Times Value of Money and Risk and Return Analysis

SOUTHERN CROSS UNIVERSITY
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Assignment No.: 2
Assignment Title: Report
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In this paper, the main focus is given on the topic of “Times Value of Money and risk
and return analysis”. The report will be classified into three parts such as Part 1, Part 2
and Part 3. Beacon Lighting (BLX) has been taken into consideration in order to
evaluate the questions.
Part 1
A.
APR = 6%
Years= 5
Periods = 60
Periodic Rate = 0.50%
PMT = $ 891.00
According to the evaluation, the amount that the company borrowed in 5 years with
the 6% of interest is $46,087.47.
B.
Annual Revenue
(million) =
$
247.70
Annual Rate of growth = 9.90%
The annual revenue that the company is $247.70 and it is growing by 9.90% which
means the annual revenue of the company in 5 years is $1,509.23.
C.
Loan A Loan B Loan C

Rate 5.45% 5.50% 5.40%
Compounding Monthly
Semi
Annually Daily
EAR = 5.59% 5.63% 5.60%
By evaluating EAR of three loans, it is observed that EAR is 5.59%, 5.63% and
5.60% of Loan A, B, and C respectively. The least effective interest rate is of option
A, and hence Loan A must be chosen.
D.
Computation of amount of payments of loan
Loan amount =
$
1,650,000.00
Year of loan = 20
Number of periods = 40
Interest rate (annual) = 4.20%
Applicable rate = 2.10%
It has been evaluated that the company has to pay the loan amount semiannually with
the $61,379.81.
E.
Yield to maturity of Bonds
C = 5.85%
F = $1,000.00
P = $922.00
N = 6
YTM = 7.44%

It is determined that Yield Maturity Bond is 7.44% with the annual coupon bonds
with the 6 years.
F.
Computation of the market price of the
bonds
Face Value =
$
100.00
Period
Cash
Flow PVF PV
1 5 0.972 4.86
2 5 0.944 4.72
3 5 0.918 4.59
4 5 0.892 4.46
5 5 0.867 4.33
6 5 0.842 4.21
7 5 0.819 4.09
8 105 0.796 83.53
Market
Price = 114.80
It has been evaluated that the market price of the bonds is 114.80.
Part 2
A. In this question, the risk has been evaluated of the company and the hypothetical
company. The evaluation the risk is given below.
i. Company