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Boral BLD Commonwealth Bank CBA Woolworths WOW JB HiFi JBH Qantas QAN Instalment per month $’000s $30.2 $98.0 $15.7 $32.9 $26.2 Annual total revenue

 

Boral (BLD)

Commonwealth Bank (CBA)

Woolworths (WOW)

JB HiFi (JBH)

Qantas (QAN)

Instalment per

month ($’000s)

$30.2

$98.0

$15.7

$32.9

$26.2

Annual total

revenue ($millions)1

$5,800.60

$22,856.00

$59,984.00

$7,095.3

$17,966.00

Annual growth

in total revenue2

6.99%

1.22%

1.12%

16.14%

3.22%

Loan A (APR,

compounding frequency)

4.53%,

monthly

5.95%,                 semi- annually

6.84%,

quarterly

4.62%, semi- annually

5.54%,

monthly

Loan B (APR,

compounding

frequency)

5.15%, semi- annually

6.02%, monthly

6.54%, daily3

4.52%,

quarterly

5.05%, semi- annually

Loan C (APR,

compounding frequency)

4.82%, daily3

5.95%, quarterly

6.25%, semi- annually

4.24%, daily3

4.50%, daily3

Property cost

$586,000

$221,000

$892,000

$691,000

$540,000

7 year bond

annual coupon rate

5.07%

3.45%

6.51%

5.85%

4.17%

7 year bond

current price

$107.25

$96.60

$99.50

$99.95

$94.00

5 year bond required rate of

return

4.95%

3.15%

3.04%

4.85%

4.78%

1 Data from S&P Capital IQ for the company’s most recent financial year.

2 Most recent 5 year historical CAGR from S&P Capital IQ

3 Assume a 365-day year

Risk and return estimates (4 marks):

a.            Use CAPM to estimate the expected return for the shares of: i) JBH and ii) a hypothetical company with a negative beta of -0.30 as at 6 December, 2019. To do this, use the yield to maturity on that date of a 10-year Australian Government bond as a proxy for the risk-free rate, assume the market risk premium is 7% and use the company’s most recent 5 year beta.

b.            Using the data from part a, estimate portfolio expected return and beta, assuming a portfolio made up of your case company and the hypothetical company in equal weighting.

c.            Drawing on expectations from theory and incorporating the overall context of your chosen company, discuss and interpret the risk and return measures from parts a and b. You may include additional measures. If so, clearly source the data and ensure you clearly explain your calculations.

Aug 16 2020 View more View Less

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