Financial Analysis: Corporate Bond, Equity, and Portfolio Investment

This report presents a financial analysis of corporate bonds, equity shares, and portfolio investments. The analysis begins with an evaluation of a corporate bond, calculating its intrinsic value and comparing it to its market value to determine its investment potential. The report also analyzes the intrinsic and market values of equity shares and preference shares, making recommendations based on these valuations. The report further explores portfolio investment strategies and calculates the total return of the portfolio. The analysis includes detailed calculations, such as present values, discounted cash flows, and growth rates, providing a comprehensive understanding of the investment opportunities and financial performance. The report aims to provide insights into investment decision-making based on financial fundamentals.

Running head: FUNDAMENTALS OF FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:

1FINANCE
Table of Contents
Investment A: CORPORATE BOND A..........................................................................................2

2FINANCE
Analysis
i) Investment in capital market should be done after analysing the favourable asset class which
could be considered based on the intrinsic value and the market value of each of the asset class.
The intrinsic value of the corporate bond was around $96,841.60 while the market value of the
bond was around $97,241.16. Since the intrinsic value is less than the market value the
investment should not be considered. On the other hand, the intrinsic value of equity share is
around $38.88 and the market value is around $37.98. Since the intrinsic value is greater than the
market value the investment should be considered. The intrinsic value of the preference share
was around $100.92 while the market value of the bond was around $109.84. Since the intrinsic
value is less than the market value the investment should not be considered.
Corporate Bond A
Face Value
$
100,000.00
Coupon Rate 5.75%
Coupon Frequency Semi-Annually
Time Period (In
Years) 5
Yield To Maturity 6.50%
Price ($96,841.60)
Preference Shares B
Face Value
$
100.00
Dividend Rate 10%
Cost of Equity 9%
Present Value/Price
$
100.92
Common Share C Year 0 1 2 3 4 5
Terminal
Value
Dividends
$
4.00
$
3.80
$
3.61
$
3.43
$
4.12
$
4.94
$
51.85

3FINANCE
Growth Rate -5% -5% -5% 20% 20%
Terminal Growth
Rate 5%
Cost of Equity 15% 15% 15% 15% 15%
Discount Factor 0.87 0.76 0.66 0.57 0.50
Discounted Cash
Flows
$
3.30
$
2.73
$
2.25
$
2.35
$
28.24
Intrinsic Value
$
38.88

4FINANCE
ii) Portfolio Investment and Total Return is shown below:
Investments Purchase Price Quantity Total Investment Weights (%) Selling Price Investment Return W*R
Corporate Bond 96,841.60$ 1 96,841.60$ 30.80% 97,803.96$ 0.99% 0.31%
Preference Share 100.92$ 1000 100,917.43$ 32.10% 110.39$ 9.39% 3.01%
Common Share 38.88$ 3000 116,633.67$ 37.10% 38.53$ -0.89% -0.33%
Total 314,392.71$ 100.00% 9.49% 2.99%
Portfolio
The investment return for the portfolio is around 9.49%.