Financial Management Assignment
` KRESNO SETIANTO ACCOUNTING 2 008201100042
Jababeka Education Park, Jalan Ki Hajar Dewantara, Cikarang – Bekasi 17550
QUESTION NUMBER 1 Year Project A Project B 1 2,400,000 3,000,000 2 3,000,000 4,000,000 3 4,000,000 2,500,000 4 3,200,000 2,000,000 5 1,800,000 1,200,000
The project costs $8m and $9m respectively and the company’s cost of capital is 14%.
1.A. Determine PVs of the project * NPV of Project A = -8.000.000+(2.400.000/(1,14))+(3.000.000/(1,14)2)+(4.000.000/(1,14)3)
+(3.200.000/(1,14)4) +(1.800.000/(1,14)5) = 1.943.072,3 * NPV of Project B =*…show more content…*

Ex | | 1,5 | 1,5 | 1,5 | 1,5 | 1,5 | 1,5 | Add WC | | | | | | | 0,8 | Total | | 2,2 | 2,2 | 2,2 | 2,2 | 2,2 | 3,35 | WACC | 10% | | | | | | | NPV | $430.718,56 | | | | | | | From the calculation above, we can se that the amount of NPV is positive and Valour should take the project QUESTION NUMBER 3 Valuation of a company can be done using several methods, one of which is dividend growth model. Ohio Ltd, a retail business selling consumer goods, is traded in the stock exchange and the following information is available for Ohio Ltd: Cost of Equity 18% Current year’s earnings per share $0.50 Retention Ratio 80% Expected annual growth rate of dividends (first 3 years) 20% Expected annual growth rate of dividends (after 3 years) 6% Ohio Ltd is expected to grow indefinitely at 6% per annum after 3 years. 3.A. Using dividend growth model, calculate the expected current share price of Ohio Ltd. 0 | 1 | 2 | 3 | 4 | 0,1 | 0,12 | 0,144 | 0,173 | 0,183 | | 0,10169 | 0,10341 | 1.03345 | | (0,12/1.18) (0.144/1.182 ) (0.173+x/(1.183)) X=0.183/(18%-6%) * Expected current share = 0.10169 + 0.10341 + 1.03345 = 1.23855 B . Ohio is experiencing a boom in the industry trend and changes its terminal growth rate of 6% to 10% due to this fact, calculate the new expected current

Ex | | 1,5 | 1,5 | 1,5 | 1,5 | 1,5 | 1,5 | Add WC | | | | | | | 0,8 | Total | | 2,2 | 2,2 | 2,2 | 2,2 | 2,2 | 3,35 | WACC | 10% | | | | | | | NPV | $430.718,56 | | | | | | | From the calculation above, we can se that the amount of NPV is positive and Valour should take the project QUESTION NUMBER 3 Valuation of a company can be done using several methods, one of which is dividend growth model. Ohio Ltd, a retail business selling consumer goods, is traded in the stock exchange and the following information is available for Ohio Ltd: Cost of Equity 18% Current year’s earnings per share $0.50 Retention Ratio 80% Expected annual growth rate of dividends (first 3 years) 20% Expected annual growth rate of dividends (after 3 years) 6% Ohio Ltd is expected to grow indefinitely at 6% per annum after 3 years. 3.A. Using dividend growth model, calculate the expected current share price of Ohio Ltd. 0 | 1 | 2 | 3 | 4 | 0,1 | 0,12 | 0,144 | 0,173 | 0,183 | | 0,10169 | 0,10341 | 1.03345 | | (0,12/1.18) (0.144/1.182 ) (0.173+x/(1.183)) X=0.183/(18%-6%) * Expected current share = 0.10169 + 0.10341 + 1.03345 = 1.23855 B . Ohio is experiencing a boom in the industry trend and changes its terminal growth rate of 6% to 10% due to this fact, calculate the new expected current

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