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Calculation of Interest Cover: 4 Que 1: 4 1.1 Interest repayments: 4 Que 2: 5 Why the differences have occurred in interest expenses: 4 Part 2: 6 Finance Contents

   

Added on  2020-05-28

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RUNNING HEAD: Corporate finance 1Project Report: Finance

Corporate finance 2ContentsPart 2.................................................................................................................................4Financial Literacy:............................................................................................................4Que 1:................................................................................................................................41.1 Calculation of monthly repayments:...........................................................................41.2 Calculation of Total interest cover:............................................................................5Que 2:............................................................................................................................5Why the differences has occurred in the interest expenses:..........................................5Part 3.................................................................................................................................6Company Perspective.......................................................................................................6Que 1:............................................................................................................................6Background:..................................................................................................................6Que 2:............................................................................................................................6Cash conversion cycle:..................................................................................................6Que 3:............................................................................................................................7Short term and long term debt financing:.....................................................................7Que 4:............................................................................................................................8Bond valuation:.............................................................................................................8Interest coverage ratio:..................................................................................................8Que 5:............................................................................................................................9Share valuation:.............................................................................................................9Task 4:............................................................................................................................10Capital Budgeting:..........................................................................................................10

Corporate finance 3Que 1:..........................................................................................................................10Calculation of free cash flows of both the projects.....................................................10Que 2:..........................................................................................................................11Discounted Payback period:........................................................................................11Que 3:..........................................................................................................................11Net present value and internal rate of return...............................................................11Que 3:..........................................................................................................................12Recommendation:.......................................................................................................12References.......................................................................................................................13Appendix.........................................................................................................................14

Corporate finance 4Part 2Financial Literacy:Que 1:The given express about the two cases which are quite similar but the outcome of boththe cases are different. Following is the calculations of both the cases:1.1 Calculation of monthly repayments:Question 2JaneInterest rate per annum6.50%Interest rate monthly0.54%Loan amount$6,35,000 Tenure (years)20Months240Monthly rate0.54%EMI amount$ 4,734.39Question 2CarlaInterest rate per annum4.50%Interest rate monthly0.38%Loan amount$5,50,000 Tenure (years)15Months180Monthly rate0.38%EMI amount$ 4,207.46The above calculations express that Jane’s EMI amount is $ 4734.39 and the Carla’s EMI amount is $4,207.46. It expresses that EMI amount of is quite lesser amount than EMI amount of Jane.

Corporate finance 51.2 Calculation of Total interest cover:Total interest cover of both the people, Jane and Carla is $5,01,253 and $2,07,343 respectively. This explain that interest amount of Carla is quite lesser. The main reason behind this difference is down payment, rate of interest and total time (Moles, Parrino and Kidwekk, 2011). Que 2:Why the differences has occurred in the interest expenses:The case briefs that Jane and Carla are two individual who wants to buy a home. Boththe individuals have purchased the house of same amount but huge difference is there among total interest rate and amount of individuals. The case explains that the chief aspects which have impacted on the performance of the company and position of the company are down payment. Further, lesser time periods have been opt by Carla for the loan than Jane and at the same time, the interest % is also different in both the cases and because of it the interest amount is different.Finance theory also explains that the more the time period, more would be the risk and thus the management thinks to higher the interest rate so that the risk and return of the project could be balanced.

Corporate finance 6Part 3:Company Perspective:Que 1:Background:Woodside Petroleum Limited is an oil and gas exploration organization. The main business is operated by this company in Australian market. Now days, the company has became the largest oil and gas production and oil and gas exploration company. Main office of the business is situated at Perth in Australia. The stock of the business has been registered in ASX (Australian stock exchange). Mainly, the company has diversified its market into various new countries and the location to grab the mining, projects and enhance the market share of the company. Currently, the biggest project of mining industry is held by Woodside limited. The current report of oil and gas exploration industry of Australia brief that the Woodside Limited held 13.5% share of oil and gas industry which is highest share in the Australian market. The company has made few changes into its operations and the strategies to manage the position and performance of the business in marketplace. The main strength of the company is its highest share in the Australian market (gas and exploration industry). The largest and biggest projects are held by this company and it would help the company to enhance the market share as well as total revenue of the company.Further, the weakness of the company is its bad corporate social responsibility, this company is continuously harming the natural resources of the Australia and further, this company has failed to manage a good relationship with its stakeholders (Nobes and Parker, 2008). Company is supposed to look over these threats and make few changes to save itself from sudden risk and consequences. If the company would not look over these threats now than themarket share of the company could be grabbed by its competitors. Que 2:Cash conversion cycle:Cash conversion cycle calculations of the company are as follows:Calculation of cash conversion cycle of 2016

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