Return College Essays Samples For Students

[Pivotal Concepts of CAPM]

Introduction

No matter the attractiveness of an investment, an investor must always be ready for risks arising. In which case, it is always impossible to do away with entire risk. The only an investor can manage the impact of this risks is by coming up with an investment that yields a rate of return that can cover the risks. This would help in covering the investors whenever they take on risk. As the result, the need for a capital asset pricing model (CAPM) sets in as an important tool for the investors. The CAPM helps in ...

Question 1: Olter’s Beta coefficient

Olter’s Beta can be determined using the Capital Asset Pricing Model. The required return on the average stock is the market return while the average return on Olter’s stock is Olter’s required rate of return.
Beta = (Expected return – Risk-free rate)/ (Market return – Risk free rate)
= (13-6)(13-6)
= 1.0

Question 2: Effect of Beta coefficient on stock price

Beta is a measure of risk and gives the variability of a stock’s return (price changes) in relation to the variability of the overall market. Since it represents the stock’s risk, Beta influences the prices of stocks. Under the Capital Asset Pricing Model, Beta is ...

Task

Compare the corporate form of organization with the sole proprietorship and the partnership.

Describe the principles dealing with ways of creating value and economic efficiency

The major principles include comparative advantage and absolute advantage. Comparative advantage is the ability of a country to produce a particular commodity in a more efficient way than other countries. Countries that have modern machinery are likely to produce machine intensive products than other countries.
Absolute advantage is the ability of a county to be able to produce a particular commodity that other countries do not produce. For instance, a country that is endowed with a unique mineral that is not produced by other countries can be said to have absolute advantage ...

QUESTION 1;

Part A: Net Present Value calculation
Working capital will be regarded as the initial investment outlay which is £ 1 million. Discount rate used in calculating the net present value of the project is 7%. The internal rate of return will be hypothetically obtained with the aim of obtaining the break-even situation of the project.
All costs and expenses are treated as cash outflows which will reduce the cash inflow in the project i.e. the project’s sales revenue. The cash outflows from the entire project will be deducted from the project’s inflows so as to determine ...

Price: 438.31 GBP Date: 4 May 2016

Company profile:
Aviva Plc provides insurance, savings, and investment products to over 31 million customers around the world (Aviva, 2016). Aviva is a composite insurance that combines life insurance, general insurance, and asset management (Aviva, 2016). Aviva operates worldwide with its headquarters in London United Kingdom (Yahoo! Finance, 2016).

One-year Price chart:

Figure 1: One-Year Aviva Price Chart

Source: Bloomberg

Price performance:
Valuation (by DDM and by comparables):

Analysts’ recommendation:

Introduction 3
Price performance and news analysis 3
News 4
Valuation 5
Multi-stage DDM 5
SML analysis 6
Discussion of pros and cons of the methods used for the above valuation 7
Conclusion 10

Appendix 13

Exhbit1: ...

Introduction

Investors prefer safer to riskier stocks since it provides a perceived security and there alternative to a risky investment or stock is the incentive in form of higher returns. In depth, the market prices are to be set such that investors expect riskier stocks to deliver higher returns although the higher returns are not to be viewed as dependable since if the risky stocks are to be counted on to deliver higher returns than the safer investments or stocks then they are to be considered not risky like demonstrated (LAOPODIS 2012). This expected high returns are valuated so as to attract ...

According to Fabozzi & Koln (2006), the Capital Asset Pricing Model (CAPM) is the works of Sharpe (1964) and Litner (1965) that marks the beginning of assets pricing theory. Dempsey (2013) asserts that CAPM still dominates the practical world in measuring systematic risk. CAPM offers a rate of return to compensate investors for taking risks. This model helps to calculate investment risk and the return on investment. CAPM reaches new heights as a model of measuring returns on securities. CAPM estimates the cost of capital for projects as well as evaluate the performance of portfolios in the financial market. Jagannathan & Meier, (2002) ...

Abstract

The aim of this project is to conduct risk assessment and return analysis on the investment vehicles in my portfolio. The investment vehicles chosen are Ford Motor, Walt Disney Company, Citigroup Inc., Wal-Mart Stores Inc., Time Warner Inc, Johnson & Johnson, US Treasury Bills, and Johnson & Johnson bond. The portfolio includes securities drawn from three categories that are the money market fund, corporate bonds, and shares. In the first scenario, the project tested the impact of novice asset allocation on return and risk in the sense that the investor allocates assets to the portfolio at own discretion. In this scenario, ...

