FIN203 Group-based Assignment FIN203 Group-based Assignment TABLE 2. Your prospective investor has also shared some information on his own company: Investment Proposal #/2 - Data for Stock Portfolio Philemon State of Probability of State of Rate of Return (%) for each State of Economy Tax rate: 17.00% Economy Economy Stock A Stock B Stock C Common stock Good 55.00% 0.1367 0.0406 0.3710 o 2,000 shares currently valued at $74.00 per share Poor 45.00% -0.0214 0.0665 -0.4095 His industry comparable stock beta is 0.90 TOTAL 100.00% 0.0656 0.0523 0.0198 His business just paid a dividend of $3.15 oo The dividend is expected to grow by +2.00% per year indefinitely The third investment proposal is a bond issued by Demeter Corp.. The private banker has laid down a base scenario to help you determine the total real return on this investment. You will Debt: buy the bond today for a clean price of $1,035.00. The bond makes annual coupon payments 110 bonds outstanding with 13 years to maturity, 4.7 percent coupon and a of 6.5 percent and mature in 10 years. You will sell the bond in one year from now when the market price of $1,070. The bonds pay interest semi-annually. required return on the bonds will be forecast to be 6.2%. Assume the inflation rate over this coming year is 2.5%. (a) Determine the cost of equity using the dividend growth model (DDM) method (a) Determine the arithmetic and geometric returns for the Atlas stock. (3 marks) (15 marks) b) Determine the cost of equity using the Capital Asset Pricing Model (CAPM) method. b ) Compute the expected return for the Philemon portfolio of three (3) stocks. (5 marks) (10 marks) (c) Explain the reason(s) for the difference in your estimates under (a) and (b). (c) (3 marks) Compute the variance and the standard deviation for the portfolio. (7 marks) d) Estimate the weight to use for debt when calculating the cost of capital of your (d) prospective investor. Compute the expected return and the standard deviation if the portfolio is invested 60 (6 marks) percent in stock B and 20 percent each in stock A and C. Discuss the change. (8 marks) (e) Determine a WACC estimate for your prospective investor using CAPM. (e) (8 marks) Calculate what would be your total real return on investment for the Demeter Corp. bond. (10 marks) ---- END OF ASSIGNMENT ---- Question 3 Your business has expanded and your team is looking for new funds. To secure your valuation, a prospective investor requires you to indicate a cost of equity and a weighted average cost of capital. For this purpose, you have gathered the following information: Your industry comparable stock beta is 1.28 Your company is currently valued at $97 per share Your business has just paid a dividend of $1.10 . . . The dividends are expected to grow by +3.00% a year over an indefinite future The expected return on the market is 8.50% for a risk-free rate of 1.50% SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 4 of 5 SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 5 of 5FIN203 Group-based Assignment FIN203 Group-based Assignment GROUP-BASED ASSIGNMENT To answer this question set, you are asked to apply what you know of the three (3) basic decisions of financial management to different kinds of business in the COVID-19 context. This assignment is worth 20% of the final mark for FIN203 Essentials of Financial Management. Your answer should be less than 250 words for each sub-question - (a), (b) and (c). The cut-off date for this assignment is 22 April 2021, 2355 hrs. (a) Indicate and analyse how the COVID-19 situation can affect capital budgeting This is a group-based assignment. You should form a group of 4 members from your seminar decisions in an oil and gas company. group. Each group is required to upload a single report via your respective seminar group site (9 marks) in Canvas. Please elect a group leader. The responsibility of the group leader is to upload the report on behalf of the group. (b ) Indicate and analyse how the COVID-19 situation can affect financing decisions in an international hotel chain business. It is important for each group member to contribute substantially to the final submitted work. (8 marks) All group members are equally responsible for the entire submitted assignment. If you feel that the work distribution is inequitable to either yourself or your group mates, please highlight this (c) Indicate and analyse how the COVID-19 situation can affect working capital to your instructor as soon as possible. Your instructor will then investigate and decide on any management decisions in a fashion retail outlet company. action that needs to be taken. It is not necessary for all group members to be awarded the same (8 marks) mark Question 2 Note to Students: After a few years, your team's business has thrived. You are approached by the private banker You are to include the following particulars in your submission: Course Code, Title of the of a renowned institution to invest your hard-earned cash in securities. GBA, SUSS PI No., Your Name, and Submission Date The first investment proposal is a single stock for a company called Atlas. Atlas has the following historical price quotes and dividend payments. You must answer ALL questions. (Total 100 marks) TABLE 1. Investment Proposal #1 - Data for Stock Atlas Provide clear and to-the-point answers. Year Price per Share ($) Dividend per Share ($) All answers will require justification to get full mark. All assumptions should be clearly labelled. 99.00 107.00 1.50 Your answer should always be in written format. It can nevertheless be supported by tables 95.00 2.00 UAW N - O 91.00 2.20 or even graphics for the sake of a more impactful presentation. Hence, ensure you make the 135.0 2.60 best use of Excel to save time and effort whenever you can. 192.0 3.00 Every number, be it a $ value, a multiple or a percentage, need to be reported and rounded The second investment proposal is a combination of three stocks in a portfolio called Philemon. to at least two (2) decimal places. To inform your decision, the private banker indicated the expected rate of return for each of the stock, given two different economic situations. The proposal is to invest 25 percent each in stock A and C, and 50 percent in stock B. Question 1 Your team is considering opening a business together. Given the economic impact of the COVID-19 crisis, you are particularly concerned about the performance and the financial health of the company you are planning to create together. As you are still unsure about the consequences of COVID-19 on your particular business, you decide collectively to explore the implication for some of the worst hit industry sectors globally. SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 2 of 5 SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 3 of 5