risk free return rate, accounting assignment help

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anaplJ

Business Finance

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3 Accounting questions. Show your working and be precise. THERE IS NO WORD COUNT

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Question 3 Show all your calculations using Excel. (a) Janet is a financial analyst who specialises in US stocks. She has been following SIMCO, a mature company in the parcel delivery business. She decides to value the company using the Gordon growth model. She calculates the required return on equity using the following data: Risk-free rate = 2% Market return = 8% Beta of SIMCO = 0.5 Beta of Industry = 0.8 The company has just paid dividends of $0.80 per share. Janet estimates that the company will grow at a rate of 3% into the foreseeable future. Calculate the value per share. Present your calculations in Excel. (b) FABULOUS PHABLET is another company that Janet tracks. It is a high growth company involved in the manufacture of mobile gadgets. Janet makes the following estimates: Beta of FABULOUS PHABLET = 1.6 Beta of industry = 1.3 She further estimates that the company’s dividend will grow at a rate of 20% this year, 15% next year and 12% in the third year. After three years, she expects dividends to grow at a constant rate of 3.5% a year. The latest dividend paid was $0.50 per share. Using the dividend discount model, what is the value per share? Present your calculations in Excel. Question 4 Calculate the following questions using Excel. (a) On 1 Jan 2016, Lynn’s stock portfolio was valued at $120,000. She made contributions of $2,000 at the end of January, $3,000 at the end of February and $3,500 at the end of March. She made a withdrawal of $2,300 at the end of June and $3,000 at the end of October. At the end of November, she received a salary bonus and made a contribution of $12,000 to the portfolio. She ended the year with a portfolio value of $128,000. Calculate the annual rate of return on her portfolio. (b) Given the following data on SIMU company, calculate the yield using the T-model and the Gordon growth models:Total earnings during a year: Book value at beginning of year: Number of ordinary shares in issue: Share price at beginning of year: Share price at end of year: Dividend per share during the year: Growth rate of book value: Expected growth rate of dividends: $60 million $380 million 200 million $2.90 $3.15 $0.205 5% 5% Question 5 Use Excel to calculate the following questions. (a) (b) (i) The 30-day rate is 1.05% and the 91-day rate is 1.2%. Calculate, using straight-line interpolation, the 45-day rate. Calculate, using straight-line extrapolation, the 95-day rate. (ii) Assuming the same data as in part (i), Calculate, using logarithmic interpolation, the 45-day rate Calculate, using logarithmic extrapolation, the 95-day rate. Calculate the following, assuming 365 days in a year: (i) I expect to receive $300 in 92 days’ time. What is the present value of the $300, assuming the discount rate is 1.5% per annum.? (ii) I invested $20,000 180 days ago and my portfolio is worth $20,800 now. What is the yield on my investment? (iii) I am promised a return of 6% per annum on an investment of $10,000 for 5 years. What is the value of this amount in 5 years’ time? (iv) I have $10,478 in my account after placing $X in the account for 3 years. The interest rate was 2% in the first year, 1.5% in the second year and 1.2% in the third year. Calculate the 3-year discount factor and $X. (Hint: The 3-year discount factor is what you would use to discount to the present) (v) I received cash flows CF1, CF2 and CF3 respectively in each of 3 years. Interest rates were the same as those prevailing in part (iv) above. What are the discount factors I should use to discount CF2 and CF3?
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Explanation & Answer

Hi, Please check the attached file for details, let me know if you have any question, thank you. James

a.
Risk-free return rate
Market return rate
beta
growth rate
required rate of return
Current dividend
Next year dividend
Value Per Share

2%
8%
0.5
3%
0.05
0.80
0.824
$41.20

b.
beta...


Anonymous
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