Corporate Finance Project Analysis, Portfolio, and Treynor Ratios

This project delves into corporate finance, presenting a detailed analysis of financial concepts. The assignment includes a project analysis that calculates discounted cash flows, net present value, and identifies the project's lifespan based on cash flow projections. It also assesses retirement benefits. Furthermore, the project encompasses a portfolio analysis, determining the expected return and beta of a diversified portfolio comprising multiple securities. The analysis also includes a Treynor ratio calculation to evaluate portfolio performance relative to a benchmark. The project examines the portfolio's realized return, systematic risk, and compares its performance to market benchmarks and government bonds. The results indicate the portfolio's performance and risk profile.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Author’s Note

1
CORPORATE FINANCE
Table of Contents
Project Analysis...............................................................................................................................2
Portfolio Analysis............................................................................................................................3
Treynor’s Ratios..............................................................................................................................4

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CORPORATE FINANCE
Project Analysis
Project Analysis
Particulars Year 0 1 2 3 4 5
Net Cash Flows ($) -10,000 2200 3000 3500 2500 2000
Discount Factor @ 10% 1 0.91 0.83 0.75 0.68 0.62
Discounted Cash Flows -10000 2000 2479 2630 1708 1242
Amount Recovered -10000 -8000 -5521 -2891 -1184 0.95
Project Time (In Years) 4.95
Net Present Value 58
Therefore, it is necessary that the project should be operated for a minimum of 4.95 years.
Retirement Benefits Year 0 1 2 3 4 5
Values 0 6000 5000 4000 3000 2000
The lowest amount of difference is between the fifth year in both the retirement values
and under the project cash flows.

3
CORPORATE FINANCE
Portfolio Analysis
Portfolio Analysis
Security Amt. Invested Weight Exp. Return Portfolio Exp. Return Beta Portfolio Beta
Share 1 $3,000 30% 8% 2.40% 0.8 0.24
Share 2 $4,000 40% 12% 4.80% 1 0.4
Share 3 $3,000 30% 15% 4.50% 1.1 0.33
Total $10,000 11.70% 0.97
a) The expected return on Portfolio is 11.70%
b) The beta of Portfolio is around 0.97 times.
c) The portfolio has comparatively less risk than a systematic average asset that usually
have beta equal to 1. In this case the portfolio has beta of 0.97 that is below 1.

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CORPORATE FINANCE
Treynor’s Ratios
Treynor Ratio
Particulars Realised Return (%) Systematic Risk Treynor Ratio
Portfolio 11% 1.2 0.068
S&P/ASX Share Price 9% 1 0.040
Government Bonds 5% 0 0.000
The portfolio has overperformed the market benchmark by 0.028 times (0.068-0.040)
based on the treynor ratio.
Computation Process