Investment planning, Strategic Management

Using examples, explain the differences between the primary and secondary markets for securities.

Question

Discuss systemic risk and any effects that it might have on investors. Give an example.

Question

Joanna is interested in purchasing a government bond parcel. She asks you to explain how it is possible that an investor can make or lose money on fixed interest investments. As part of your explanation, calculate the purchase price of a 10-year government bond parcel with two full years remaining in its term. The bond's yield rate is 8.95% p.a., paid as a half-yearly coupon, and assume that the prevailing market interest rate is 7.50% p.a. Use a parcel price of $100.

Question

Yanni asks you to explain why different discounted cash flow (DCF) calculations use different discounting rates. Use the information provided below to frame your explanation. Yanni and Joanna's current investment property was purchased six months ago (assume this was in the current financial year) for $418,000 in an area that they believe has high growth prospects. They have an interest-only loan of $280,000 attached to this property. The expected sale price in three years is $575,000. Cash flows from the property are:In year 1:

Rent income $33,000

Cash expenses $12,500

  • In year 2, rent income is expected to increase by 2% compared to year 1 and cash expenses are expected to increase by 1.5% compared to year 1.
  • In year 3, rent income is expected to increase by 2.5% compared to year 2 and cash expenses by 2.0% compared to year 2.

The appropriate discount rate is 8.75%, being the risk-free rate plus a premium. The discount rate also recognises the interest rate for the property loan of 7.75%.

In your response, you should address the following points:

a)  Explain why DCF is used to evaluate investments and what impact increasing the discount rate will have on the results of a DCF valuation.
b)  Calculate to the nearest dollar the present value (PV) and net present value (NPV) of the couple's investment property.

c)  Calculate the internal rate of return (IRR) of this investment to one decimal place.

d)  Explain whether this investment is good value if comparative properties are returning 15.25% per annum.

Posted Date: 2/23/2013 3:09:06 AM | Location : United States







Related Discussions:- Investment planning, Assignment Help, Ask Question on Investment planning, Get Answer, Expert's Help, Investment planning Discussions

Write discussion on Investment planning
Your posts are moderated
Related Questions
Question: (a) To prepare a successful quality based strategy requires an effective leadership. Explain briefly the requirements of effective leadership in this context.

Q. Concept of clan - cultural control? Clan control requires a common understanding of norms and standards amongst an organisations diverse membership e.g. staff and team membe

write an essay of approximately 1500 words in which you critically analyse and evaluate the value innovation strategy that sanlam opted for in their 2009 blue star financial advise

You are Pam, Vice President of Marketing for Superior Products, Inc. You joined the company two months ago, replacing an individual who hadbeen the VP of Marketing for the comp

Assume the population of Darwin in 50 yrs will be 2million. There will be gas related industries in the surrounding areas of Darwin. Mining activities in the Northern Territory wil

Q. Multidimensional performance measurement? Multidimensional performance  indicators recognise that the constant drive to increase profitability can ultimately be self-defeati

Mergers and acquisitions (abbreviated M&A) are both an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of di

Critically evaluate and analyse leadership you have witnessed in specific situations. This means comparing concrete examples (what was said and what was done) to relevant theories

need to make a memo to company executives explaining why adequate training is important to the company and how the financial costs can be justified

Q. Show the Modern methods of budgeting? A flexible budgeting system produces many budgets projecting costs and revenues over different ranges of production or sales volumes.