Finance Assignment: Time Value of Money, Capital Budgeting, and Financial Investments

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

1FINANCE
Table of Contents
1.0 Introduction..........................................................................................................................2
2.0 Objective and Research Methodology.................................................................................2
3.0 Theoretical Background.......................................................................................................2
4.0 Literature Review.................................................................................................................3
5.0 Analysis and Interpretation..................................................................................................5
6.0 Conclusion............................................................................................................................7
7.0 Executive Summary.............................................................................................................8
8.0 References............................................................................................................................9
9.0 Appendix............................................................................................................................11

2FINANCE
1.0 Introduction
The assignment covers various aspects of the concept of time value of money, capital
budgeting and financial investments. The above mentioned concepts are very useful and
applies in all stages of finance for determining the fair values or assessing the financial
viability of an investment. It is essential to consider various factors and condition while
evaluating the same and the same has been done while evaluating the above factors (Muda
and Hasibuan 2018).
2.0 Objective and Research Methodology
The objective of the study about the various assessment tools for the purpose of
evaluating the same into the financial evaluation process. There were several research
evaluated while analysing the paper in terms of the various concepts and techniques involved
while calculating the components of time value of money. Financial viability assessment with
the help of the capital budgeting project and the same can be well analysed with the help of
the tools like the net present value and internal rate of return approach. The methodology
evaluated while conducted the assessment of the paper was inclusion of various secondary
data in the field of financial market instrument comparing the features and characteristics of
stocks and bonds (Chan and Rate 2018). The weighted average cost of capital shows the cost
of capital associated with a company when taking the various sources of finances the
company used for borrowing the same. The weighted average cost of capital is generally the
costs associated with the debt and equity sources of finance which the company utilizes for
applying the same in the capital structure of the company (Hung 2016).

3FINANCE
3.0 Theoretical Background
The background of the study can be well evaluated with the help of the various
background and features of the various financial instruments like stocks and bonds. The
valuation of the stock was done with the help of the concepts and techniques of the dividend
discount valuation method. The dividend at the initial year was factored with the growth rate
of 8% for a sum of five period and then the same was discounted with the required rate of
return to get the value of the stock in five years of time. The formula applied for the
calculation of the value of the stock was:
Value of the Stock (V5): Dividend at Fifth Year (D5)/ (Required Rate of Return (Re)-
Growth Rate).
Weighted Average Cost of Capital
The weighted average cost of capital for a company shows the costs associated with a
company in terms of the capital structure of the company and the same can be applied for
determining the overall weighted cost of capita. The WACC for a company is generally
derived by the weight associated with the capital source and the cost associated with the same
so that the appropriated costs and weightage can be applied for determining the net cost of
capital for a company (Krüger, Landier and Thesmar 2015). The WACC is very useful in
analysing the cost which the company has to incur for financing the various activities of the
company. The financial risk or the weightage of the debt can be well analysed with the help
of the weighted average cost of capital. The WACC on a comparison purpose is also used for
evaluating the costs paid by other companies or firms in the similar industry for financing
there business activities (Magni 2015).