Ahmed Khulaif, is the CEO of Georgy & Harold (G&H) Industrial company. He asked Mahmout our areas relatedfAbotaleb, the group CFO, to draft the annual letter to sharcholders. The letter covers inancialfio G&H: governance, financial performance, the firm's capital investment plan, and the .investment the firm is making in the stock market :The following parts are taken from the report Part 1 We have made so much progress in developing the governance structure of G&H and the relationship ith our stakeholders. We set maximizing profits (i.e., net income) as the basis against which wew easure executives' compensation (the implicit incentive) to align the management's interest withm aliharcholders. Also, we improved the speed by which we release our financial reports to the financs ".markets to ensure that we reveal information honestly and on instantly to investors Part IT The plastics and metals divisions did equally well last year. The following table shows some financial" :data related to both divisions Company Plastics Metals Sales 240 600 Total Assets 140 280 Total Liabilities 50 80 ROE 15% 15% However, it is important to note that the plastics division has a relatively lower net margin compared to the metals division. The net margin can be obtained from the common size balance sheet." Part HI: "To finance our capital investment plan, we abtained a 25-year, $1,000,000 loan from Strategic Northem Bank (SNB). The interest on the loan is 6%. The monthly payment of the loan 1s $6,443.01. This means that in total, we will repay $4,464,967.03. The sitver mine project that is being built with an initial investment of $15 million today. Is expected to generate $10 million annually for 10 years. The first cash flow will occur 5 years from now. The project discount rate 1s 7%. Based on these numbers, the expected net cash flow from this project is around $ 25 million." Note: net cash flow is PV of project cash flow PV of project costs Part IV: "Another alternative to fund our projects is to issue two bond issues. A $2,500,000 3-year issue that will pay 2.5% annual coupon, and a 2,500,000 5-year 1ssue that will pay 3.5% annual coupon. This comes as a natural step after credit rating agencies classified G&H as a "AA" company. This will guarantee that all our debt issues will be rated as "AA". The current YTM in the market is 3%, this will allow us to sell the 3-year issue at a premium and the 5-year at a discount. Since the 3-year issue carries higher interest rate risk relative to the 5-year issue, we are planning to sct a sinking fund for both issues." Part V: "We made good investment in the stock market last year. We invested in a well-diversified portfolio. It 1s well-known that diversification benefits increase as we increase the size of the portfolio. We invested in two funds with the following information: Asset (A) Asset (B) E(r)=10% E(r,)=8% g, = 6% a,=5% w, = 0.3 wy =0.7 Tap = 0.0008 Based on this information, the expected return of the portfolio AB is 9.3% and the standard deviation is 4.34%." Evaluate each part of the report and indicate the mistakes in each, if any