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Real Estate Investar Group Analysis

   

Added on  2020-05-08

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Running head: INTRODUCTION TO ACCOUNTING AND FINANCE‘Introduction to accounting and financeName of the studentName of the universityAuthor note
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1INTRODUCTION TO ACCOUNTING AND FINANCETable of ContentsPart I – Debt valuation...............................................................................................................2Part II – Valuation of shares.......................................................................................................3Part III – Cost of capital.............................................................................................................6Part IV – Analysis of the market................................................................................................8Reference....................................................................................................................................9
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2INTRODUCTION TO ACCOUNTING AND FINANCEPart I – Debt valuation1.Long term debt and Short term debtLong term debt – From the annual report of Real Estate Investor, it is noticed that thecompany’s long term debt for the year ended 30th June 2016 amounted to $ Nil. Short term debt – From the annual report of Real Estate Investor, it is noticed that thecompany’s short term debt for the year ended 30th June 2016 amounted to $ 240,730. Duringthe year the company raised the borrowing through finance lease amounted to $ 5,775 and thebalance $ 234,955 raised through convertible bonds (Shibata & Nishihara, 2015). However,the company issued convertible notes amounted to $ 234,995 for the settlement of a paymentto the Australian Property Monitors Pty Ltd as per Equity Participation Agreement. This wasat unsecured level and interest charged is 5% per annum. The convertible notes are to bematured on 10th December 2016 or earlier if the note’s principal amount becomes payable(Real Estate Investar Group Limited annual report, 2016). 2.Debt structureTotal amount of debt of the company for the year ended 30th June 2016 amounted to $240,730, out of which the long-term debt is nil. Therefore, the borrowings are inclusive of100% short-term debt. 3.Industry influenceAs the company falls under the investment industry, the tax rate is quite high. As thedebt is tax deductible, therefore the company raise through short-term debt. 4.Cost of debtFor the year ended 30th June 2016, the interest rate on borrowing for Real EstateInvestor was 5%.
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