PART A
Required:
1. Calculate the amount of each monthly payment
Financed Amount = 17,990 - 2,000
Rate is equal to 0.0125, the monthly interest rate.
36 payments in total.
$15,990 is the loan amount or present value.
Future value for loans is typically zero.
Loan Amount 17990
Down Payment 2000
Amount 15990
Financed
Monthly 0.0125
Interest Rate
Number of 36
Payments
Monthly $554.3
Payment 0
2. Create and complete the amortization schedule using an Excel
spreadsheet
PART A (b)
Princip
Period Payment Interest al Balance
1 $554.30 $199.88 $354.42 $15,990
195.44470 $15,635.
2 $554.30 5 $358.85 58
190.95903 $15,276.
3 $554.30 12 $363.34 72
186.41728 $14,913.
4 $554.30 66 $367.88 38
181.81877 $14,545.
5 $554.30 01 $372.48 50
6 $554.30 177.16277 $377.14 $14,173.
Page 1 of 9
22 02
172.44857 $13,795.
7 $554.30 44 $381.85 89
167.67544 $13,414.
8 $554.30 9 $386.62 04
162.84265 $13,027.
9 $554.30 96 $391.46 41
157.94946 $12,635.
10 $554.30 03 $396.35 96
152.99509 $12,239.
11 $554.30 6 $401.30 61
147.97880 $11,838.
12 $554.30 22 $406.32 30
142.89980 $11,431.
13 $554.30 47 $411.40 98
137.75731 $11,020.
14 $554.30 97 $416.54 59
132.55055 $10,604.
15 $554.30 36 $421.75 04
127.27870 $10,182.
16 $554.30 3 $427.02 30
121.94095 $9,755.2
17 $554.30 43 $432.36 8
116.53648 $9,322.9
18 $554.30 37 $437.76 2
111.06445 $8,885.1
19 $554.30 72 $443.23 6
105.52403 $8,441.9
20 $554.30 04 $448.77 2
99.914348 $7,993.1
21 $554.30 22 $454.38 5
94.234545 $7,538.7
22 $554.30 04 $460.06 6
88.483744 $7,078.7
23 $554.30 32 $465.81 0
82.661058 $6,612.8
24 $554.30 58 $471.64 8
76.765589 $6,141.2
25 $554.30 28 $477.53 5
70.796426 $5,663.7
26 $554.30 61 $483.50 1
64.752649 $5,180.2
27 $554.30 41 $489.55 1
58.633324 $4,690.6
28 $554.30 99 $495.67 7
52.437509 $4,195.0
29 $554.30 02 $501.86 0
46.164245 $3,693.1
30 $554.30 35 $508.13 4
31 $554.30 39.812565 $514.49 $3,185.0
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88 1
33.381490 $2,670.5
32 $554.30 42 $520.92 2
26.870026 $2,149.6
33 $554.30 52 $527.43 0
20.277169 $1,622.1
34 $554.30 31 $534.02 7
13.601901 $1,088.1
35 $554.30 39 $540.70 5
6.8431926
36 $554.30 27 $547.46 $547.46
PART B
A. Systematic Risk:
Market risk, or systematic risk, is the term used to describe the inherent risk
of a market or a section of the market.
Related Events:
Continued Increase in Interest Rates in the Australian Economy: This
risk is systemic as it impacts not just Orange-Mobile PLC but all businesses
that are part of the economy.
Change in Encryption Laws in the Mobile Phone Industry: This is a
systemic risk since it is a potential regulatory change that might affect all
mobile phone providers.
Page 3 of 9
Increasing Australian Dollar Depreciation Against the US Dollar:
Orange-Mobile PLC and all other businesses involved in international trade
are susceptible to currency changes, which is why this is a systemic risk.
B. Unsystematic Risk:
Affects a certain business or sector. Having a portfolio of several assets
allows for diversification, which lowers or eliminates this kind of risk.
Related Events:
1. The Entry of Grapes-Mobile (USA’s Second-Largest Mobile
Provider) into the Australian Market: This poses an unsystematic
risk since it is a competitive threat unique to Orange-Mobile PLC.
2. Orange-Mobile PLC Being Ordered by the Government to Recall
the Afourer 777 Due to a Battery-Related Technical Issue: This
incident is unique to the business and its offering, posing an
unsystematic risk.
3. Recently Orange-Mobile PLC Found to Have Prepared
Fraudulent Financial Statements: This is an unsystematic risk
since it is company-specific and has to do with its ethical and
governance procedures.
Impact of Increasing the Number of Securities in the Portfolio:
1. Systematic Risk
Adding more securities to a portfolio does not lessen systemic risk since it
still impacts the entire market.
2. Unsystematic Risk
Page 4 of 9
Increasing a portfolio's number of securities can help lower unsystematic
risk.
Page 5 of 9
PART C
Solution
A. Initial Data Setup
Cost of Machine: $60,000
Life Expectancy: 20 years
Annual Maintenance Cost: $8,000
Salary Savings (Replaced Employee): $25,500 per year
Depreciation: Straight-line over 20 years to a zero-salvage
Marginal Tax Rate: 3%
Cost of Capital: 15%
B. Annual Net Cash Flows
Net Cash Flow= (Salary Savings−Maintenance Cost + Tax Savings on Depreciation) ×
(1−Tax Rate)
Excel table
PART C
Original Expense -60000
Years of Life Expectancy 20
Cost of Annual
Maintenance 8000
Pay Savings 25500
Devaluation -3000
Rate of Taxation 0.03
Capital Cost 0.15
Annual Cash Flow 19885
Page 6 of 9
Cash
Year Flow
-
1 489665.75
-
2 489665.75
-
3 489665.75
-
4 489665.75
-
5 489665.75
-
6 489665.75
-
7 489665.75
-
8 489665.75
-
9 489665.75
-
10 489665.75
-
11 489665.75
-
12 489665.75
-
13 489665.75
-
14 489665.75
-
15 489665.75
-
16 489665.75
-
17 489665.75
-
18 489665.75
-
19 489665.75
-
20 489665.75
$25,413.0
NPV 8
Page 7 of 9
IRR -979331500%
PART D
PART D
Stock market indes and share prices of Tesla PLCS
Market Stock Sales
Years Indes Price Units
2014 2000 $15.00 500,000
2015 2400 $25.00 550,000
2016 2900 $33.00 540,000
2017 3500 $40.00 560,000
2018 4200 $45.00 565,000
2019 5000 $55.00 590,000
2020 5900 $62.00 600,000
2021 6000 $68.00 610,000
2022 6100 $74.00 615,559
Capital Structure of Tesla (in 2024) AUD
Current
Balance sheet book
Market
values
Values
Long-Term Debt 1,200,000
Preference Shares 900,000
Ordinary Shares 3,100,000
Page 8 of 9
5,200,000
CAPM 10,400,000
WCC 3,980,559
CAPM 38000
Page 9 of 9