The risk and return tradeoff are a financial management principle that explains the potential relationship between the risk involved and the return resulting from such risky investment. Potential increase in return is closely associated with an increase in the investment risk involved while a low level of risk is associated with low returns on investment. However, despite the positive correlation between risk and return, there is no guarantee that greater risk will obviously result in greater returns. To minimize the possibility of loss, potential investors create a portfolio of different investments with varying levels of risk to spread the ...

Introduction

In every investment decision, it is necessary to scrutinize the benefits and cost before venturing into it. An investor should evaluate the benefits he or she would get if they invested their capital in the project rather than depositing the cash in the bank to accumulate annual interest. A project manager is solely responsible to decide on behalf of his clients on the best project to invest from a pool of several and closely related benefits on behalf of his client. The key factors that the manager would consider are rate of return on investment, period it would take the ...

Re: Portfolio’s Risk and Return Tradeoff

Profitable Portfolio construction is a difficult task and a task that demands huge knowledge and analysis. More than the monetary investment, it needs investment in the form of research about the past performance, current performance, and the future prospect as well as the research about the industry. Apart from that, balancing the risk and the return stands as the determining factor in the construction of the portfolio. An investor must also simultaneously look for the tradeoff of the risk and return of the entire portfolio rather than of the single stock. As an investment advisor of the company, I ...

Vodafone

Introduction
This report seeks to assess the expected returns for Vodafone using the CAPM model. The CAPM model is based on three inputs: risk-free return, market return and company beta. Therefore, the report will estimate these three parameters and use them to find the expected return of Vodafone. Finally, it will provide a critique of the CAPM estimation technique.

The risk-free rate of return is often taken as the return of short term government securities. The 3-month treasury bill for UK is 0.48 . Therefore, we assume that the risk free rate.

Market Return

Expected market return are the average rate of ...

ASSIGNMENT 1

Introduction
This paper consists of three parts. Part 1 includes the evaluation of two investment projects for a car manufacturer Chrysler Ford using the key five capital budgeting techniques. These include payback period, discounted payback period, net present value, internal rate of return, and modified internal rate of return. As a result of application of these investment appraisal methods, the projects that would lead to the maximization of the stockholders wealth were identified.
Part 2 represents a critical appraisal of the given techniques for making capital budgeting decisions. It is explained why discounted cash flow methods are preferable to ...

- Introduction
The report is the second part of the SIM and Statistical arbitrage assignment. This report describes the process which has been done in the first part. It includes the collecting of the necessary information and data, a determination of the stocks, analysis of this data and the obtained results.
- Stocks Analyzed

The average return of News Corporation is higher than the average return of Commonwealth Bank of Australia. The standard deviation of the first one is lower than the standard deviation of the second company. Therefore, the stock of the News Corporation is more efficient ...

Introduction

Rolls Royse is a global leader in the provision of power systems and services at sea, on land and also in the air. Over the years, the company has established a very strong position in defense aerospace, energy and nuclear production and also civil airspace. The company is headquartered at Buckingham Gate in England but has operations in the regional offices in the US, Europe, Middle east, Asia and recently, Australia.
In evaluating the performance of Rolls Royse, we shall gather both qualitative and quantitative information regarding the company and carry out a number of operations to gauge the company’s performance. ...

Portfolio Management

Risk of the firm
Referring to the regression results, we found out that the beta of the firm is 0.70. This indicates that the return of the company’s stock are less sensitive from the market that carries a bet multiple of 1. In other words, if the market return changes by 1%, the stock return being less related to that of market return will only change by 0.70%.
In addition, the regression results also provide us with R-Square multiple of 0.32. Important to note, R-Square multiple is the ratio of market risk to the total risk of ...

Answer a)

i) Comparing the expected return and standard deviation of various assets in the portfolio, we have analyzed the following characteristics:
a) Australia Shares on account of total risk of almost 22% is capable of providing return of 16%
b) Australian Bonds with risk accounting to 7% provides return of 11.5% to the investor.
c) Cash being the most liquid asset and least risky asset with risk factor of only 4.4%, provides return of 9.25%.
d) As for international shares, despite the high risk factor of 22.62% and relatively low return of 14.88% as compared to asutralians shares, the ...

