Determine the expected return, Financial Management

Assignment Help:

Question :

(a) Lucky Corporation is considering an investment in one of the two mutually exclusive proposals: Project A which involves an initial outlay of Rs 170,000 and Project B which has an outlay of Rs 150,000. The Certainty Equivalent Approach is employed in computing risky investments. The current yield on treasury bills is 0.05 and the company uses this as the riskless rate. The evaluated values of net cash flows with their respective certainty equivalents are:

1804_Determine the expected return.png

Required:

i. Which Project could be acceptable to the company?
ii. Justify which Project is riskier?
iii. If the company was to use the risk adjusted discount rate method, which Project could be analysed with higher rate?

(b) If the required rate is 10 percent, evaluate the present value of the cash flow streams detailed below:

I. Rs 100 at the end of year 1.
II. Rs 100 at the end of year 4.
III. Rs 100 at the end of year 3 and year 5.
IV. Rs 100 for the next 10 years ( for years 1 through 10).

(c) Miss. Kiran has in her possession 300 preference shares of Cintex company Ltd, which currently sells for Rs 400 per share and pays an annual dividend of Rs 34 per share.

I. Determine Miss Kiran's expected return.
II. If Miss Kiran needs an 8 per cent return, given the price, should she sell or buy more stock.


Related Discussions:- Determine the expected return

par value, The face value of the debt security can be thought of as ...

The face value of the debt security can be thought of as the principal amount on which interest is paid by the issuer. It is the amount the issuer is willing to r

Claim for refund, Claim for Refund - A refund isn't automatically mailed if...

Claim for Refund - A refund isn't automatically mailed if one is due. A taxpayer whether individual orbusiness, should file a request on a form. It should also be filed within the

Current assets, A firm has $700 in inventory, $600 in fixed assets, $600 in...

A firm has $700 in inventory, $600 in fixed assets, $600 in accounts receivables, $800 in accounts payable, and $50 in cash. What is the amount of the present assets?

Quarterly earnings studies, Quarterly Earnings Studies The Quarterly Ea...

Quarterly Earnings Studies The Quarterly Earnings Studies are a part of time-series analysis. These studies aim at predicting future returns for a stock based on publicly avail

Explain medium term expenditure framework, Question 1: The various crit...

Question 1: The various criteria for evaluating a revenue measure or system are: ? Yield ? Political expediency ? Consistency with economic and social goals ?

Board of directors, Q. Board of Directors Board of Directors - Individu...

Q. Board of Directors Board of Directors - Individuals responsible for overseeing the affairs of an entity including the election of its officers. Board of a CORPORATION which

What is commercial papers, Q. What is Commercial Papers? Commercial Pap...

Q. What is Commercial Papers? Commercial Papers: Commercial papers (CPs) are short-term, unsecured securities issued by highly creditworthy large companies. They are issued wit

Balance sheet equation concept, Balance Sheet Equation Concept The His...

Balance Sheet Equation Concept The Historical Cost Concept needs support of two other concepts for practical reasons, viz. (i) The Money Measurement Concept (already discus

What the term objective denotes- financial management, What the term object...

What the term objectives denotes- financial management It must be noted at the outset that term 'objective' is used in the sense of a goal or decision criterion for three decis

Major objective of working capital management, Q. Major objective of workin...

Q. Major objective of working capital management? The major objective of working capital management is to decide the optimum amount of working capital required. Usually managem

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd