Question: can any tutor assist me please Section A (Compulsory question) Question 1 Yulbury plc is listed on the Australian Stock Exchange. Analysts estimate the stock's

can any tutor assist me please

can any tutor assist me please Section A
Section A (Compulsory question) Question 1 Yulbury plc is listed on the Australian Stock Exchange. Analysts estimate the stock's equity beta to be at 2.17. The ASX 200 Index is expected to earn a return of 15 percent per annum. The T-bill rate is at 5 percent per annum. The firm plans to invest in one of two mutually exclusive projects P or Q. Either project is the same risk as the firm's other assets. The expected cashflows of the two projects are: Project Today Year 1 Year 2 Year 3 Year 4 P Outflow Inflow Inflow Inflow Inflow $200,000 $10,000 $40,000 $140,000 $70,000 Outflow Inflow Inflow Inflow Inflow $150,000 $70,000 $60,000 $100,000 $80,000 Required: (a) Calculate the company shareholders' required return. (10 marks) (b) Using the net present value approach, which project should Yulbury plc accept? Assume the discount rate to be the cost of equity capital. (12 marks) (c) The two projects have the same project beta, being 1.52. Derive the projects' required retum and advise on project selection using the net present value and the discounted payback period approaches. (12 marks) (d) Assume that the general inflation rate has risen by 25 percentage points. Discuss the impact of this on the cost of equity, the after-tax weighted average cost of capital and on project selection. No calculations are required here. (16 marks) (Total - 50 marks) End of Section A

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