Introduction

The one of the most important questions for investors is how the expected return of an investment is affected by its risk. The answer to this question gives the Capital Asset Pricing Model (CAPM). It was developed by W. Sharpe, J. Linter, J. Treynor and J. Mossin in 1960s.
The idea of CAPM is that there are a number of risks that have an impact on the asset prices. It is natural to assume that an investor should receive high reruns from the high-risk investments. The price of such assets should be relatively high in order to compensate a ...

Q1 Answer

The risk in financial investment refers to the events that may affect the attainment of a financial goal. On the other hand, Paul (2012) defines the rate of return as the gains from the investment that an investor receives after a given duration of time. Both risk and rate of return can be said to be directly related. This is to mean that when the risk of investment is very high, then the rate of return is very high. However, this does not mean that always when an investor takes high risks will gain high returns, He or she ...

Question One

Alpha and Beta of a stock are important risk tools. Alpha refers to the measure of the investment compared to a given index. In effect, the tool measures the difference between the actual return and the expected returns. As such, it is a mathematical estimate of the investment return. Therefore, a positive Alpha means that the investment has outperformed the predicted performance. The converse is true for a negative value. The value of Alpha is obtained from the vertical intercept of the regression line, the intercept on the Y axis (Jones, 2010). Examining own computation regarding Apple and General ...

1. An investor does not need to make a decision which portfolio to choose when a risk free asset is included. There is now only one tangent portfolio he can choose. Explain this statement with graphs analysis.
The line of possible portfolio risk and return combinations given the risk-free rate and the risk and return of the portfolio of risky assets is called capital allocation line(CAL). For an individual investors and under the assumption of CAPM model that each investor faces homogeneous expectations, the best capital allocation line is the one that offers the highest expected utility in ...

Rolls Royce is a multinational corporation that operates in four main global markets which include; defense aerospace, energy, civil aerospace and marine. The company values it’s and brand more than anything else. Strategic innovation has been essential to the organization’s corporate objectives for over ten years and currently the company is delivering outstanding performance across the globe. This paper endeavors to conduct a financial analysis on Rolls Royce by evaluating the information provided in the annual report.

Discuss the importance of comparing income from operations to cash flow from operations

One significant effect of comparing the income from operations to cash flow operations is due to the fact that both give different ...

Introduction

The performance of a company is gauged by the evaluation of both qualitative and quantitative information regarding the company. Some of the qualitative information that is used in this evaluation of the company could be the experience of the management, macro and micro environment in which the company operates among other metrics.
In making a decision as to whether a company is doing well, an in-depth analysis of the company’s financial information is particularly important. The comparison of the company’s financial data with its previous year’s performance and also with its peers and industry at large would shade ...

Discount Rate in Project Appraisal

Discount rate is a measure of risk and the cost of capital used to finance a project. There are various models, which have been designed, to determine the discount rate to use in appraising projects of multi-activity companies. The models include capital asset pricing model, arbitrage pricing theory, weighted average cost of capital and marginal cost of capital. These alternative ways of deciding on discount rates are discussed in this paper.

One of the approaches is the interaction between equity; asset and debt through information available can be utilized. In this case, a sector that has identical characteristics as the new project ...

Fed fund return is the term used in the United States of America. Fed fund return is the rate of return or the interest rate at which the financial institutions especially the depository institutions like credit union and bank lend the excess of its balance, often known as reserve balance, to the other similar kind of depository institutions without having the collateral. The fund that is deposited in the Federal Reserve to maintain the reserve requirement as specified by the regulatory body is called reserve fund.
Bear Stearns and Lehman Brothers did not collapse in a single day. The ...

There are different methods used in capital budgeting. They include the net present value, profitability index, internal rate of return and payback period. This research paper will evaluate the differences that exist between these methods basing the argument on the strengths and weaknesses of these methods.
The net present value method is used to determine whether a certain project should be invested or not. It is obtained by summing the present value of the future cashflows of a project. On the other hand, profitability compares the present value of the future cashflows to the initial capital outlay of a project in ...

QUESTION 1

Adjusted Trial Balance
Statement of Comprehensive Income
Balance Sheet
QUESTION 2
Financial ratios
Financial analysis
Analysis of liquidity
Current ratio
At the of the financial year 2015, the current ratio for British Airways was 0.5965 indicating that its current assets could pay off 59.65% of its short-term liabilities. This further shows that the company had a low liquidity since its current assets were insufficient to meet the short-term obligations (Gibson, 2012, p. 243). The ratio declined from 0.6512 in 2014 and 0.6300 in 2013. The trend shows that the liquidity of British Airways improved in 2014 but declined in ...

