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# FINM2400 1.png FINM2400 2.png FINM2400 3.png FINM2400 4.png

FINM2400 1.png

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Answered Same Day Jun 22, 2021 FINM2400 University of Queensland

## Solution

Chirag answered on Jun 22 2021
Question 1
A) Drawer:
The Drawer is the party that obliges the drawee to pay the payee.
The Creditor, the beneficiary or payee is the party to which the bill of exchange is payable.
The drawer and the payee are the same entity unless the drawer transfers the bill of exchange to a third party.
B) Price Today =989025.8773
C) Market Value of Bond
Face Value         200000
Coupon Rate         8
Market Rate        8
Years to Maturity    6
Payments per year    4
Market Value        (\$200,000.00)
D) If market yield increases, the price of the bond decreases.
Question 2
a) Dividend Yield

Dividend per share at the end = 1.55

Price per share at the end = 35

Dividend Yield = Dividend per share / Market value per share (P0)

capital gain yield = (P1- P0)/P0

P0
32.635

P1
35

2.365
capital gain yield

7.25%

1.55
dividend yield

4.75%
Expected Return

12%
b)
Hermes Ltd

Year 0
Year 1
Year 2
Year 3
Year 4
Price
2
3.25
4.5
5.75
5.98

1
0.9050
0.8190
0.7412
0.6707

2
2.941176471
3.685428226
4.26168171
92
104.89
Question 3
a) Annual Depreciation = 2000000/4 = 500000
b) Annual Operating cashflow

Year 1
Year 2
Year 3
Year 4
Revenue
1,250,000.00
1,250,000.00
1,250,000.00
1,250,000.00
Variable Cost
450,000.00
450,000.00
450,000.00
450,000.00
Depreciation
500,000.00
500,000.00
500,000.00
500,000.00
Working Capital
25,000.00
25,000.00
25,000.00
25,000.00
Sale

350,000.00
Working Capital

100,000.00
Profit Before Tax
275,000.00
275,000.00
275,000.00
725,000.00
Tax
82,500.00
82,500.00
82,500.00
217,500.00
Profit after Tax
192,500.00
192,500.00
192,500.00
507,500.00
Depreciation
500,000.00
500,000.00
500,000.00
500,000.00
Sale

350,000.00
Cash Flow From Operating Activity
692,500.00
692,500.00
692,500.00
657,500.00
c) Project cash Flow

Cash Flow From Operating Activity
692,500.00
692,500.00
692,500.00
657,500.00
Cash Flow From Investing Activity
-2,000,000.00
-
-
350,000.00

Total Cashflow
-1,307,500.00
692,500.00
692,500.00
1,007,500.00
d) NPV

Total Cashflow
-1,307,500.00
692,500.00
692,500.00
1,007,500.00

Return
1
0.9091
0.8264
0.7513

-1307500
629545
572314
756950
651309
NPV provides the profitability of project
e) Payback period

Payback period= Initial investment/ net cash flow
3.070738298

The amount invested returns in 3.07 years
The time it takes to earn back the cash invested in the...
SOLUTION.PDF