Financial Analyst Challenger Ltd 金融会计assignment代写

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Financial Analyst Challenger Ltd 金融会计assignment代写
 

 NA INDIVIDUAL ASSIGNMENT

DUE DATE: Submission 17 Jul 2018 –11:59PM

WEIGHTING – 40 marks, weight 20%

You are a Financial Analyst with Challenger Ltd and the chief financial officer (CFO) requests you

to evaluate two new capital budgeting proposals. Specifically, you are asked to provide a

recommendation and also respond to a number of questions aimed at assessing your level of

competence in capital budgeting process.

Instructions are as follows:

Provide an evaluation of two proposed projects, both with identical initial outlays of $200,000.

Both of these projects involve additions to a client’s highly successful product line. The required

rate of return on both projects is set at 11%. The expected after-tax cash flows from each

project are as presented in the table below.

PROJECT X  PROJECT Y

Initial outlay  -$400,000  -$400,000

Inflow year 1  $80,000  $160,000

Inflow year 2  $140,000  $160,000

Inflow year 3  $130,000  $160,000

Inflow year 4  $160,000  $160,000

Inflow year 5  $160,000

Inflow year 6  $160,000
 

Financial Analyst Challenger Ltd 金融会计assignment代写
 

In evaluating these projects, please respond to the following questions:

1. Offer your insight on what discount rate means? (5 marks)

2. What is the payback period on each project? If Challenger Ltd imposes a 2.5-year maximum

acceptable payback period, which of these projects should be accepted? (7 marks)

3. What are the main limitations of the pay back method of valuation. Despite these limitations, the

pay back method, most chief financial officers (CFOs) use it. Explain why. (5 marks)

4. Determine the NPV for each of these projects? Should the projects be accepted? Explain. (5

marks)

5. Determine the IRR for each of these projects? Should the projects be accepted? Explain. (3 marks)

6. Under what circumstances will the NPV and IRR offer different prescriptions? (3 marks)

7. How would you accommodate unequal lives of the project while determining the NPVs of the

project? Demonstrate using calculations. (3 marks)

8. Explain why unequal lives of projects make NPVs of the projects incomparable. (3 marks)

9. Determine the profitability index for each of these projects? Should the projects be accepted?

Explain. (4 marks)

10. Clarity of Presentation (2 mark)

Word Limit – About 1200 words – tables and calculations not included in the word limit.

END OF ASSIGNMENT

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Financial Analyst Challenger Ltd 金融会计assignment代写