Part A: Flight Centre and Webjet Share Price Question 1 (25 marks)

a. What is the current price of ordinary shares in Flight Centre Travel Group Ltd. and Webjet Ltd. ? How has each evolved over the last 5 years? Graph each series and discuss their evolution, noting the salient points. (10 marks)

b. Define the systematic and unsystematic risk, relative to Flight Centre and Webjet. Identify at least two factors that affected the systematic risk of the institution in the last 5 years and reflected in the movement its share price. Which share price was more volatile, Flight Centre or Webjet ? (15 marks)

Part B: Corporate Finance

Question 1

(a) What is the future value of $1200 invested for 3 years at an interest rate of 6% p.a., compounded quarterly?

(b) What is the Effective Annual Rate in part (a)?

(c) What is the present value of an annuity consisting of payments of $265 every six months for

12 years, if the discount rate is 9% p.a., compounded semi-annually?

(d) You deposit $100 into a bank account where it remains for 9 years, at the end of which time

the money has grown to $183.85. What is the annual interest rate on the account

(e) If the nominal rate of interest is 11% and the expected inflation rate is 8%, what is the approximate real interest rate?

Questions 2

1. Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield the following aftertax cash flows.

Year C D

1 $4,000

2 $6,000

3 $5,000

4 $4,000

5 $6,000

6 $2,000

7 $2,000

8 $2,000

$8000 $6,000 $6,000 $1,000 $3,000 $4,000

(a) Basedonthepaybacktechnique, ifthemaximumacceptable Payback Periodis 4 years, would you accept Project C, Project D, neitherorboth

(b) Based on the NPV technique, if the required rate of return is 12%, would you accept Project C, Project D, neither or both?

(c) Based on the EAA technique, if the required rate of return is 12%, would you accept Project C, Project D, neither or both?

Question 3

(a) Yin Zhang bought an investment property last year for $350,000. This year the value of the property has gone up to $400,000. Yin Zhang also received $12,000 in rental income for the year. What is Yin Zhangs holding-period return on the investment? [7 marks]

(b) You have invested in Huawei Ltd whose dividend per share has grown 10% per annum for the past 10 years. Assume that Huaweis growth rate is expected to be maintained indefinitely. The latest dividend per share was 90 cents was yesterday. If your required rate of return is 15 per cent, what is the value of Huaweis shares? [7 marks]

(c) The Treasury bond rate is 3%, the average return on the All Ords Index is 12%, and ANZ has a beta of 1.2. According to the CAPM, what should be the required rate of return on ANZ shares?

Question 4

Some financial managers prefer capital budgeting model such as internal rate of return (IRR) or no discounted payback models over the net present value (NPV) model, which is preferred by academic financial analysts. Why ? Briefly discuss. (Word Limit:500 words)

Can you provide solutions to Questions 1, 2, 3 and 4 with references?