金融报告学|Financial Reporting 07 33175代写

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Focuses on advanced financial reporting for UK corporate bodies. The module covers various topics such as the regulatory framework, reporting entity, accounting for tangible and intangible assets, government grants, inventories, tax, provisions, and financial statements preparation. By completing this module, students will be able to prepare and evaluate financial statements for a single entity. It appears to be a comprehensive course that will equip students with the necessary knowledge and skills required for advanced financial reporting.

金融报告学|Financial Reporting 07 33175代写

问题 1.

Your firm has the opportunity to invest $\$ 20$ million in a project with positive net present value. Even though this investment adds to the value of the firm, under some circumstances the firm might reject it.

证明 .

There are a few reasons why a firm might reject an investment with a positive net present value:

  1. Lack of funds: The firm may not have enough funds available to invest in the project, even though it would generate a positive return.
  2. Risk: The project may be risky, and the firm may not be willing to take on the associated risks. For example, the project may require significant upfront investment, or there may be a high degree of uncertainty about future cash flows.
  3. Opportunity cost: The firm may have other investment opportunities with even higher expected returns, and it may choose to invest in those projects instead.
  4. Strategic considerations: The investment may not align with the firm’s long-term strategy or goals, or it may not fit well with the firm’s existing operations.

Ultimately, the decision to invest in a project with a positive net present value will depend on a range of factors specific to the firm and the project in question. The firm will need to carefully evaluate the costs and benefits of the investment, taking into account both the potential return and the associated risks and tradeoffs.

问题 2.

For most firms, a small or moderate amount of borrowing will have essentially no effect on the probability of bankruptcy. Therefore, a small amount of borrowing will have no effect on the risk of equity.

证明 .

This statement is not entirely accurate. While it is true that a small or moderate amount of borrowing may not significantly increase the probability of bankruptcy for a firm, it can still have an impact on the risk of equity.

When a firm takes on debt, it must make regular interest payments to creditors. These payments reduce the amount of cash available to the firm for other purposes, such as paying dividends to equity holders. This can increase the risk of equity because if the firm experiences financial difficulties and is unable to make its interest payments, it may default on its debt obligations. This could lead to a decline in the value of the firm’s equity, as creditors may take legal action to recover their investments.

Furthermore, borrowing can also affect the firm’s cost of capital, which is the expected return that investors require to invest in the firm’s securities. If the firm’s borrowing increases, investors may demand a higher return to compensate for the additional risk associated with the increased leverage. This can increase the cost of equity and reduce the value of the firm’s equity.

Therefore, even small or moderate levels of borrowing can have an impact on the risk of equity, and firms should carefully consider the tradeoffs between the benefits of borrowing and the associated risks.

问题 3.

The average return on stocks in the U.S. (the market portfolio) over the past 30 years has been $12 \%$ annually. You find two mutual funds that have average returns of $13 \%$ and $16 \%$ over the same time period. This evidence contradicts the efficient market hypothesis.

证明 .

The efficient market hypothesis (EMH) suggests that all available information is reflected in stock prices, and therefore it is not possible to consistently achieve higher returns than the market portfolio without taking on additional risk. However, the EMH does not imply that all stocks or mutual funds will have the same returns. Some stocks or funds may outperform the market portfolio, while others may underperform.

In this case, the fact that two mutual funds have achieved returns higher than the average return on the market portfolio over the past 30 years does not necessarily contradict the EMH. It is possible that these funds have taken on additional risk to achieve higher returns, or that they have had some luck or skill in selecting stocks that have outperformed the market. However, it is also possible that these returns are simply due to chance and that these funds will not continue to outperform the market in the future.

Therefore, while the higher returns of these mutual funds may seem to contradict the EMH at first glance, further analysis is necessary to determine whether this is actually the case.

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