THE UNIVERSITY OF AUCKLAND新西蘭assignment代寫Department of Accounting and Finance
FIN251 Financial Management S2 - 2011
Due Date: 4 pm, Friday, 12 August 2011
This assignment accounts for 10% of your overall course mark. It should demonstrate your individual work. Although you are free to discuss the questions with other students in general terms, the final answer and write up should be your own. Copying is not permitted and is considered cheating.
Answer all four questions and show all working. Answers to your assignment must be typed.
Please hand in your assignment at the Assignment Centre on Level 0, OGG Building with the Department of Accounting & Finance cover sheet attached.
Mr. Litview Comliq has just celebrated his 60th birthday on 31 July 2011. It is also the day he is promoted to CEO of Success Quest Ltd. He has a saving account that he deposits $1,500 a month at the beginning of each month. He opened this account on his 25th birthday. During these 35 years of saving, he has been able to earn a constant annual interest of 4% (compounded monthly). It is now time for him to check out his savings and plan for the future.
(a) How much money has Mr. Comliq saved over the past 35 years when he checks his savings account on his 60th birthday?
(b) Mr. Comliq wants to have a total of $2 million on his 65th birthday. He thinks his increased salary will help him to achieve that goal in the next 5 years. How much money will Mr. Comliq need to contribute at the beginning of every month for the next 5 years so that his total savings will reach the $2 million mark? Assume that he could earn an annual return of 5% (monthly compounded) on his savings in the next 5 years.
(c) How much can Mr. Comliq withdraw per year to enjoy his life after retirement if he plans to spend all the money in his savings in 10 years? Note that he retires after he celebrates his 65th birthday and wants to withdraw the money at the end of each year. Assume he could earn 5% interest (annually compounded) per year during these 10 years.
NB. Ignore tax and assume all numbers are in real terms. Do NOT change to a nominal analysis by incorporating expected inflation into your workings.
In 2010, the New Zealand government issued government bonds with a face value of $1,000. The bonds mature in 15 March 2019 and have an annual coupon rate of 5% (paid semi-annually).
(a) Assuming today is 15 March 2011, how much is a government bond worth if the bond’s yield to maturity (YTM) is 5.5%? Note the coupon payment on 15 March 2011 should not be included in your calculation.
(b) Assume that ANZ purchases this bond for the price in part (a) and intends to hold it for 4 years, i.e. until 15 March 2015. Also, assume that the bond’s YTM suddenly drops down to 4.5% immediately after ANZ’s purchase and remains at that level during its holding period. After that the yield jumps back up to 6% for the remaining 4 years of the bond. What is the bond price when ANZ sells it to another institutional investor? What is the annual rate of return for ANZ and why it is different from the 5.5% YTM in part (a)?#p#分頁標題#e#
Whenext Top Ltd. has been able to earn an annual 20% return on equity over the past 10 years. The company has a policy of retaining 40% of its earnings for reinvestment. It expects to achieve $3 earnings per share next year.
(a) Assuming that Whenext Top continues to earn 20% return on its equity and intends to keep its payout ratio constant, what should the share price of Whenext Top be today if investors require a 15% rate of return?
(b) What is the rate of return for an investor who purchases the stock now at the price calculated in (a) and sells it back in 2 years’ time?
(c) If the company announces that its return on equity in the future will drop down to 15%, what is the effect on its stock price?
You are in search of a cheap electricity provider. You are currently under a fixed price plan with Power Save Ltd. where you pay 23.50 cents per kilowatt hour (kWh). On average, you and your family consume 800 kWh of electricity a month. You pay for electricity at the end of each month. After shopping around, you find that SuperSave Elec Ltd. is offering a discount of $100, which will be deducted from your first monthly bill, if you switch to their company under a fixed price plan for a year. The electricity price per kWh charged by SuperSave Elec is 24 cents. Assume the discount rate is 10% per year (compounded monthly).
(a) How much is your electricity costs per year at today’s value? Do the calculation for both providers and exclude the discount amount.
(b) How much could you save if you decide to switch to SuperSave Elec for a year?
Total: 40 marks
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