Reference no: EM133188507 , Length: 800 words

FINC20018 Managerial Finance - Central Queensland University

Part A - Calculation and theory questions

Question 1
Payday lending provides people with short-term loans and gets its name from the fact that the loan is to be paid back at the borrower's next payday. Andrew is short some money for car repairs and his next paycheck is two weeks away. For the amount of loan shown in row 1 in the data table, Andrew must pay a fee in advance shown in row 4 and then repay the loan in two weeks.
a) What implied interest rate would Andrew pay for this two-week period?
b) Is this a good deal? Why or why not?

Question 2
Charlie Hebro intends to save for a house by making monthly deposits into a term savings account that earns interest at the rate shown in row 7 of the data table, with interest compounded monthly. His budget allows him to save the monthly amount shown in row 14 of the data table starting at the end of this month.
a) What will his savings be if he follows his plan for 7 years?
b) If he receives an unexpected inheritance of $80,000 today which he deposits to start off his home savings, what will his total savings be at the end of the seven years.

Question 3
William Bunting has credit card debt shown in row 8 of the data table. He is considering increasing his home mortgage loan to pay it off. The credit card and home mortgage interest rates are shown in rows 5 and 3 respectively of the data table. Both loan types are computed on monthly stops. He is intending to increase his home mortgage payments so as to amortise the credit card debt over three years.
a) How much would his monthly repayments to the credit card company be if he intended to pay out the debt over three years?
b) By how much will his mortgage payments increase if he adopts this plan to deal with his credit card debt?
c) How much would he save by transferring his credit card debt to his mortgage?

Question 4
Cairns Travel, Inc. has a total asset turnover in row 9 and a net profit margin in row 10. The total debt ratio for the firm is in row 11.
a) Calculate the company's return on equity.
b) Briefly explain how the debt ratio will impact on equity investors.

Question 5
Henderson Engineers Ltd. has the number of shares of ordinary shares outstanding in row 13, and the current price per share is in row 15. If the company's profit is in row 16, calculate the PE ratio and would you consider investing in this share based on the PE ratio?

Part B - Essay
The pandemic has accelerated the issuance of sustainable financial products which gives investors a variety of choice. Despite a wild ride in markets, the issuance of social bonds has gained the momentum and quadrupled during the period of covid-19. Critics have long alleged that sustainable funds cannot beat conventional investments. Nonetheless, with unemployment spiking around the world, rising concern over climate change and strained health-care systems, social bonds are expected to emerge. Analyse the impact of financial innovation on sustainability and social responsibility. Your answer should be in the form of an essay with 800 words limit excluding reference list. All sources should be cited using standard APA referencing style.