Introduction

The firm randomly sampled 30 customers that visited the restaurant between 1st match 2016 to 28th march the same year. The overall is further divided into three strata with each having a total of ten respondent based on whether the customer purchased alcohol beverage, non-alcoholic beverage or food. The decision is taken since the paper aims at understanding its ability to retain customers based on satisfaction and probability of return measures in each business line. In addition, the firm is interested in understanding satisfaction level associated with the support facilities such as the washroom, interior design, sink cleanliness and ...

Analysis: Next Plc

Assignment 1:
Executive Summary:
The report makes a recommendation about the balanced scorecard of Next Plc. It makes this recommendation on the basis of mission, vision and strategic objectives of the company. The strategy map links the perspectives of the balanced scorecard with the strategic objectives of the company. It is by adopting the perspectives mentioned in the balanced scorecard, the company can achieve its strategic objectives.
The limitations of the balanced scorecard as a strategic management tool have also been identified and are largely dependent on an effective accounting system. Balance scorecard tends to put the interest ...

Facilitator:

Fundamentals of investing
Investments involve making a choice among the available alternatives to adopt the best option that would yield ultimate returns for the capital invested. Capital budgeting involves different methods that investors use in evaluating opportunities available in the market and choosing the best place to invest. The most essential stage in the investment process encompasses determining the risk and return of different ventures and investing in the most promising venture (Hartwig, 2012). Different methods apply in the determination of the risk and return in standalone investment assets. This includes measuring of historical rates of return, expected rates ...

Summary of Chapters

Chapter 7: Mathematics of Investing

One of the return measures used includes compounding. Compounding can be done arithmetically or geometrically. In order for one to determine whether to use arithmetic compounding or geometric compounding one has to take into account the future value of what is to be estimated (Evensky, Horan, and Robinson 122). Arithmetic compounding is best used when determining the estimate of the anticipated future return for the following year when there is no other information. The geometric compounding is best applied when determining the anticipated return over many periods.

Covariance

This is applied when investments in a combined ...

There are various techniques used to evaluate viability of investments and in comparing different investments. These techniques include net present value, payback period, accounting rate of return and internal rate of return . Net present value is preferred when evaluating projects because in takes into consideration time value of money unlike Payback period and accounting rate of return. Although internal rate of return considers time value of money it is confusing to compute and conceptualize .
Net Present value is computed by discounting annual cash flows at a given discounting rate. Annual cash flows are determined by subtracting annual cash outflows ...

“Diversification eliminates unique risk. But there is some risk that diversification cannot eliminate”

Diversification of portfolios is one of the effective ways to minimize the risks and increase the returns. However, it is acclaimed that there are certain risks that cannot be eliminated. These risks are called market risks that cannot be overcome through diversification of the portfolio. There are several theories that stress that the diversification of portfolios should be used to bring stability in its returns and lessen the risks. Systematic risks or market risk emerged because of the changes in the economic cycles of the market that are influenced by various factors and activities taken place in the economy ( ...

Criticisms of Payback and Simple Rate of Return Methods

Payback Period and Simple Rate of Return Methods are among the tools used in capital budget budgeting. Payback period measures the length of time to recoup an investment, while the simple rate of return method, also known as Accounting Rate of Return (ARR) provides the expected income for the entire life of a capital investment (Investopedia, 2014).

The formulas to calculate for these two methods are:

- Payback Period = Cost of Project / Annual Cash Inflows

Criterion: The project that has shorter payback period is deemed better.

- Simple Rate of Return= Average profit /Initial investment

Criterion: Choose the project with higher returns or exceeds the hurdle rate.

Although considered as the simplest method in appraising capital investments, one of the criticisms with the payback period method is it ignores benefits from ...

Answer ot question #1: Not provided as we agreed to check it by yourself.

Answer to question #2: B
Explanation: Expected return and mean return are completely two different concepts. Expected return is the weighted average of the possible returns, where the weights correspond to probabilities. In contrast, mean return is the average of all of the historical returns over a particular time period. So the statement B is not correct.

