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Question on 1 Answer A Sue smith

PV = Present value of cash flow CF = annual cash flow R = discount rate Now, PV= CF/ r PV= 600/0.06 = 10,000

Hence, sue smith is required to pay amount of 10,000 as an initial single payment. And For three students its (3 x 10,000) = 30,000

Answer B

If the university could earn 9% instead of 6% than rate is 0.09 So, According to question, PV= 600/0.09 = 6666.67 Hence for three students (6666.67 x 3) = 20,000 Question 2 Answer A

He nc e ,d e p os i tof$ 22, 214 . 03i sr e qu i r e dt ot opr o vi d ef orf ul lc o v e r a g eoft h e a nt i c i pa t e dbud g e ts ho r t f a l l s . ( wor k i n gi si ne x c e l ) Answer B If there is Increase in the earning rates, it will result in decrease in in the single amount that need to be deposited. This is due to the fact that, A greater number discounted to cash flow will result in lesser present value.

there will be lesser present value when the cash flow will be discounted by a greater number.

Question 3 Answer A Future value (FV)= Present value (PV) x Future Value Factor = PV x (1+ rate) numbers of periods

At the end of each year: FV for A = $3448.96 FV for B = $123616.78 FV for C = $6211.19

(wor k i ngi si ne x c e l )

Answer B At the beginning of each year: FV for A = $3682.835 FV for B = $138450.8 FV for C = $6956.537

(wo r k i ngi si ne x c e l )

PART 2: Question 1 Answer A Nelson’s waters purchased share 1000 shares at 20.50 pesos per shares. It can be calculated by the following formula.

rt= Ct+ Pt – P(t-1)/ P(t-1) Whereas: Rt – Required rate of return during period Pt – Price of assets at Time P(t-1) – Price of Assets at time C1- Cash received from investment in assets form. Now, 0+24.75−20.5 20.5

Rt=

=0.2073 =20.73% Finally, the return on investment is 20.73%

Answer B From exchange rate translation of purchase and sales price into NZ$, can be calculated as follows: Value∈ pesos

NZ$= Exchange rate =

20.50 9.21

= 2.2258 Hence, purchase price is $2.2258 For, sales price NZ$=

24.75 9.85

= 2.5126 Hence, sale price is $2.5126

Answer C

Rt =

0+2.5126−2.2258 2.2258

= 0.1289 = 12.89% Therefore, the return on investment is 12.89%

Answer D The two returns are different because of the fluctuation in the currency value as NZ$ is higher than the pesos. As in return Nelson will receive less NZ$ in compared to pesos. As the NZ$ is higher in terms of return so NZ$ is more important for Nelson.

Question 2

Answer A Each project’s payback period Payback period = (no. year recovered) +

unrecovered cost at starting of last year ca sh flow∈following year

Forpr o j e c tA Cu mu l a t i v ec a s hflo w: Ye a r s

Ca s hflo ws

Cumul a t i v e

0

4 0, 0 0 0

4 0 , 00 0

1

1 3 , 00 0

27 , 0 00

2

1 3 , 00 0

14 , 0 00

3

1 3 , 00 0

1, 0 0 0

4

1 3 , 00 0

1 2, 0 0 0

5

1 3 , 00 0

2 5, 0 0 0

At t hee n doft h ey e a r4i th a sb e e nr e c o v e r e ds oi t l i e si ny e a r4 . 1000

Payback period = 3 + 13000 40,000

= 13000 = 3.08

Hence, the payback period for A is 3.8 years. For project B

Ye a r s

Ca s hflo ws

Cumul a t i v e

0

4 0, 0 0 0

4 0 , 00 0

1

7 , 0 00

3 3, 0 0 0

2

1 0 , 00 0

23 , 0 00

3

1 3 , 00 0

10 , 0 00

4

1 6 , 00 0

6 , 00 0

5

1 9 , 00 0

2 5, 0 0 0

At t hee n doft h ey e a r4i th a sb e e nr e c o v e r e ds oi t l i e si ny e a r4 . 10,000

Payback period = 3 + 16, 000 58 , 000

= 16 000 = 3.625

Hence, the payback period for B is 3.625 years. For project C

Ye a r s

Ca s hflo ws

Cumul a t i v e

0

4 0, 0 0 0

4 0 , 00 0

1

1 9 , 00 0

21 , 0 00

2

1 6 , 00 0

5, 0 0 0

3

1 3 , 00 0

8 , 00 0

4

1 0 , 00 0

1 8, 0 0 0

5

7 , 0 00

2 5 , 00 0

At t hee n doft h ey e a r3i th a sb e e nr e c o v e r e ds oi t l i e si ny e a r3 . 5000

Payback period = 2 + 130 00 31 , 000

= 13 000 = 2.38

Hence, the payback period for C is 2.38 years. According to this, Project C will be preferred because it has minimum payback period, In compression to project A and B.

Answer B Net present value (NPV) for project A is $2566 Net present value (NPV) for project B is $(322.53) Net present value (NPV) for project C is $5454.168 (wor k i ngi si ne x c e l ) According to this, Project C will be preferred because it has maximum positive NPV.

Answer C

From finding A and B we would recommend project C because it has maximum NPV and lowest payback period.

Question 3 Answer A Expected return for X is 4% Expected return for Y is 11% Expected return for Z is 10% Hence, the largest expected return is project Y which is 11%.

Answer B Standard deviation of project X is  172.6 = 13.2. Standard deviation of project Y is 519 = 22.78

(wor k i n gi si ne x c e l )

Standard deviation of project Z is 220 = 14.83 Higher the standard deviation higher the risk, so From the calculation Project Y has the greatest risk.

Answer C Coefficient variation of assets (CV)=

13.2 For Project x= 4

= 3.3 22.78 For Project Y = 11

= 2.07

Standard deviation expected return

14.83 For Project Z = 10

= 1.48 Higher coefficient variation, higher the risk. So, project Y has the greater risk.

PART C I NTRODUCTI ON: Co mpa n yv a l uei sav a s tt o pi ca n dt h a ta r edi s c u s s e di na l lo ft hea r e a .Th eor g a n i s a t i o nor b u s i ne s sfir m wa ntt oh a v et heg o o dv a l u eo fmo ne ya swe l la sg o o dv a l u eo ft h ec omp a n y . Va l u eofc o mpa n ywi l lb ede t e r mi n e db yt h ea s s e t sweh a v ei na no r g a ni s a t i o n.I ft h e o r g a ni s a t i o nwi l lh a v el o t so fa s s e t si nt he i rb a l a n c es h e e tt h a nt he ywi l lh a v eg o odv a l ueo f t h ec o mp a n yb e c a u s et he yc a nb r i n gmon e yf r o mt h ea s s e t sa swe l la sc a ni n v e s to nd i ffe r e nt s e c t o r ss uc ha ss h a r ema r k e t s .Co mp a n yv a l u ec a nb ed e t e r mi n e di nd i ffe r e n twa y ss u c ha s a s s e t s b a s e da pp r o a c h .Co mp a n ywh os es h a r ev a l u ei shi g hi ns h a r ema r k e tc a na l s os h o wt h a t t h ev a l u eo ft h ec o mp a n ya swe l l a sho wmuc hi n v e s t me n tt h ec omp a n yh a v ed on es of a r .

CONTENT: CEO wh i c hs t a n dsf o rc h i e fe x e c u t i v eo ffic e rwh ot a k e st h eh i gh e s tp o s i t i o ni nt h ec omp a n y , wh op l a y st her o l el i k ec or p or a t ed e c i s i o nma ki n g ,ma n a gi n gt h er e s o u r c e sa ndo p e r a t i o no f t h ec omp a n ya n da l s opl a y st her o l eofc o mmu ni c a t o rb e t we e nb o a r do fd i r e c t o r sa nd c o r po r a t eo pe r a t i o n s[CI TATI ONI n v1 8\ l3 0 81] . The t e r m Ca p i t a li n v e s t me n tc a nb ee x p l a i n e da st h ef u n d st ha ta r eu t i l i z e db yt he o r g a ni z a t i o n so re n t e r pr i s ef o rt h ee x p a n s i ono fi t sbu s i n e s so b j e c t i v e s .Mo r e o v e r ,c a p i t a l i n v e s t me nti sa l s okn o wn sa st h efir m’ sa c q ui s i t i ono fc a p i t a la s s e t so rfix e da s s e t st ha ta r e u s e d b yt he c omp a n y f o rt he ma n y y e a r ss u c h a s ma nu f a c t ur i n g p l a nt sa nd ma c hi n e r y[CI TATI ONI n v1 8\ l 30 8 1] .

Co mpa n yv a l u ei st h es o u lo ft h ec o mp a n yi de n t i t ywhi c hg i v e sv i e wo fc omp a n yp r i n c i p l e s , f a i t ho rph i l o s op h yofv a l u e s .Thec omp a n ywi t has t r o n gv a l u ea l l o wsb o t hi n t e r na la nd e x t e r n a la d v a nt a g e st ot hec o mp a n y[CI TATI ONFON1 3\ l30 8 1] . Someo ft h ea d v a n t a g ea r e a sf o l l o ws : a) Fi r s ta d v a n t a g ei sc or ev a l u eh e l p si nd e c i s i o nma ki n gp r o c e s s .Fora ni n s t a n c e :A c o mp a n ymi g h th a v et h ec o r ev a l u ei nma ki n gni c eq u a l i t ypr o d uc t s . Ac o mp a n ymi g h t p r e f e rmor eq u a l i t ypr o d uc t st h a nq u a n t i t ya n dmo n e y .So ,a n yp r o du c t swhi c ha r en o t a b l et os a t i s f yt heq u a l i t ys t a nd a r da r ee l i mi n a t e d[CI TATI ONFON13\ l30 8 1] . b )Co r ev a l u eg i v e sa ni de n t i t yt ot h ec o mp a n ya ndgi v e si nf or ma t i o na b ou tt h ec o mp a n y t ot h ec u s t o me r .Fo re x a mp l e ,t h ec o r ev a l u eo ft h eWoo l wor t hi st og e tr i do ft he p l a s t i cb a g s . Sp e c i a l l yi nt hi sc omi t a t i v ema r k e tWo o l wo r t h si sma ki n gp os i t i v ei mp a c t o nt