Reference no: EM133106799

Questions -

Q1. Assume David graduated last year from the University of Technology with a business degree and that she applied for a job with CBA. As part of the bank's evaluation process, he has been asked to take an examination that covers several financial analysis techniques. See how he would go by answering the following questions.

a. The Bankstown Sports Club is redoing its Commercial Kitchen at a cost of $1,500,000. It expects to generate cash flows of $750,000, $200,000, and $800,000 over the next three years. If the appropriate discount rate for the company is 10 percent, what is the NPV of this project? Should the club accept or reject the project?

b. Sarah needs $150,000 as a deposit on a house in 5 years. How much does she need to invest today in a saving account paying 5 per cent per annum?

Q2. Sam's mother has agreed to deposit a certain amount of money each year into an account paying 10 per cent annually to help her granddaughter Tammy go to university. Starting next year, and for the following 5 years, Sam's mother plans to deposit $4000, $6000, $7000, $8,000, and $9500 into the account. How much will Sam's grandmother has at the end of the 5 years?

Q3. Zucchini Pty Ltd. believes that at its current stock price of $16.00 the firm is undervalued in the market. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The firm's managers expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price after repurchase. The firm's current earnings are $44 million. If management's assumptions hold, what is the expected market price after repurchase?

Q4. Jones Estate Pty Ltd expects to grow at a rate of 22 per cent for the next 5 years and then settle to a constant-growth rate of 6 per cent. The company's most recent dividend was $2.35. The required rate of return is 15 per cent.

A. Find the present value of the dividends during the rapid growth period.

B. What is the price of the share at the end of year 5?

C. What is the price of the share today?

Q5. Virhin Pty Ltd. is investing $6 million in new machinery that will produce the next Generation routers. Sales to its customers will amount to $1 750 000 for the next 3 years and then increase to $2.4 million for 3 more years. The project is expected to last 6 years and cost the company annually $898 620 (excluding depreciation). The machinery will be depreciated to zero by year 6 using the straight-line method. The company's tax rate is 30 per cent, and its cost of capital is 16 per cent.

A. What is the payback period?

B. What is the average accounting return (ARR)?

C. Calculate the project NPV.

D. What is the IRR for the project?