Answer to question #3: A

Answer to question #4: B
Explanation: Dividend yield is the return on investment in the form of dividend. It measures the dividend income earned for each dollar invested. Here General Electric Company stock was purchased at the price of S14.64 on ...

Executive Summary

This work is about the preparation, appraisal, and interpretation of financial statements. The financial statements considered herein are Cash Flow Statement, Trading Profit and Loss Account (Income Statement), and the Balance Sheet of SIMPLECO PLC. Based on the provided information, the above statements are prepared and analysed so as to determine the financial position of the company. The analysis involves calculation and interpretation of the financial ratios. These ratios fall under three categories: profitability ratios, liquidity ratios, and leverage ratios. A conclusion is finally made concerning the performance of the company based on its financial position.

Introduction

Financial statements play a ...

Business Decision Making 3 of 3

A Gantt chart is a scheduling technique used to assign a time scale and sequence to a project or plan. A Gantt chart comprises of horizontal bar charts drawn to scale for every project activity. The length of the horizontal bars shows the time to attain completion (Ghionea, 2014). The steps involved in the creation of Gantt charts include the establishment of horizontal axis to represent time, use of vertical axis to represent activities, and representation of each bar using suitable length. The activities represented by the Gantt chart include lot preparation, creating footings, establishing foundations, and framing.
Figure ...

Apple Company was founded in 1976 as the specialized company in computers; however, with the passage of time, it has developed as complicated company, involved in to a large extent more than computers. The company was started in California by the co-founder Steve Jobs. In 2007, the company has entered in the mobile industry. The company now designs, markets and produces computers, mobiles, media and communication devices, music players, digital devices along with selling multiple software services, solutions for network and vendors services for digital content, software and applications (Rawnilson, 1). Some of the major products of the company ...

Business Decision Making 3 of 3

Business Decision Making 3 of 3

A Gantt chart is a scheduling technique used to assign a time scale and sequence to a project or plan. A Gantt chart comprises of horizontal bar charts drawn to scale for every project activity. The length of the horizontal bars shows the time to attain completion (Ghionea, 2014). The steps involved in the creation of Gantt charts include the establishment of horizontal axis to represent time, use of vertical axis to represent activities, and representation of each bar using suitable length. The activities represented by the Gantt chart include lot preparation, creating ...

Answer 1)

Referring to the calculations performed in Part 1, we found the following results related to each stock:
The above results indicate that Amgen Inc, offered highest average monthly return of 1.68%, followed by Raytheon Inc. with 1.60% and then the market index S&P 100 with the return of 1.09%. Our results go with the risk-return relationship as the stock with highest return, i.e. Amgen Inc. attracts maximum volatility. Here we have measured the stock volatility with standard deviation and as a core notion of the concept of portfolio management, high returns are followed with high risk and the concept ...

- Describe briefly the legal rights and privileges of common stockholders.
Common shareholders ownership is considered to be residual. That implies that common shareholders can claim firm’s earning only after those of government, debt holders, and preferred shareholders have been met. They are considered to be a true owner of the company or the corporation. By virtue of being the true owners, they possess dividend rights, assets rights, voting rights, and pre-emptive rights.
Going into further details , the common shareholders have the legal right to elect it board’s directors. The board in turn decides and elects ...

Liquidity Ratios

These are ratios that help accompany to meet its short term maturity obligations. They are arbitrary measures that are used to verify a company’s capability to settle off short-term debts responsibilities. They basically measure the ability of the company to meet its near-term obligations. Current ratio and acid test ratio are example of liquidity ratio measures.

Current ratio

Current ratio is a liquidity measure that shows the rate at which a company is able to meet its short- term liabilities using its current assets. It indicates the capability of a company to meets its short term liabilities with its current assets. Companies with current ...

Investment Portfolio Project Final Paper and Presentation

Investment Portfolio Project Final Paper and Presentation
In an ideal situation, an investor would like to investment in an asset or portfolio of asset characterized by high returns and low risk. However, the ideal world does not exist and so is the ideal portfolio as opined in the sentence above. This understanding gave birth to several portfolio theories and among these theories is the modern portfolio theory whose key contributors included Harry Markowitz and William Sharpe. In the modern portfolio theory of MPT as it is famously referred to, the theorists emphasize the importance of diversification in the portfolio. ...

