Customer Service Chat
Get quote & make Payment
Portfolio Management, Financial Management
The purpose of this project is to help you to gain an understanding of how the stock market works and of the relationship between theory and practice.
You are given a notional £200,000 to invest and manage. You are required to follow an active trading policy at least in the first term. In the second term you can follow a buy and hold policy. Shares must be bought in multiples of 100 if the price is less than £2 and in multiples of 50 if the price is greater than £2. Debentures and Government stocks, which have a nominal value of £100 each, may be bought without restriction.
Commission is payable on all purchases and sales, at the following rates:
Ordinary Shares 1.0% of value (minimum: £10)
Government Securities 0.7% of value (minimum: £12.50)
You may invest in overseas securities, though all transactions must be in £ Sterling.
Transfer stamp duty is payable on all share purchases: the rate is £0.50 for every £100 or fractional part of £100.
There are no overdraft facilities nor additional sources of finance. Your cash balance must not become negative.
You are required to liquidate your holdings by Friday 22 March, 2013, and to submit your portfolio project, together with your transactions table, by Friday 29 March, 2013. When writing up the project, there is no need to describe every single transactions you have entered into (though every transaction should be listed in your transaction sheet). You should:
(i) Outline the portfolio theory that you have applied in your project.
(ii) Carefully explain your investment policy, giving examples of how you implemented it and explaining how and why it changed over the life of the project (if it did);
(iii)Explain carefully what brought about the changes (for example, knowledge you gained on the course or from practical experience);
(iv) Comment on your findings.
(v) Comment on the divergence between the theory you have learnt on the course and the practical problems of implementation;
(vi) Comment on the performance of the stock market in general and on what you think has influenced it over the life of the project;
(vii)Provide an assessment of how well your strategy has worked in terms of risk and return. This will require a brief comparison with other strategies, one such being a buy-and-hold policy.
(viii)Any limitations that you encountered.
Post plc and Reply plc are two companies that are in the same business risk class.
Post plc is financed by 60 million ordinary shares with a market value of 350p each and by £200 million 10% irredeemable debentures with a current market value of £125 each. Post plc has operating earnings before interest and tax of £85 million per annum.
Reply plc is financed by 10 million ordinary shares with a market value of 700p each and by £60 million 5% irredeemable debentures with a market value of £70.00 each. Reply plc has operating earnings before interest and tax of £20 million per annum.
Both companies have the same dividend policy in that they both do not retain any earnings, choosing instead to distribute all the earnings to their shareholders.
Mr Roberts is a shareholder in Post plc, with a holding of 2,000 ordinary shares. Mr Roberts is thinking of selling his shares in Post plc and buying shares in Reply plc as he believes he may be able to make a capital gain by doing so. Assume that Mr Roberts is able to borrow or lend at a rate of 10%.
The rate of corporation tax is given as 30%.
(i) Calculate the after tax cost of equity, the after tax cost of debt, and the overall weighted average cost of capital for both Post plc and Reply plc. Explain what each of these represents.
(ii) Mr Roberts has asked for your advice as he wishes to switch his investment from Post plc to Reply plc but still retain his investment profile. Carefully explain showing all calculations what actions Mr Roberts would have to take in order to achieve this position. Fully explain your answer. Would you advise Mr Roberts to go ahead with such a switch.
(iii) Calculate Mr Roberts income position in Post plc and Reply plc both before and after the switch.
Posted Date: 2/22/2013 5:15:48 AM | Location : Oman
Ask an Expert
Portfolio Management, Assignment Help, Ask Question on Portfolio Management, Get Answer, Expert's Help, Portfolio Management Discussions
Write discussion on Portfolio Management
Your posts are moderated
Write your message here..
Breaks in specific cost of capital, Breaks in Specific Cost of Capital: Th...
Breaks in Specific Cost of Capital: The specific costs of capital may also be affected by the amount of finance the firm wants to raise. As the amount of financing increases, the
Bond derivatives-callable bonds , Callable bonds give the right...
Callable bonds give the right to the issuer to redeem the bond prior to its maturity date, at a specified call price. These bonds are beneficial to the
WACC, The following is the existing capital structure of Company XYZ Ltd. O...
The following is the existing capital structure of Company XYZ Ltd. Ordinary shares at Shs.10 par 1,000,000 Retained 800,000 12% preference shares Shs.10 par 400,000 16% loan Shs.1
Explain hedging transaction exposure, Discuss and compare hedging transacti...
Discuss and compare hedging transaction exposure by using the forward contract vs. money market instruments. While do the alternative hedging approaches generate similar result?
Discount rate, #quA stock has a current dividend of $0.32 with a growth rat...
#quA stock has a current dividend of $0.32 with a growth rate of 8% annually. Assuming a 10% annual discount rate, what should the price of the stock be one year from today? Answer
Cost of capital, what is the major value of the weighted cost of capital ca...
what is the major value of the weighted cost of capital calculation for the firm?
Determine the financial structure of business risk, Determine the Financial...
Determine the Financial structure of business risk Financial structure shifts toward suppliers of funds recognize a more highly levered position increased financial risk associ
Income statement, Income Statement A formal statement of the parts...
Income Statement A formal statement of the parts used in determining an organization net income that is called profit and loss statement. The several categories reported
Problems arising due to the existing structure, Problems Arising Due to the...
Problems Arising Due to the Existing Structure The problems that arise as a result of an increase in the population of older generation is universal in nature. Unless there are
Decision making, Write a report to the Board of Directors of Solvent Ltd to...
Write a report to the Board of Directors of Solvent Ltd to analyse the performance of companies X and Y and to give recommendation as which of those two investment opportunities is
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
Why Us ?
~24x7 hrs Support
~Quality of Work
~Time on Delivery
~Privacy of Work
Human Resource Management
Literature Review Writing Help
Follow Us |
T & C
Copyright by ExpertsMind IT Educational Pvt. Ltd.