Alex Plc is a newly-established company with interests in retailing and property development. Its current market...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Alex Plc is a newly-established company with interests in retailing and property development. Its current market capitalisation is £75m. The company trades exclusively in the UK, but it is planning to expand overseas either by acquisition or joint venture within the next two years. The company has built up a portfolio of investments in equities and corporate and government debt. The main aim of developing this investment portfolio is to provide a source of funds for its overseas expansion programme. Summary information on the portfolio is given below. Type of security Value(£ million) Average% return over the last 12 months 15.0 UK equities US equities UK corporate debt Long-term government debt Three-month treasury bonds 3.3 1.8 13.5 0.9 8.2 2.0 7.4 0.4 5.0 Approximately 60% of the UK equities are in small companies' shares, and details of the portfolio are as follows. Company No. Еxpected return (%) Beta Share Dividend Shares price (£) yield (%) Rasiak 12 70,000 150,000 100,000 Bisgaard 80,000 130,000 1.27 3.75 5.6 Johnson 1.53 4.25 3.5 16 Smith 1.01 2.50 4.2 14 0.95 0.82 9.5 15 4.50 6.2 Idlakez 3.50 4.8 The average return on all UK equities, over the past 12 months, has been 12%. On US equities, it has been 12.5%. You are required to: 202 BAC5014 Coursework 1. Approximate the risk-free rate in this case. Furthermore, calculate the average Beta of the UK component of the company by applying CAPM (Capital Asset Pricing Model). (5marks) 2. Ignoring taxation, discuss the advantages and disadvantages of holding such a portfolio of investments in the circumstances of Alex Plc. (30marks) 3. Regarding the invested equities of UK small companies, provide Alex Plc advice on how it should change the composition of the portfolio, giving a rationale for the changes that you recommend. (15marks) 4. Alex Plc is going to increase its investment in equities issued by UK Blue-chip companies. Please prepare a report to recommend One UK Blue-chip company with supportive evidence. Your analysis should be based on: a) Your evaluation of the share price, in which you need to apply three different valuation methods : i) NAV (Net Assets Value) model, and ii) DCF (discounted cash flow) model. (40marks) b) The impact of the new investment on overall risk and return of the portfolio. (10marks) (100 marks in total) Notes: Word limit is 4,000 words. One electronic copy to be sent to Turnitin by 14th May 2021 3pm. All data must be collected from reliable resources (e.g. Fitch, Yahoo Finance and official company web sides) and properly referenced. For the chosen company, you need to present relevant financial data and any finsancial information.for the nset 12 monthe D Focus Alex Plc is a newly-established company with interests in retailing and property development. Its current market capitalisation is £75m. The company trades exclusively in the UK, but it is planning to expand overseas either by acquisition or joint venture within the next two years. The company has built up a portfolio of investments in equities and corporate and government debt. The main aim of developing this investment portfolio is to provide a source of funds for its overseas expansion programme. Summary information on the portfolio is given below. Type of security Value(£ million) Average% return over the last 12 months 15.0 UK equities US equities UK corporate debt Long-term government debt Three-month treasury bonds 3.3 1.8 13.5 0.9 8.2 2.0 7.4 0.4 5.0 Approximately 60% of the UK equities are in small companies' shares, and details of the portfolio are as follows. Company No. Еxpected return (%) Beta Share Dividend Shares price (£) yield (%) Rasiak 12 70,000 150,000 100,000 Bisgaard 80,000 130,000 1.27 3.75 5.6 Johnson 1.53 4.25 3.5 16 Smith 1.01 2.50 4.2 14 0.95 0.82 9.5 15 4.50 6.2 Idlakez 3.50 4.8 The average return on all UK equities, over the past 12 months, has been 12%. On US equities, it has been 12.5%. You are required to: 202 BAC5014 Coursework 1. Approximate the risk-free rate in this case. Furthermore, calculate the average Beta of the UK component of the company by applying CAPM (Capital Asset Pricing Model). (5marks) 2. Ignoring taxation, discuss the advantages and disadvantages of holding such a portfolio of investments in the circumstances of Alex Plc. (30marks) 3. Regarding the invested equities of UK small companies, provide Alex Plc advice on how it should change the composition of the portfolio, giving a rationale for the changes that you recommend. (15marks) 4. Alex Plc is going to increase its investment in equities issued by UK Blue-chip companies. Please prepare a report to recommend One UK Blue-chip company with supportive evidence. Your analysis should be based on: a) Your evaluation of the share price, in which you need to apply three different valuation methods : i) NAV (Net Assets Value) model, and ii) DCF (discounted cash flow) model. (40marks) b) The impact of the new investment on overall risk and return of the portfolio. (10marks) (100 marks in total) Notes: Word limit is 4,000 words. One electronic copy to be sent to Turnitin by 14th May 2021 3pm. All data must be collected from reliable resources (e.g. Fitch, Yahoo Finance and official company web sides) and properly referenced. For the chosen company, you need to present relevant financial data and any finsancial information.for the nset 12 monthe D Focus
Expert Answer:
Answer rating: 100% (QA)
PageNoat Answer Given data The advantage of holding Such a Po... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
Posted Date:
Students also viewed these computer network questions
-
n There is a newly established SERVICE COMPANY as of Jan 01, 2015. You should prepare your SA by considering below items to be recorded to the Journal; 1. On the l" of January, some capital from...
