b) The following information on the performance of three funds A, B and C in Australia. Fund Average return (%) Standard deviation (%) Beta Market ?? Risk-free rate ? Fund A 19.50 10.75 0.873 Fund B 28.65 14.82 1.251 Fund C 25.70 12.33 1.005 (i) (ii) Use the data provided on Canvas to calculate the annual return of the market (ASX/S&P200). Find a proxy for the risk free rate in Australia and explain your reasoning. [2 marks] Calculate the Coefficient of variation, Sharpe and Jensen Indices of performance for these funds and interpret the results. c) Obtain information on the following two funds: Colonial First State Imputation Vanguard Emerging Markets Shares Index Fund [6 marks]. Compare the risks to investors presented by each of these fund and identify the types of investors that would favour these funds. [4 marks] If a firm rations capital its value is not being maximised. A value maximizing firm w projects with positive NPV. The firm may however want to maximize value subject that the capital ceiling is not to be exceeded. A linear programming method can be used to solve constrained maximization objective should be to select projects subject to the capital rationing constraint such the projects NPVs is maximized. Illustration Management is faced with eight projects to invest in. The capital expenditures du been rationed to Sh 500,000 and the projects have equal risk and therefore should the firm's cost of capital of 10%. 4. The Optimal Budget: Project Cost NPV 2 250,000 87,951 3 100,000 28,038 4 75,000 16,273 5 75,000 3,395 500,000 135,657 ABANDONMENT VALUE It has been assumed so far that the firm will operate a project over its full physical life. may not be the best option - it may be better to abandon a project prior to the end o Any project should be abandoned when the net abandonment value is greater than the of all cash flows beyond the abandonment year, discounted to the abandonment Consider the following example: Project A has the following cashflows over its useful life of 3 years. The market value value) has also been given. Year Cash Abandonment flow Sh'000' value Sh'000' 0123 (4,800) 4,800 2,000 3,000 1,875 1,900 1,750 0