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FIN80005 Introduction to Corporate Financial Management

   

Added on  2020-05-11

16 Pages2061 Words76 Views
Running head: CORPORATE FINANCIAL MANAGEMENTCorporate Financial ManagementName of the Student:Name of the University:Authors Note:

CORPORATE FINANCIAL MANAGEMENT1Executive Summary:The relevant evaluation of investment options is mainly conducted to understand the financialoutcome, which could be provided from production of confectionaries. There are differenttypes of scenarios, which could be conducted for determining the overall viability of theinvestment option. Relevant scenarios could be conducted for deriving the financial stabilityand feasibility of the production of confectionaries. In addition, the overall investmentanalysis is mainly conducted on different scenarios, where the range of income that could bepresented from investment is depicted. The investment appraisal techniques mainly representthe overall financial stability of the new project, which could increase firm value in future.Therefore, it is advisable to Riverlea to commence with the production of confectionaries intheir production function.The relevant evaluation is mainly conducted on the share price movement of Riverlea afterthe announcement of extra income that will be generated in near future. In addition, theoverall valuation could mainly indicate overall impact of the announcement, which isconducted on the share price of the company. Relevant calculation is mainly conducted todetect the probability of the share price value after the announcement. Therefore, from theevaluation it could be identified that shares of Riverlea is directly affected by strong marketefficiency. In addition, share price movement after the announcement mainly indicates thatthe share price of the company adequately reflected to the news. The overall investmentstrategy such as short selling could be conducted by the organisation for generating higherrevenue from investment.

CORPORATE FINANCIAL MANAGEMENT2Table of ContentsPart 1:.........................................................................................................................................31. Introduction:...........................................................................................................................32. Findings:.................................................................................................................................32.1 Calculating the Discounted Rate:.........................................................................................32.2 Drafting the expected cash flows of the project:..................................................................42.3 Sensitivity Analysis:.............................................................................................................62.3.1 Drafting the cash flow when 40% probability is there for 40% lowers incrementalrevenues:....................................................................................................................................62.3.2 Drafting the cash flow when 10% probability is there for 20% increase in incrementalrevenues:....................................................................................................................................83. Concussion and Recommendations:....................................................................................10Part 2:.......................................................................................................................................101. Introduction:.........................................................................................................................102. Findings:...............................................................................................................................112.1 Determining that stock has semi-strong market efficiency:...............................................112.2 Portraying the relevant trading strategy:............................................................................133. Concussion and Recommendations:....................................................................................13Reference and Bibliography:....................................................................................................14

CORPORATE FINANCIAL MANAGEMENT3Part 1:1. Introduction:The relevant evaluation of investment options is mainly conducted to understand thefinancial outcome, which could be provided from production of confectionaries. There aredifferent types of scenarios, which could be conducted for determining the overall viability ofthe investment option. Relevant scenarios could be conducted for deriving the financialstability and feasibility of the production of confectionaries.2. Findings: 2.1 Calculating the Discounted Rate:ParticularsValueRf5.05%Beta1.56Rm9.22%CAPM11.55%The above figure mainly represents the overall discounting rate, which could be usedin deriving the NPV valuation of the project. This NPV valuation could mainly help ingetting the overall financial stability of the project. Furthermore, derivation of the cost ofcapital could mainly be conducted with the help of CAPM formula, where with the use ofadequate beta, market premium and risk free rate could directly help in detecting the cost ofcapital. Locatelli, Invernizzi, and Mancini (2016) mentioned that use of adequate discountingrate companies are mainly able to compensate for the inflation rate, which could hamperprofitability of the organisation.

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