Answer correctly all questions. Provide solutions for this questions.

Question 1:

The interest rate on the bank loan is 8.2% p.a.

Bank Loan Amount: 210

The interest rate on the bank loan is 5.2% p.a.

Mortgage Loan Amount: 550

The corporate bonds have a credit rating of A+ and have 6 years to maturity. They make quarterly coupon payments at a coupon rate of 8% p.a

Corporate Bonds Amount: 310

The Ordinary shares are shown on the balance sheet at their book value of $1 per share. They have a beta of 1.5. They have just paid a dividend of $0.10. The dividend is expected to grow at a rate of 9% p.a. for the next 3 years, and after that it will grow at a constant rate of 2% p.a. in perpetuity.

There are 430 ordinary shares on the balance sheet.

The preference shares have a par value of $1 each and are shown on the Balance Sheet at their par value. They pay a constant dividend of $.07 and they are currently trading for $1. There are 250 shares on the balance sheet.

Retained earnings: 280

Total shareholders equity: 960

Total liabilities and shareholders equity: 2,150

The expected return on the market is 8.7%.

PLEASE ANSWER THE FOLLOWING:

Bank Loan Weight:

Mortgage Loans Weight:

Corporate Bonds Weight

Price of Ordinary Shares:

Market Value of Ordinary Shares:

Ordinary Shares Weight:

All weighted costs after-tax costs (Tax rate 30%)

AFTER CALCULATING ABOVE, PLEASE FIND THE ANSWERS BELOW

Weighted Cost of the Bank loan (i.e. cost x weight):

Weighted Cost of the Mortgage Loan

Weighted Cost of the Corporate Bonds

Weighted Cost of the Ordinary Shares

Weighted Cost of the Preference Shares

Weighted Average Cost of Capital:

Question 2.

AUDITFIX also has a successful tax compliance and consulting division. As part of your graduate training, you've spent one month working in this division in the last year. During this time, you worked on a tax consulting project with NEPTUNE COFFEE. The CFO of NEPTUNE COFFEE is eager to reduce the tax liability paid annually to the Australian Government. He has asked the Tax Partner of AUDITFIX to develop tax planning advice whereby profits can be shifted from Australia to the Caytania Islands where the company tax rate is zero.

AUDITFIX has recently launched a new division that offers social and environmental reporting assurance services. As part of your graduation position at AUDITFIX, you also spent one month working in this division and your current partner, Terry O'Driscoll, wants to discuss your experience. During this placement, you also worked on a different project with NEPTUNE COFFEE which is considering preparing a social and environmental report for the first time. He wants you to attend a meeting with the CFO of NEPTUNE COFFEE where you will answer the following questions.

NEPTUNE COFFEE is new to the Australian market but holds significant market share in Europe. They have recently been successful in getting their products stocked in all Coles and Woolworths stores in Australia and as a result, sales are expected to double in the next financial period. All manufacturing of NEPTUNE COFFEE products is completed in Brazil with inventory shipped to Australia monthly. The manufacturing arrangements means NEPTUNE COFFEE has a small team operating out of its Sydney head-office which focuses primarily on sales and administration.

1. Explain two potential consequences of the CFO's decision to continue to engage in 'aggressive' tax avoidance. 2 Marks

2. Describe two social and two environmental disclosures that NEPTUNE COFFEE may include in its first sustainability report. Briefly explain why you consider each disclosure to be important for NEPTUNE COFFEE. 6 Marks.

3. Discuss what level of assurance AUDITFIX could provide to NEPTUNE COFFEE for its sustainability report. 2 Marks

4. Describe why it may be problematic for AUDITFIX to offer tax services to NEPTUNE COFFEE while also auditing its sustainability report and financial statements. 2 Marks.

Question 3.

download from the websites the Income Statement and Balance Sheet of a real company. The financial statements for the TWO most recent years should be used.

You will find the financial statements either on the websites of companies or you can search them on https://finance.yahoo.com or http://www.annualreports.com

I have data for Emaar the income statment

Perform a horizontal analysis of some major items of the income statement and the Balance Sheet and state your comments and interpretations on the same.

Calculate the following ratios for the two years. Write the formulas clearly and show the amounts used in the calculations with complete steps. Compare the results of the two years and write your analysis on the same.

a.any two profitability ratios

b.any two activity ratios

Working capital is that portion of capital which is required for holding current assets like stock of materials and finished goods, accounts receivable and cash for meeting current expenses like salaries, wages, taxes, rent, etc.

Using the Financial Statements from the Task A, calculate the liquidity ratios for two years and comment on the same.

You are required to identify factors why a company would have working capital shortages and suggest ways to improve the working capital management of the company.

TASK C (4 Marks) [CLO 4]

Answer the following questions, showing complete calculations answer according to the questions asked in each.

(C1) Mr. Khalil is planning ahead for his son's education. He's eight years old now and will start college in 10 years for which Mr. Khalil will require $45,000 in 10 years.

-How much will he have to set aside today if the annual interest rate is 6% and bank compounds it semi-annually?

-How much will he have to set aside today at the same rate, if the bank does a monthly compounding?

-Explain the difference in your answers above.

(C2) Aamir deposits $7,500 and expects to get $15,000 after six years.

-What would be his expected rate of return?

-If he expects to get 14,000 after six years, what rate of return is he expecting?