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

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...