FIN201 Corporate Finance Assignment 1: Project and Portfolio Analysis

This document presents a complete solution to a FIN201 Corporate Finance assignment. The solution includes detailed calculations for Question 1, determining the payback period of a project given net cash flows and a cost of capital. Question 2 analyzes a portfolio, calculating its expected return and beta, and determining whether it has more or less systematic risk than an average asset. Part B of Question 2 assesses the portfolio's performance against a benchmark using the Treynor ratio. The assignment utilizes financial concepts such as payback period, portfolio return, beta, and the Treynor ratio to evaluate investment projects and portfolio performance. References are provided in Harvard style.

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note:

FINANCE
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Table of Contents
Q1: Calculating the years the project should run.......................................................................2
Q2 (A): Calculating the expected return, beta of the portfolio..................................................2
Q2 (B): Analysing whether the portfolio outperformed or underperformed the market...........2
Bibliography:..............................................................................................................................3

FINANCE
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Q1: Calculating the years the project should run
Year Net cash flow Retirement values Total value Cum-values
Year 0 -10000 0 -10000 -10000
Year 1 2200 2200 -7800
Year 2 3000 5000 8000 200
Year 3 3500
Year 4 2500
Year 5 2000
Payback period 2.0 Year
Q2 (A): Calculating the expected return, beta of the portfolio
Security Amount
invested Amount invested Expected
return
Bet
a
Retur
n Beta
Share 1 3,000
.00 8% 0.8 2.40% 0.24
Share 2 4,000
.00 12% 1 4.80% 0.40
Share 3 3,000
.00 15% 1.1 4.50% 0.33
10,000.00
Portfolio return 11.70%
Portfolio beta 0.97
Yes, the portfolio has more or less systematic risk than an average asset.
Q2 (B): Analysing whether the portfolio outperformed or underperformed the market
Particulars Return
Ris
k Treynor ratio
Portfolio 11% 1.2 5.00%
S&P/ASX 9% 1 4.00%
Government bond 5% 0
The portfolio has outperformed the benchmark, as the Treynor ratio of the portfolio is
higher than S&P/ASX.

FINANCE
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Bibliography:
Abramov, A., Radygin, A. and Chernova, M., 2015. Long-term portfolio investments: New
insight into return and risk. Russian Journal of Economics, 1(3), pp.273-293.
Jordan, B.D., Miller, T.W. and Dolvin, S.D., 2015. Fundamentals of investments: valuation
and management. McGraw-Hill Education.