Financial Analysis Assignment | Financial Management
Added on 2020-05-28
38 Pages7207 Words71 Views
Running Head: Financial AnalysisFinancial Management
Financial Analysis 1 Question 1Part a)Year Profits of Company Dividend Income Opening Balance Interest @8% Total available balance Consumption Closing balance 2016-17 $ 8,00,000.00 $ 64,000.00 $ - $ 5,120.00 $ 69,120.00 $ 53,327.41 $ 15,792.59 2017-18 $ 9,60,000.00 $ 76,800.00 $ 15,792.59 $ 7,407.41 $ 1,00,000.00 $ 1,00,000.00 $ - Dividend: 800000*80%*10%= $64000 960000*80%*10%= $76800Therefore, the consumption that can be made by Jillian Black in year 2016-17 is $53327.41Refer excel file.Part b)YearDividendDCFPV of Dividends2018 $ 3.00 12019 $ 3.60 0.885 $ 3.19 2020 $ 4.18 0.783 $ 3.27 2021 $ 4.68 0.693 $ 3.24 2022 $ 4.91 0.613 $ 3.01 Total $ 12.71 Dividend growth model= D1 Ke – gPrice= $ 4.91 0.13-0.05 $ 4.91 = $ 61.39 0.08Present Value $ 61.39 PV of dividends $ 12.71 Expected Market Price $ 74.10
Financial Analysis 2Question 2:Part a)i)No. of years of deposits = 65-40 = 25 YearsAs compounding is done monthly the years will be converted to months.No. of months of deposits = 25 x 12 = 240 monthsRate per annum= 6%Rate per month = 0.06/12 0.5%Refer to the table in Appendix 1:Amount available in fund after 65th birthday= $2,078,981.89 Amount required= $ 2,000,000Surplus available= $ 78,981.89ii)Surplus funds = $ 78,981.89Rate of interest= 6% p.a.No. of years (85 – 65) 20No. of months (20 x 12) 240 Amount of pension payable monthly can be determined using the following formula:P = I (1+ r) m78981.89 =I (1+.005)240I= 78981.89/139.581Note: 139.581 is the cumulative discounting factor at 0.05% for 240 monthsTherefore the pension payable every month will be =$ 565.851Note: Refer Table 2 in Appendices
Financial Analysis 3Part b)i)Effective Rate Formula: I = (1+ (r/m) )m −1 (1 + (0.048/12))12-1 4.907%ii)Loan amount= Instalment(1+r)tT240R0.004600000=Instalment (1+.004)240Instalment Amount=$ 3893.74iii)For the first 12 months the instalment will be $3500. In this instalment, both principle and interest will be calculated on the opening balance of loan every year.After 12 months, the instalment amount will be changed and it will be $3750. This instalment will also include the principle and interest.Remaining period will be calculated as follows:Retirement age= 65th year.Pension fund will be fully paid at the end of 85th yearNumber of years = 20 years.Number of months= 20 x 12 = 240 months.Remaining months= 240 – 12-12 = 216 Months.Cumulative discounting factor @ 0.04% per month = 144.50Therefore, the instalment amount will be= Amount outstanding after 24th Month Cumulative discounting factor @ 0.04% =$ 571,856.23/144.50 =$3958.85The above calculated amount also includes both principle and interest amount.Note= Refer Table 3 in Appendices
Financial Analysis 4iv) Loan amount= $ 600000Interest rate= 4.8% p.a.Loan = Instalment (1+r)t600000= Instalment (1 + .004)tTime year= 24.17 Years24 years and 2.04 months.Note: Refer Table 4 in Appendicesv)The extra amount paid over and above the loan is $ 204.231 due to the rounding off factor used in calculation.Therefore, the amount of final repayment is $ 600204.231Note: Refer Table 4 in AppendicesQuestion 3Part i)As cash flows are given uneven in the question the average cash flow of 3 years is assumed to occur evenly for the purpose of calculation of payback period.=12000+18000+27000 3=19000 Investment X Investment Y Year Cash Flows Cash Flows 0 $ -42,000.00 $ -42,000.00 1 $ 19,000.00 $ 18,000.00 2 $ 19,000.00 $ 18,000.00 3 $ 19,000.00 $ 18,000.00 Payback Period (Years)2.212.33Note: Project X will be preferred over Project Y as it has lower payback period.Part ii) Investment X Investment Y Year Cash Flows Cumulative CFs Cash Flows 0 $ -42,000.00 $ -42,000.00 $ -42,000.00 1 $ 12,000.00 $ -30,000.00 $ 18,000.00 2 $ 18,000.00 $ -12,000.00 $ 18,000.00
Financial Analysis 53 $ 27,000.00 $ 15,000.00 $ 18,000.00 Payback Period (Years)2.442.33Yes, the payback period would be different in case of uneven cash flows and it will be increased.
Financial Analysis 6Part iii)0%2%4%6%8%10%12%14%16%18%20%22%24%26%28%30%32%34%36%38%40%42%44%46%48%50%$-20,000.00 $-15,000.00 $-10,000.00 $-5,000.00 $- $5,000.00 $10,000.00 $15,000.00 $20,000.00 Net Present Value ProfileUnnamed Series 1Discounting RatesNetpresentvaluesSeries 1= Investment XSeries 2= Investment YNote: Refer Table 5 in Appendices
Financial Analysis 7Part iv)PROJECT XNPVTABLEYearCash FlowsPVF @ 14% PV PVF @ 15%PVPVF @ 14.75%PV0 $ -42,000.00 1.000 $ -42,000.00 1.000 $ -42,000.00 1.000 $ -42,000.00 1 $ 12,000.00 0.877 $ 10,526.32 0.870 $ 9,153.32 0.871 $ 10,457.89 2 $ 18,000.00 0.769 $ 13,850.42 0.756 $ 10,472.90 0.759 $ 13,670.94 3 $ 27,000.00 0.675 $ 18,224.23 0.658 $ 11,982.73 0.662 $ 17,871.16 NPV $ 600.96 $ -10,391.05 $ - IRR=LDR+ NPV at LDR x (UDR-LDR)NPV at LDR- NPV at UDR IRR=14.75%INVESTMENT YNPV TABLE YearCash FlowsPVF @ 13%PVPVF @ 14%PVPVF @ 13.70%PV0 $ -42,000.00 1.000 $ -42,000.00 1.000 $ -42,000.00 1.000 $ -42,000.00 1 $ 18,000.00 0.885 $ 15,929.20 0.877 $ 15,789.47 0.880 $ 15,831.13 2 $ 18,000.00 0.783 $ 14,096.64 0.769 $ 13,850.42 0.774 $ 13,923.60 3 $ 18,000.00 0.693 $ 12,474.90 0.675 $ 12,149.49 0.680 $ 12,245.91 NPV $ 500.75 $ -210.62 $ 0.65 IRR=LDR+ NPV at LDR x (UDR-LDR)
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