Financial Management

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1FINANCIAL MANAGEMENT
Table of Contents
Question One-Time Value of Money:.............................................................................................3
a) Drawing a time line depicting all of the Cash flows:..................................................................3
b) Indicating the amount that needs to be accumulated by Broadbent:...........................................3
c) Calculating the deposit amount of Broadbent for retirement annuity:........................................3
d) Indicating how much deposit is needed by Broadbent:...............................................................4
e) Indicating how much deposit is needed by Broadbent if Mr Sprod's retirement annuity was a
perpetuity:........................................................................................................................................4
Question TWO-Bond and Share Valuation:....................................................................................5
a) Calculating the price of Bond A and Bond B:.............................................................................5
b) Calculating the annual coupon rate:............................................................................................5
ci) Calculating the firm’s expected dividend stream over the next 3 years:....................................6
cii) Calculating the firm’s current stock price:................................................................................6
ciii) Calculating the firm’s expected value in one year:..................................................................6
civ) Calculating expected dividend yield, capital gains yield and total return during the first year:
.........................................................................................................................................................6
Question THREE-Investment Decision Criteria/Capital Budgeting:..............................................7
a) Calculating the Net Present Value and Internal Rate of Return:.................................................7
a) Discount rate 23%:......................................................................................................................7
b) Discount rate 18%:......................................................................................................................8
c) Discount rate 10%:......................................................................................................................9
Question FOUR Risk and Return:.................................................................................................10
a) Graphing the capital Allocation Line:.......................................................................................10

2FINANCIAL MANAGEMENT
b) Indicating the fraction of investment in A, that will make the portfolio standard deviation to
12%:...............................................................................................................................................10
Bibliography:.................................................................................................................................12
Appendices:...................................................................................................................................13

2 6 12 13 22 32
0
Cash inflow: Accumulation period Cash outflow: Distribution period
12 end of year deposits@9% 20 end of year payments @12%
3FINANCIAL MANAGEMENT
Question One-Time Value of Money:
a) Drawing a time line depicting all of the Cash flows:
b) Indicating the amount that needs to be accumulated by Broadbent:
Particulars Value
PMT 42,000
I 12%
n 20
PV =PMT × 1−(1+i)−n
i =42,000 × 1−(1+ 12% )−20
12 % =313,717
c) Calculating the deposit amount of Broadbent for retirement annuity:
Particular
s Value
FV 3,13,717
I 9%
n 12