0%
No. of compounding periods per year (m) 4
Number of periods (m x n) 16
Periodic rate (r/m) 1.8%
Present value (PV) -$217.45
b) The growth rate in the revenue of the company for the five-year trend period was
analysed as below:
Growth Rate in Revenue
Year 0 1 2 3 4 5
Revenue
1363.
7 1363.7
1535.52
6
1729.00
3
1946.85
7
2192.16
1
Growth Rate 0 12.60% 12.60% 12.60% 12.60% 12.60%
Total
Revenue
1363.
7
1535.52
6
1729.00
3
1946.85
7
2192.16
1
2468.37
3
c) The effective annual rate for the loan for the various term period will be as follows:
Effective Annual Rate (EAR)
Particulars
Investment
A
Investment
B
Investment
C
Stated annual rate (r) 6.48% 6.45% 6.52%
No. of compounding periods per year (m) 4 365 6
EAR 6.64% 6.66% 6.70%
d) The total payments that needs to be made at the end of the period for financing the entire
property cost would be as follows: