# Assignment

## Assignment

MAY 2015 REASSESSMENT INTAKE 9, HANOI

FIN501 CORPORATE FINANCE

ASSIGNMENT 1

Due date : 2 July 2016

Word limit : 3,000

Weighting : 30% of total marks for the subject

PART A

Question 1 (20 marks)

Can our goal of maximizing the value of the shares conflict with other goals such as avoiding unethical or illegal behaviour? In particular, do you think issues like customer and employee safety, the environment, and the general good of society fit into this framework, or are they essentially ignored? Support your views with specific examples.

Question 2 (16 marks)

a. Your neighbour, knowing you are studying finance, asks you ‘what is this idea of probabilities and what does it tell me?’ Provide an answer for your neighbour.
(8 marks)

b. The neighbour then says ‘OK, I know understand probabilities, but what really confuses me is the idea of expected values and standard deviations. What do they mean?’ Provide an answer explaining what they are telling the user.
(8 marks)

Question 3 (12 marks)

Currently Acer Ltd dividends are growing by 10% pa and this is expected to continue for another two years. After that time they are expected to grow by 8% pa for the next two years, and then by 6% every year. Next year’s dividend is expected to be \$0.80, and the appropriate discount rate is 12%. If you have \$20,700 to invest, how many shares can you buy in Acer Ltd?

Question 4 (12 marks)

Three years ago, Barney Ltd. issued 10 year \$1,000 bonds with a 7% coupon rate paid semi-annually, at par value. The market currently requires a 9% yield.

i. What was the price of the bond at issue?
(2 marks)

ii. What is the current price of the bond?
(3 marks)

iii. If the market yield falls to 6% in two years time, what will the bond's price be at that time?...