hec us t ome r . CEO i sr e g a r de da st h et o pd e c i s i o nma k e ri nt h eo r g a n i s a t i o n.Mo r e o v e r ,CEOsh a v ea d e fin i t i v ed u t yt ou s et he i rp oi n t so fvi e wf o rp r o c e d u r ed e t a i l i n ga ndu s a g e .I ti sb e l i e v e dt ha t l o n gt e nu r e d CEO t e nd st o be l e s so pe n mi n d e da n d ma s s i v e l yd e c r e a s et h e i r p e r s pe c t i v e s [CI TATI ONWe n1 2\ l 30 8 1] . TheCEOse x a mi n eo u t s i d eb o a r dme mbe r si ft h e ya r eus e f uli nn u mbe r so fa r e a s .Ho we v e r , CEOsa l s omo n i t or st h efina n c i a lp e r f o r ma n c e ,a sb e i n gas ou n di n gb oa r dt ot h et e a ma n d a l s oh i r ea ndr e pl a c et h en e wCEO[CI TATI ONBRU9 3\ l30 8 1] .Mo r e o v e r ,s t u d ys h o wst h a t t h eo r g a n i s a t i o nh a si t sv a l u e ,b u tt heCEOswi l ln o tb ea wa r et ha tt he ya l s oa ddt h ev a l u et o t h ec omp a n y[CI TATI ONBRU9 3\ l3 0 8 1] . I na no r g a n i s a t i o nt heCEOh e l p si ns e l e c t i o nt he b o a r dme mb e r sa n da l s oh a v et h ep o we rt oc on t r olo v e rt h eb o a r d ,onwh i c ht h eo u t s i d e me mb e r sh a v el i mi t e dus e f u l n e s swhi c hme a n si nt h es ma l lc o mp a ni e st h ei ns i d e rwi l lh a v e mo r ep o we rt h a nt h eo ut s i d e r[CI TATI ONBRU9 3\ l30 8 1] . Ov e rt hepa s tt e ny e a r s ,r e s p o ns i b i l i t ya nda c c ou n t a b i l i t yofCEOsi sr e g a r d e da smo s t i mpo r t a n te t h i c a lc o n c e r n .So meo ft h er e p u t e dor g a n i s a t i o ns u c ha sAI G,Wo r l d c o m,Enr o n a r eb l a mi n gCEO f o rdo i n gt h ewr o n g d oi n g .Ke n ne t hLa y ,CEO ofEn r o nc o r po r a t i o na f t e r b e i n gc a u g ht o ff r a ud o r hi s wr o n g d oi n g wa st he r e a s o ni nd e a t ho f En r o n o r g a ni s a t i o n[CI TATI ONFe r 1 1\ l3 0 8 1] .Or g a ni s a t i o nc a nd e mi s eb e c a u s eo fCEOf a i l u r et o a c ta c c o un t a b l ea n dr e s p on s i bl ef o re x a mp l e ,Ke nLa ya n dJ e ffSki l l i n ga tEnr o n .Be c a u s eo f t h a tCEOi sr e g a r de da st heba c k b on eo ft h eo r g a ni s a t i o n.Mo r e o v e r ,t h e ya r et h ep a t hl e a de r s

o ft h eo r g a ni s a t i o n.Th eJ ur yf o u ndt hef r a u do fKe n La ya sh ewa sg i vi n gt h ef a l s e i n f or ma t i o na b ou tt h efin a n c i a ls t a t u so fEn r o n[CI TATI ONFe r 11\ l3 0 81] . Thema i np u r p o s eofc o r p o r a t eg o v e r n a nc es y s t e mi nAu s t r a l i ai sma dea n di mp l e me n t e dt o r e d u c et hea g e n c yp r o b l e m[CI TATI ONAp p1 5\ l3 08 1] . “ Co r p o r a t eg o v e r n a n c ei sde fin e da s af r a me wo r kofl e g a l ,i n s t i t u t i o n a la n dc u l t u r a lf a c t o r ss h a p i n gt h ep a t t e r n so fi n flue n c et h a t s t a k eh o l d e r se x e r to nma n a g e r i a ld e c i s i o n ma ki n g ” [CI TATI ONAp p1 5\ l3 0 81] .Cor p o r a t e g o v e r n a nc eh e l p st op r o t e c tt h eo u t s i d ei n v e s t o ra g a i n s te xp r op r i a t i o nb yi ns i d e r s [CI TATI ON Ap p1 5\ l3 0 8 1] .I n t e r na lc or p or a t eg o v e r n a n c eme c h a ni s msh e l pt oi de n t i fie sCEO d u a l i t y , b o a r ds i z e ,b o a r dc o mp o s i t i o na ndc ommi t t e ec omp o s i t i o nwh i c hp l a y sav i t a lr o l ei nt he Aus t r a l i a nfir ms [CI TATI ONApp 1 5\ l30 8 1] .Ac c o r d i n gt oCGPRsi s s u e di n2 01 0a nd2 0 1 4 , s i n g l ei n d i v i d ua lc a n n o tho l dt h ed u a lpo s i t i o no fCEOa ndr o l eofc h a i ro ft h eb oa r d . CEO pl a y sa ni mp o r t a n tr o l ef o ra n yb us i n e s sor g a ni s a t i o na swe l la sc or p o r a t ec a p i t a l i n v e s t me nt .Thes t ud ys h o wst h a tt he r ewi l lbet h ep o s i t i v er e l a t i o ns hi pb e t we e n CEO r e p u t a t i o na n dwe a l t he ffe c t so fc o r po r a t ec a pi t a li n v e s t me n t sa n dt h a ti sde s c r i b e db yt he e ffic i e n tc on t r a c t i n gh yp o t h e s i sa swe l la st he r ewi l lb et h en e g a t i v er e l a t i o n s h i pb e t we e n we a l t he ffe c t sofc a p i t a li n v e s t me nt sa ndCEO r e p ut a t i o na ndi sde s c r i b e db yr e n te x t r a c t i o n h y po t h e s i s[CI TATI ONJ i a 11\ l3 08 1] . I nt h es t o c kma r k e ta swe l l , CEOi so neo ft h ep e r s on wh oc a nc ha n g et h ema r k e tr e s po n s e ss uc ha st h eo r g a ni s a t i o nwh i c hh a v emo r er e pu t a b l e CEOs ,t h es t o c kma r k e tr e s p o ns e so fc a p i t a li n v e s t me n t sa r eont he i rf a v o ur [CI TATI ON J i a 1 1\ l3 0 81] .Fur t he r mo r e ,“ CEO r e pu t a t i o nmi t i g a t e st h en e g a t i v es t oc kp r i c er e a c t i o n a s s o c i a t e dwi t ha nn o un c e me n t so fc a pi t a li n v e s t me n t sb yfir mswi t hhi g hf r e ec a s hflo wa nd l o wgr o wt ho p p or t un i t i e s ” [CI TATI ONJ i a 1 1\ l3 0 8 1] .I ft heo r g a ni s a t i o ni so fh i ghf r e ec a s h flo wa n dl o wg r o wt ho pp o r t un i t i e swi t hr e p u t a b l eCEOsc a na l s oh a v ebe t t e rp os t i n v e s t me n t o p e r a t i n gp e r f o r ma n c ei mp r o v e me nt st h a nt h os ewi t hl e s sr e pu t a bl eCEOs [CI TATI ON J i a 1 1\ l30 8 1] . I na no r g a n i s a t i o n ,CEO ho l dt h ep o we ra n dt h e yh a v et h ec o n t r oli na ni n v e s t me n t .I nt h e o r g a ni s a t i o nt h ebo a r dme mbe r sh a v et hep o s i t i v ee ffe c to nR&Di n v e s t me nta n dt heCEOc a n e x e r c i s et h epo we rt omod e r a t et h i se ffe c t [CI TATI ON Ch e 14\ l3 0 81] .I nt h efir mt he p o we r f ulCEO c a n pr o v i d et hes t r a t e g i ca d v i c ea nd c o n t r o lo v e rt her e s o u r c e sf o rt he i n v e s t me ntt oe n h a nc ei nn o v a t i v ec a pa bi l i t i e s [CI TATI ON Ch e 1 4\ l3 08 1] .Th e r ewi l lbea n i mpo r t a n tr o l eo fCEOi na nor g a n i s a t i o nf o rt h ec a pi t a li n v e s t me n ta ndc or p o r a t eg o v e r na n c e . Tho s eb u s i ne s sfir m wh i c hh a v et h er e pu t a b l eCEOc a na l s omo t i v a t ea ndp r o v i d et hea d v i c e

f ort h ed i r e c t o r st oi nc r e a s et hei n v e s t me n ta ndt oe nh a n c et h ec a pi t a loft h efir m[CI TATI ON Ch e 1 4\ l30 8 1] .

CONCLUSI ON I nt hi swa ywec a mei nc on c l u s i o nt ha tt heCEOpl a y sa ni mp o r t a ntr o l ei nt h ebu s i ne s sfir ms . CEO i sa l s okn o wna st hed e c i s i o nma k e ri nt h ec o mp a n yf o rt hec a p i t a li n v e s t me n t .Th os e b u s i ne s sfir mswh i c hh a v et h eg oo da ndr e pu t a b l eCEOc a np e r f o r mwe l la n dt h e r ewi l lb et h e g r o wt ho ft hec o mp a n y .Th eg o o dCEO c a ni n c r e a s et hec a p i t a li n v e s t me n ta swe l la s c o mp a n yv a l u e .Wh e nt h e r ewi l lb emo r ec a pi t a li n v e s t me ntt h ec o mp a n yc a ne xp a n dt h e i r b u s i ne s sa swe l la st h e ye a r nt h eh i ghr e pu t a t i o ni nt h es o c i e t i e s .Co mpa n yv a l u es h o wsh o w g o odi st h ec o mp a n yi nt h es h a r ema r k e t ,s oi ti si mp o r t a ntf o rt heCEO t oh a v et h eg oo d c o mp a n yv a l u e .

Re f e r e nc e s Ap pu h a mi , R. , &Bh u y a n , M. ( 2 0 1 5) . Ex a mi n i n gt h ei n flu e n c eo fc o r p o r a t eg o v e r n a n c eon i n t e l l e c t ua lc a p i t a le ffic i e nc y :Evi d e n c ef r o mt o ps e r vi c efir msi nAus t r a l i a . MANAGERI ALAUDI TI NGJ OURNAL, 34 7 3 7 2.

BRUNO,A.V. ,BYGRAVE,W. D. , &TAYLOR, N. T. ( 1 9 93 ) . THECEO, VENTURE CAPI TALI STS, ANDTHEBOARD.J ou r n a lo fBu s i n e s sVe n t ur i n g , 8( 2) , 99 11 3 . Ch e n , H. L. ( 2 01 4) . Bo a r dCa p i t a l , CEOPo we ra n dR&DI n v e s t me n ti nEl e c t r on i c sFi r ms . Co r p or a t eGo v e r n an c e :AnI n t e r n a t i o na lRe v i e w, 42 2 4 3 6. Fe r r e l l, O. , &Fe r r e l l , L.( 2 0 11 ) .Th eRe s p on s i b i l i t ya ndAc c ou n t a bi l i t yo fCEOs :Th eLa s t I n t e r vi e wwi t hKe nLa y . J ou r n a lo fBu s i n e s sEt h i c s , 20 9 2 1 9. FONG, W. P . ( 2 0 13 , Ma r c h12 ) .Co mpa n yCo r eVal u e s :Wh yt oHa v eTh e man dHo wt o De fi neTh e m. Re t r i e v e df r o m7Ge e s e :h t t ps : / / 7g e e s e . c o m/ b e n e fit s of h a v i n g c o r e v a l u e s a nd h o wt o s e t t he mi n y ou r o r g a n i z a t i o n / I n v e s t o p e di a . ( 2 0 1 8) . Re t r i e v e df r omCh i e fe x e c u t i v eoffic e r -CEO: h t t p s : / / www. i n v e s t o p e di a . c o m/ t e r ms / c / c e o . a s p J i a n ,M. , & Le e , K. W. ( 2 0 1 1) .Doe sCEOr e pu t a t i o nma t t e rf orc a pi t a li n v e s t me nt s ?J o ur n a l o fCo r p or at eFi n an c e , 9 2 994 6 . We n g , D. H. , & Li n , Z. ( 2 0 12 ) . Be y o ndCEOTe nu r e :Th eEffe c to fCEONe wn e s son St r a t e g i cCh a n g e s .J o u r n alofMa n a g e me n t , 4 0, 2 01 0 ....