Corporate Finance Assignment, SMU, Singapore: Blue River Financial Ltd offers investments that pay12.50% interest compounded monthly
University | Singapore Management University (SMU) |
Blue River Financial Ltd offers investments that pay 12.50% interest compounded monthly, whereas Mutual Financial Ltd offers investments that pay 13% compounded annually. Which investment would you select?
XYZ Ltd operates a chain of weight-loss centers for carb lovers. Its services have been in great demand recently, and its profits have soared. XYZ recently paid an annual dividend of $2.70 per share. Investors expect that the company will increase the dividend by 25% in each of the next three years, and after that, they anticipate that dividends will grow by about 6% per year. If the market requires an 11% return on XYZ shares, what should the share sell for today?
Suppose a firm follows NPV criteria to make its investment decision. Also, suppose that the firm misestimates the required rate of return of its shareholders and continues applying a discount rate that is too high. What consequences will this practice have on the firm’s share value?
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To settle a debt with interest at 12% compounded semiannually, Mr Who agrees to make 15 payments of $400 at the end of each half-year and a final payment of $292.39 six months later. How much did Mr Who borrow?
ABC Ltd issued $1,000 par value bonds a few years ago with a coupon rate of 7%, paid semi-annually. After the bonds were issued, interest rates fell. Now with three years remaining before they mature, the bonds sell for $1,055.08. What YTM do these bonds offer?
Find the discounted value of $1000 due in 3 months if the simple interest rate is 11%
Blue Duck Plumbing Ltd has identified the following two mutually exclusive projects:
What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept?
(b) If the required rate of return is 11%, what is the NPV for each project? If you apply the NPV decision rule, which project should the company accept?
(c) Comment on your decisions in (a) and (b) above
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