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Financial Management Stock Market Entity Performance Comparison

6445 words - 26 pages

Table of Contents31.0 Introduction 32.0 Task 1: Stock Performance vs. market performance 32.1 Comparison of Alufab stock performance with Market performance 82.2 Ratio comparison for AluFab 2010 - 2011 ( Evaluation of the Financial Performance of the company 92.3 Conclusion 93.0 Task 2 - Capital Asset Pricing Model. 93.1 The Relevance of the Capital Asset Pricing Model (CAPM) to investors 113.2 CAPM Calculation 123.2.1 Price per Share Calculation 123.3 Conclusion 134.0 Task 3 - Weighted Average Cost of Capital for Alufab 134.1 Use of WACC and advantage over other models. 144.2 Conclusion 155.0 Task 4 - Performance Appraisal Methods 155.1 Payback period calculation 155.2 Net Present Value ...view middle of the document...

Market performance 2010 - 2011……………


Fig.1.5: Comparison of Stock vs. Market performance 2010 - 2011………………


Table 1.2: Ratio comparison of Alufab PLC 2010 -2011………………………….


Fig.2.1: CAPM Model with Security Market Line (SML) plotted…………………


Table 2.1: Capital Asset Pricing model Calculation……………………………….


Table 2.2: Calculation of Price per Share of Alufab PLC…………………………..


Table 3.1: Calculation of The Weighted Average Cost of Capital………………….


Table 4.1: Payback period Calculation………………………………………………


Table 4.2: Net Present Value Calculation……………………………………………


Table 4.3: The Internal Rate of Return Calculation………………………………….


Fig.4.4: Different Forms of Investment Appraisal…………………………………..


Fig.4.5: Comparison of Investment Appraisal methods……………………………..


IntroductionThe following report consists of the coverage of four areas namely, investment evaluation, which is carried out by the comparison of the stock performance of Alufab - manufacturers and fabricators of Aluminium products, with the market performance, and also by the assessment of financial performance by the comparison of ratios over two years. The calculation of risk by the use of the Capital Asset Pricing Model (CAPM)is undertaken, where the price of a share of Alufab is also calculated by the use of the CAPM. Cost of Capital calculation by the use of Weighted Average Cost of Capital (WACC) and finally implications and description of various forms of investment appraisal methods is included in the body of the report.Task 1: Stock Performance vs. market performance2.1 Comparison of Alufab stock performance with Market performanceThe stock prices fluctuate due to the forces prevailing in the market namely the demand and supply. Thus, the increase in the share price depends on the increase in demand while the increase in supply results due to the shareholders behaviour of selling the shares rather than buying them.Hence, the stock performance for Alufab during the years 2010 and 2011 are compared with that of the market performance...

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