ACC00716 Finance - Business Case Study: BORAL LTD - Assignment Help

Q1.

221. a) Boral Limited with a payment of $29,100 and a discount rate of 7% will receive $1,215,221.86 from the bank for the installment contract. 
222. b) The current revenue of Boral Limited is $5,731,100,000 with a 6.6% annual growth in the fifth year the revenue will be $7,889,037,307.05.
223. c) Boral Limited out of all the available options to borrow funds will choose the option with the lowest effective annual rate. Option A has an EAR of 5.04%, Option B has an EAR of 5.06% and Option C has an EAR of 5.03%. Option C is the most feasible option for borrowing funds the interest is compounding on a daily basis.
224. d) Boral Limited new property cost $574,000 with the adjustment on the APR of the quarterly compounding factor, the bank is to be paid monthly 120 times. The quarterly payment will be $17,315.58.
225. e) The Yield to Maturity is 54% for the 8-year bond.
226. f) The coupon amount which is paid semi-annually is $35.

Q2.

1. a) Boral Limited has a 5 year beta of 1.14, with the hypothetical company beta a negative 0.2. Using CAPM the expected rate of return for Boral is 74% and the hypothetical company has 0.70% as their expected rate of return.
2. b) Portfolio with an equal weight will have a return of 72% whereas the beta of the portfolio will be 0.47. 

Q3.

Boral Limited is an internationally recognized group with building products and construction materials and has three divisions: construction materials business, plasterboard, and building products. It was demerged in the year 2000 splitting the energy assets and construction and materials assets. The original corporation was found in 1946, and since then Boral Limited has more than 11,000 employees. Boral has a mega footprint globally (Boral). It is currently being traded as BLD in the Australia Securities Exchange. The biggest competitor Boral faces are CSR Limited, LafargeHolcim Ltd and Foretta Brick, LLC (Company Profile). The industry of Construction materials have been greatly affected by the recession in the last decade, it has been on a recovery mode ever since, due to the nature of the industry and dependency on the construction (housing or building) the macroeconomic factors impact the industry greatly. For an investor it is essential to understand the role of risk and return it gets, the contrasting concepts have a strong relationship which impacts the investors as a whole. Risk in investment is the % chance of the expected investment return or how much it will deviate whereas the return is a result of the risk taken in an investment. 

The Risk-Return spectrum can be defined as a direct relationship, the lowest level or risk and return are mainly called the Risk-free investments which are the government bonds they yield low returns but get the surety of return. The moderate level of risk provides a moderate level of return these are mainly referred to as the companies with a high market capitalization whereas the high-risk portfolio or securities can yield high returns for an investor they can be startup companies, penny stocks and companies will small market capitalization. To understand and use this effectively the investor has to realize his risk tolerance on how much he is willing to invest in a level of risk which can have uncertain results which can result into losing investment entirely. The investor needs to first look at the return he expects from his asset allocation, for securities investors gain in two ways firstly the current yield rate and then the gain from the share price.