Subject Corporate Finance

with the formula write in microsoft word or hand writing

Question Lizer is a reputable pharmaceutical firm in new drugs and vaccine development. Its market value today is 640 million. The firm operates its business in the UK. However, it plans to enter the overseas market by take-over or joint venture for the upcoming 2 years. The firm possess investment portfolios in UK shares as well as corporate and government bonds. The purpose of this portfolio is to obtain financial returns to finance its overseas business expansion. The firm's portfolio is as the following: Asset Type Value ( million) Average Previous Year Annual Return (%) UK shares 12.1 13 US shares 8.3 11 Corporate bonds in the 4.2 7.1 UK Long-term government 10.3 6.3 bonds in the UK Short-term government 2.1 5.0 bonds in the UK (3-months) Roughly, 20% of the UK shares are in small fimms' equities. Some of these equities trade at the Altemative Investment Market (AIM). The mean retum on all UK shares for the previous year was 11%. In US shares, it was 10.4%. There is no taxation involved. Required: Critically discuss the advantages and disadvantages of investing in this kind of portfolio within the context of the situation encountered by Lizer. (25 marks) [Total : 25 Marks]