Purpose Statement

Introduction
Nehemiah 1: 5-11 is a prayer that demonstrates the importance of faith in pursuing the moral path in relation to the cultural values that one holds. The characteristics that are presented within this passage demonstrate the importance of belonging to a community, which transcends the boundaries of the physical world. Within the passage, Nehemiah prays for the success of the request he made to Artaxerxes to help his people, who had been defeated and broken, many in captivity or exiled. With the gates and walls of Jerusalem broken their sense of safety and community had been destroyed. In ...

Part One

Risk
There is no standard way to define risks. However, one of the definitions of risk is the probability that the return on an investment will be lower than the expected return (Business Dictionary, n.d.). Examples of risk include business risk, transactional risks and exchange rate risk.

Beta

Beta is a measure of systematic risk of a stock. The value measures the volatility of the stock compared to the volatility of the market (Forbes, n.d.). The value of Beta can be either positive or negative while the beta value of the market is always one. As such, in interpreting the ...

Analysis of Coca-Cola and PepsiCo

- Description of the companies

Coca-Cola is a beverage company that owns or licenses and markets non-alcoholic brands. The company started as a Coke brand in Atlanta back in the year 1886. The brand was started by Dr. John S. Pemberton, who was a pharmacist. Large scale bottling of the product commenced in 1899. Coca-Cola currently operates in more than 200 countries, with its daily sales averaging 1.9 billion beverage servings. The company distributes its products through its controlled and distribution stores. It offers a variety of non-alcoholic drinks including Coca-Cola, Diet Coke, Coco-Cola zero, Sprite, Fanta, water, juices and juice drinks, among ...

Investment Management

Investment Management

Introduction

This paper entails a discussion of two key principles investment management that are currently in play in today`s financial markets. The first part of the paper entails a discussion on the Capital Asset Pricing Model and its subsequent application to a real life situation. The second part of the paper entails a discussion on assessment of the performances of two respective mutual and pension funds that are invested in Argentinian junk bonds.

According to Levy (2011, pg. 55), the Capital Asset Pricing Model (CAPM) is used in the determination of the required rate of return of various risky assets such ...

Answer a)

T-Bills are independent from state of economy on account of having back up faith of US Treasury. In other words, T-Bills are risk free from default probability because the return of 5.5% will be realized irrespective of state of economy. US Treasury will have to redeem the T-Bills in any economic state.
However, the rate of 5.5% is composed of Risk Free Rate(2.5%) + Inflation premium(3%) and since there is uncertainty about level of inflation in the future, T-Bills are not purely risk free in terms of purchasing power. For Example if Inflation averaged to be 3.5% ...

INTRODUCTION

Tantalizers Plc is a leading Fast Food company established in May 1997 with a promise to deliver full value for money to an increasingly discerning target audience. The company pioneered the integration of African menu into fast food operations.
In order to evaluate how tantalizers’ plc has improved in its financial performance in terms of profitability, efficiency and stability, its financial statement in 2008 and 2009 would be analyzed and interpreted using some basic financial ratios. Profitability, efficiency and financial risk ratios will be used to evaluate the company’s performance in 2008 and 2009 respectively.

Financial Ratios

Turnover Growth

Net profit ...

Chapter 1: Introduction 3

Chapter 2: Financial Performance and Position of TESCO 6
Chapter 3 Financial Management Policy 14
Chapter 4 Investment Strategy 18
Chapter 5 Valuation of TESCO 22
Chapter 6 Conclusion 26
Abstract
The present report provides critical analysis of financial positioning of Tesco Plc. For this, the financial data has been gathered for past five years as well as its competitors to critically assess financial positioning of Tesco in the retail industry. The reports highlight the recent issues of Bretix which has significantly impacted economic conditions of the United Kingdom leading to declining the consumer confidence because of triggering inflation. ...

Executive Summary

The report comprises of two main tasks that are financial ratio analysis and distress analysis to determine and evaluate the financial performance of HSBC. The case study is prepared to analyze the financial conditions of HSBC. HSBC Bank Plc. is one of the largest financial services providers in the world. HSBC operates in Finance and Insurance industry that is highly competitive in the global market. The decline in values of current ratio, quick ratio, and cash ratio reveals that the company did not succeed in maintaining stability in its financial position, but the decrease of 0.02 and 0.01 is ...

