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Part A: Theories of Financial Management A market is the combined behavior of thousands...

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Finance

Part A: Theories of Financial Management

  1. A market is the combined behavior of thousands of people responding to information, misinformation, and whim. The basic question is, can an investor, consistently beat the market? Using the Efficient Market Hypothesis, discuss whether it is possible for an investor to consistently earn positive excess returns.

  1. Provide a summary table that describes Operating Leverage, Financial Leverage, Business Risk, and Financial Risk.

PharmaNiaga is in the midst of evaluating a potential biopharma project for the company. The company has determined the after-tax cash flow for the project will be RM10 mil, RM12 mil, RM15 mil, RM10 mil, and RM 7 mil respectively for the next 5 years. The initial cash outlay for this project will be RM40 mil. PharmaNiaga requires a minimum of 15% hurdle rate. Calculate the following to see if this project is worth pursuing or not.

  1. Payback period (2.5 marks)
  2. Net Present Value (2.5 marks)
  3. Internal Rate of Return (2.5 marks)
  4. Profitability Index (2.5 marks)

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