-
TicketTime is a newly established company that is trying to promote new musicians. The company organizes and holds concerts all over Pakistan annually during the winter/spring season. Financial year...
-
Extreme Inc. is a newly established enterprise. It was set up by an entrepreneur who is generally interested in the business of providing engineering and operational support services to aircraft...
-
What does the following code fragment print when \(\mathrm{n}\) is 50 ? Give a high-level description of what the code fragment does when presented with a positive integer n. Stack stack while (n> 0)...
-
The BCD Partnership plans to distribute cash of $20,000 to partner Brad at the end of the tax year. The partnership reported a loss for the year, and Brad's share of the loss is $10,000. Brad has a...
-
Bill plans to open a self-serve grooming center in a storefront. The grooming equipment will cost $265,000, to be paid immediately. Bill expects aftertax cash inflows of $59,000 annually for seven...
-
Why do auditors prepare analytic flowcharts of processing systems?
-
An refinisher of antiques named Constance has been so successful with her small business that she is planning to expand her shop with all new equipment. She is going to start enlarging her shop by...
-
Blue Llama Mining Company is analyzing a project that requires an initial investment of $2,750,000. The project's expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 -100,000 Year 3 Year 4...
-
A storeroom is used to organize items stored in it on N shelves. Shelves are numbered from 0 to N-1. The K-th shelf is dedicated to items of only one type, denoted by a positive integer A[K]....
-
This paper focuses on financial soundness indicators (FSIS) and suggests two sets of such indicators for insurance companies. FSIs are one of the major tools for surveillance and early supervisory...
-
Write a Python program to implement the A* search algorithm for finding the shortest path between two nodes in a graph.
-
Quantity data of NICE company for the month of March 2020 ; WIP, beg 12,000 units (20% completed); Started in process 58,000 units; WIP, end 17,000 units (80% completed) ; Lost units 8,000. Normal...
-
What is the importance of cost accounting in optimizing MARGINS and PROFITABILITY?
-
There is a T-bill futures contract expiring in 70 days being traded. The 91-day T-bill yield is 3.44%, the 161-day T-bill yield is 0.1%, and the risk-free rate is 0.05%. If the market price on the...
-
News about the recent wildfires generally talk about number of acres burned by the fires. Most people don't think in terms of acres. If an acre is defined to be 4840 square yards, then , i. How many...
-
I am currently working in R programing i have a date that is 1998-01-01 (yyyy-mm-dd) and i need to change it to (yyyy-mm) to run a time series analysis
-
The text defined intrinsic value as the value of an asset given a hypothetically complete understanding of the assets investment characteristics. Discuss why hypothetically is included in the...
-
On January 1, 20X0, Mariachi Corporation acquired 70% of the outstanding shares of Sombrero Company for $ 85,000 cash. On that date, Sombrero Company had $ 35,000 of common shares outstanding and $...
-
Under what circumstance can one corporation control another without owning a majority of the controlled corporations voting shares?
-
Parch Ltd. purchased 100% of the voting shares of Subbet Ltd. for $ 1,400,000 on October 1, 20X6. The SFP of Subbet Ltd. at that date was: Required What are the eliminations and adjustments required...
-
Which one of the following sets the standards for behavior within the organization? A. The mission. B. The values. C. The philosophy. D. The vision.
-
When reviewing an organizational chart, what represents the formal line of authority and responsibility within the organization? A. Specialization of labor. B. Chain of command. C. Span of control....
-
Which type of structure has decision making and power being led by a few people? A. Flat. B. Integrated. C. Matrix. D. Tall.
Study smarter with the SolutionInn App