Net Present Value

The Net Present Value is used in estimating the potential value of every project by applying the discounted cash flow valuation that requires an estimation of the size and time of all cash flows that increases from the project (Ehrhardt & Brigham, 2016). However, NPV is affected greatly by the discounting rate. Therefore, making a selection on the proper rate that is sometimes known as the hurdle rate is essential during decision making. Moreover, this should make a reflection on the riskiness of the investment because it is typically measured by the unpredictability of cash flows. Therefore, it must take ...

INTRAPRENEURSHIP PLAN

EXECUTIVE SUMMARY
HDI Securities Inc. is a participant in the Philippine Stock market and had been incorporated since May 26, 1992. The company formation was dated back to the patriarch of the Chai clan (Singapore based clan chia family) who come together to own a seat in the Philippine stock market. The aim and objective of the company is to function as a brokerage firm to cater for the investments of its fund providers.
Currently the company is facing the challenges provided by the economy in which it was rank as the 37th position spot in the overall performance ...

Identifying and Managing Risk

Introduction
Risk management is a very important technique in business, and virtually all spheres of life. Through risk management, one is able to identify, assess and prioritize risks. From the results of this, then one is able ti implement a coordinated and economical usage of resources in order to monitor, control and minimize the impact and probability of any unfortunate events and to capitalize on the realization of opportunities. This is the gist of many articles by Dr. James Kallman, a guru in risk management. This paper will compare and evaluate risk management techniques proposed by Dr. James Kallman and those ...

BSB123

Introduction
There are many types of investments in the market. Some of the types of investments include bonds, property, cash, and fixed interest investments. Different investments have different levels of risk and returns. Some of the risks that face investment include changes in interest rates, and inflation which affects the purchasing power of players in the market. It is also worthwhile to note that the longer the period of returns the higher the risks that investments are likely to experience. This paper compares and analyses the various dynamics in 1-year return and 3-year return investments.

 Consider the distribution of 1 year returns

This graph does ...

Question 1

Beta is a measure of a project’s risk relative to the entire market . There are several factors that determine the value of beta of a project when it is calculated from domestic stock index against the world stock index. They include; financial leverage, operating leverage and the nature of the project .
Financial leverage is the amount of debt in a firm’s capital structure. Payment of interest on debt is a contractual obligation and is fixed. Fixed financing costs cause profits after tax of a project to vary with changes in sales and earnings before interest and tax. Financial leverage increases a project financial ...

Investment Proposal for Cengage Learning, Inc.

Executive Summary

Purpose of the Paper
The main purpose of the paper is to prepare an effective investment appraisal for Cengage Learning by using various financial management tools.

Overview of the Paper

The paper comprises of following material that can be seen in the overall paper.
Investment appraisal techniques for introducing new product line
Selection of two most common techniques
Importance of techniques through literature
Testing of Feasibility of new project
Interpretation and conclusion on the analysis
Techniques Used
Results
It is found from the above two analysis that the project is viable for the company and has potential to provide high return ...

QUESTION A

Credit Default Swap
It is a financial instrument lenders use to hedge default risk. The lender acquires a CDS and pays premiums to the CDS seller who takes the default risk (Lasher 200). If the borrower defaults, then the CDS seller pays the par value of the loan to the lender. The CDS seller also pays the protection buyer accrued interests on the loan during the intervening period.

Cash flows in case of no default

Annual CDS premium = 4% × 1,000,000 = $40,000
Quarterly payments = 40,000/4 = $10,000
A will pay quarterly CDS premiums to B for the three years. At the end of ...

Risk and return relationship has always fascinated portfolio managers, economists and researchers. With modern portfolio theory, it is generally assumed that risk and return have a direct relationship, i.e. higher the risk of an instrument, higher the return it is expected to generate.
Most of the modern portfolio equations and theorems are based on this assumption that return increases as risk taken increases and that higher risk instruments outperform the lower risk instruments. This relation holds true for all instruments.
Total risk associated with a product or an instrument can be broken down into credit risk, market related risk ...

Introduction to Finance

Introduction to Finance

Part 1

The income statement of the Home Depot is simple. Unlike the income statement of other companies, it is relatively simple with fewer terms mentioned. The income statement begins with the net sales of the company followed by the cost of goods sold (The Home Depot, Inc., 2014). These two are the fundamental things in the income statement. Net sales represent total sales less any sales return while the cost of goods sold represents the cost incurred for the materials that is sold. The next important term in the income statement is gross profit, which is the ...