Task: The assignment consists of two parts: Part A of focuses on financial instruments of two companies, QANTAS and Westpac Banking Corporation. Part B is about the fundamentals of capital budgeting. Part A: QUANTAS and WESTPAC Share Prices 1. What is the current price of ordinary/common shares of AMP and Westpac? How has each evolved over the past 5-years? Explain how clips of news reported in the press (e.g. newspapers, TV or periodic financial journals) have moved the share prices of both Qantas and Westpac shares. Use a graph each series to illustrate your discussion. 2. Define Systematic and unsystematic risk. How might the current COVID-19 pandemic affect systematic risk and/or unsystematic risk of both Qantas and Westpac? Part B: Capital Budgeting Neridas Drilling Ltd requests you to evaluate two new capital budgeting proposals and provide your recommendations. You are required to submit a report by responding to the underlisted questions. Instructions are as follows: Provide an evaluation of two proposed projects, both with identical initial outlay of $400,000. The required rate of return on both projects is set at 15%. The expected after-tax cash flows from each project are presented in the table below. In evaluating these projects, please respond to the following questions: 1. Determine the net present value (NPV) of both projects. Should the projects be accepted or rejected? Explain in detail, including all calculations. 2. Determine the IRR for each of each project. Should the projects be accepted or rejected? Explain in detail, including all calculations. 3. Would your conclusions in parts (2) and (3) change if the required rate of return decreased to 12%? Explain in detail, including all calculations. 4. Under what circumstances will the NPV and IRR offer different recommendations, and which recommendation is preferred? Carefully explain 5. Determine the profitability index (PI) for each of these projects? By PI criterion, should the projects be accepted or rejected? Explain. 6. Define payback period. What is the payback period on each project? If Neridas Drilling Ltd imposes a 3-year maximum acceptable payback period, which of these projects should be accepted? What are the main limitations of the pay back method of capital budgeting?

Subject Name: Finance

Level: Undergraduate

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