Assignment _The Investment Detective (FINANCIAL MANAGEMENT)

8/21/2019 Assignment _The Investment Detective (FINANCIAL MANAGEMENT)

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FIN6001 FINANCIAL MANAGEMENT Summer 2015

Assignment Weight 10%

Part A:

Briefly explain the different types of capital available to listed companies in the UAE. Whichtype of capital do they prefer and why?

Briefly explain the role and importance Primary markets and Secondary markets.

Briefly explain fnctions and importance of the Securities and Commodities Authority of theUAE.

!n "ne #$ #%&' at (.)% pm *r. +a,ed -a,ab +htaseb$ Senior -esearch Stdies/onsltant of the Emirates Securities and Commodities Authority will deliver a lecture on

“The Steps” toward successful investing . 0t is mandatory to attend this lectre and 1ather the

re2ired information for answerin1 the above ) 2estions. www.sca.go.ae

Part B:

The Investment Detective

3he essence of capital bd1etin1 and resorce allocation is a search for 1ood investments inwhich to place the firm4s capital. 3he process can be simple when viewed in prely

mechanical terms$ bt a nmber of sbtle isses can obscre the best investment choices. 3hecapital5bd1etin1 analyst$ therefore$ is necessarily a detective who mst winnow 1oodevidence from bad. +ch of the challen1e is in knowin1 what 2antitative analysis to1enerate in the first place.

Sppose yo are a new capital5bd1etin1 analyst for a company considerin1 investments inthe ei1ht pro,ects listed in E!"#$#t 1. 3he chief financial officer of yor company has asked

yo to rank the pro,ects and recommend the 6for best6 that the company shold accept.

http://www.sca.gov.ae/





0n this assi1nment$ only the 2antitative considerations are relevant. 7o other pro,ectcharacteristics are decidin1 factors in the selection$ except that mana1ement has determined



that pro,ects 8 and ( are mtally exclsive.

All the pro,ects re2ire the same initial investment$ 9# million. +oreover$ all are believed to be

of the same risk class. 3he firm:s wei1hted5avera1e cost of capital of the firm has never beenestimated. 0n the past$ analysts have simply assmed that &) percent was an appropriatediscont rate ;altho1h certain officers of the company have recently asserted that the discontrate shold be mch hi1her<.

This case was prepared by Professor Robert ! "runer with the permission of Professor #ordon

$onaldson% the author of an antecedent case!

Copyright & '()) by the *niversity of +irginia $arden School oundation% Charlottesville% +A! All

rights reserved!

E%&I'IT 1 Pro,ect =ree /ash =lows ;dollars in thosands<

Pro(ect

1

2

)

*

5

6

+

,

-um$er:

/2000

/2000

/2000

/2000

/2000

/2000

/2000

/2000

I-#t#a



I-estme-t

>ear &$330

$1,666

$160

$280

$2,600

$1,200

$50

#

330

334

200

280

900

60

)

330

165



350

280

300

60

?

330

395

280

90

350

'

330

432

280

70

700



@

530

440

280

1200

8

530

442

280

2,250

(

$1,000

444

280



A

446

280

&%

448

280

&&

450

280



&#

451

280

&)

451

280

&?

451

280



&'

$10,000

400

280

Sm of $3,710

$2,165

$10,000

$5,960

$4,200

$2,600

$2,560

$4,670

cash5flow

benefits



Excess of $1,710

$165

$8,000

$3,960$2,200

$600

$560

$2,670

cash flow

over initial

investment



3o stimlate yor analysis$ consider the followin1 2estions

/an yo rank the pro,ects simply by inspectin1 the cash flows?

What criteria mi1ht yo se to rank the pro,ects? Which 2antitative rankin1 methods

are better? Why? ,"rief e-planation of various methods e-pected.

What is the rankin1 yo fond by sin1 2antitative methods? *oes this rankin1 differfrom the rankin1 obtained by simple inspection of the cash flows?

-ecommend the 6for best6 that the company shold accept.

Submit the report on or before June15, 2015.

Assignment _The Investment Detective (FINANCIAL MANAGEMENT)

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