this is finance and investment questions. I need the answer to be in accordance to the question (australia).
here is the questions:
Question 4 (Total marks for this question = 14 marks)
The rate of return for an Australian Commonwealth Government Treasury Bond is given as 4% per annum. The yearly return for the Australian share market is given as 12%. Suppose a listed company has a beta value of 0.75. The dividend payments for the listed company are expected to grow at 4% per year. The current dividend is $3 per share.
(a) Calculate the market premium. (2 marks)
(b) Calculate the investors required rate of return for the companys shares.(4 marks)
(c) Calculate the intrinsic price of the shares. (4 marks)
(d) If the market price is $50 per share, would you buy shares in the company? Explain your answer. (2 marks)The broadest index on the Australian share market is the All Ordinaries Index.(a) Define the All Ordinaries Index and explain how the All Ordinaries Index can be used to estimate the market return of the Australian share market. (4 marks)
(b) Construct a table showing the daily closing value of the All Ordinaries Index from September 30, 2013, to October 18, 2013, inclusive. (2 marks)
(c) On your table, show the daily percentage change in the All Ordinaries Index in this time period, to two decimal places. (4 marks)
(d) Did the All Ordinaries Index show any volatility during this time period and what was the cause of this volatility? (5 marks)Question 7 (Total marks for this question = 10 marks)
Consider an investment project with a length of n years and an initial outlay IO. Let be the net cash flow for the project in year t, where t = 1, 2, , n. Let k be the project discount rate per annum, expressed in decimal form. t ACF
Write down a formula for the net present value, NPV, for the project. (2 marks)Write down a formula for the profitability index, PI, for the project. (2 marks)(c) Using your answers to (a) and (b), show that . (4 marks) NPV IO PI IO? ?
(d) Why is the net present value used more than the profitability index in capital budgeting? (2 marks)Question 10
State whether or not you think the Board of the Reserve Bank of Australia will decrease the cash rate again in the current interest rate cycle. Give reasons for your answer.