Investment planning, Strategic Management

Assignment Help:

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.


Related Discussions:- Investment planning

Strategy plan that includes resource implications, a) Way a suitable struct...

a) Way a suitable structure for a strategy plan that make sures appropriate participation from all stakeholders of an organization. b) Make criteria for reviewing potential option

Effect of globalization in management of an organization, The following ess...

The following essay will discuss how the popular trend of globalization is affecting the communication style and management of an organization. There will be explanations provided

Calculate the price earnings ratio, Q. Calculate the Price earnings ratio? ...

Q. Calculate the Price earnings ratio? Price earnings (PE) ratio PE   = (Market share price/EPS)                     (no. of times) The PE ratio is most widely quoted inv

Synergy, explain the concept of synergy

explain the concept of synergy

Strategic management of bread talk, This report discusses is based on the s...

This report discusses is based on the strategic management of Bread Talk. Bread Talk is, a Singapore based fFood cCompany . It is identified that under strategic management, The co

Which of the following are recognized implementation methods, Trail and dis...

Trail and dissemination Parallel conversion Direct conversion Phased conversion

Organisation and develop a strategic plan, Develop Strategic Plan This...

Develop Strategic Plan This assessment requires that you analyse the capabilities of an organisation and develop a strategic plan. To enable you to do this you must complete t

SWOT, #quIf a SWOT analysis reveals that an objective is unattainable, apar...

#quIf a SWOT analysis reveals that an objective is unattainable, apart from changing the objective, what other changes might make the goal attainable? • Discuss the limitations of

Blue ocean starategy, Ask quest''Blue Ocean Strategy’ a. What is it? b. Wh...

Ask quest''Blue Ocean Strategy’ a. What is it? b. What are its characteristics? c. If you were to develop a Blue Ocean Strategy for a firm of your choice (any industry, any size,

Describe the system development strategies, A customer has engaged your sof...

A customer has engaged your software development company to develop a new order-processing system. However, the time frames are very tight and inflexible for delivery of at least t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd