Financial Management_Group Activity submissionDr. Nader Naifar
Learning outcome:
LO1: Apply capital budgeting techniques (CH3)
LO2: Calculate risk and return of a portfolio (CH5)
1. Instructions and guidelines (Read carefully)
Instructions
1. Insert your name and surname in the space provided above, as well as in the file name. Save the file as:
Shibani Group Activity Submission.
2. Submit your assignment via Blackboard
3. Do not delete the plagiarism declaration or the assignment instructions and guidelines. They mus
PLEASE NOTE: Plagiarism cases will be investigated in line with the Terms and Conditions for Stud
IMPORTANT NOTICE: Deadline: 10 June 2023.
Guidelines
1. Working in groups of three students
2. There is 3 sheets in this workbook: Instructions, Answers_EX1 and Answers_EX2
3. Make sure that you have carefully read and fully understood each question before answering it. Answer
4. Answer the question in your own words. Do not copy any text from the slides, readings, or other sources
5. Enter your answers into the grey blocks provided. inputs to the grey cells.
6. Use the information provided in the spreadsheet to perform calculations .
7. Use Excel formulas to show your calculations, as marks may be awarded for correct calculations even
then only include the final answers in the spreadsheet.
Plagiarism declaration:
1. I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is one’s o
2. This assignment is my own work.
3. I have not allowed, and will not allow, anyone to copy my work with the intention of passing it off
4. I acknowledge that copying someone else’s assignment (or part of it) is wrong, and declare that m
2. Mark allocation
Each question receives a mark allocation. However, you will only receive a final percentage mark and will n
there to show you the weighting and length of each question.
Exercise 1
Q1
Q2
Exercise 2
Q1
Q2
Q3
Q4
TOTAL:
4
1
1
1
1
2
10
Exercise 1
You are an investor with SAR 12 million cash to invest. You wish to purchase an office building with this ca
located in different areas of the same city. The following information is available regarding the three possib
Distance from the Central Business District (km)
Floor space (square metres)
Asking price (SAR)
Management costs (SAR per square metre per month)
1
2
3
4
5
Commercial rent in the central business district (CBD) is SAR 60 per square metre per month and d
the CBD. Tip: Cumulatively means that, if the building is located 2 kilometres away from the CBD, re
and by another 5% on SAR 57 on the second kilometre, which gives you SAR 54.
Building 2 has been certified as complying with sustainability standards.
A suitable discount rate for all areas is 6%.
There is a fountain outside Building 1 that you can persuade the local government to renovate by th
in the area have increased the rent charged per square metre by 3.5%.
The local government will impose a 2.5% tax, by the time you complete the purchase of the property
sustainability standards. Ignore the effects of any other taxes.
Q1:Calculate the net present value and internal rate of return of each building assuming that net op
value to the nearest SAR and your calculated internal rate of return to two decimal places.
Q2:Recommend, based on your calculations in Question 1, and purely from a financial perspective,
Exercise 2
In this exercise, you will compute average daily return and standard deviation measures for two different po
the 4th individual assignment (You select 1 stock from the assignment of each student in the group).
for
the previous
assignment
to complete
this
Q1:Using
the daily
return data
on Stock
1,assignment.
Stock 2, and Stock 3, compute the expected return and s
assignment).
Q2:Compute the variance-covariance matrix for stock 1, stock 2, and stock 3
Q3:Compute the correlation matrix for stock 1, stock 2, and stock 3
Q4: Now, consider two portfolios with the following weights. Compute the average daily return and
i. A portfolio that is equally-weighted between stock 1, stock 2, and stock 3
ii. A portfolio that consists of 40% in Stock 1, 20% Stock 2, and 40% Stock 3
ion
the file name. Save the file as: First name Surname Group Activity Submission – e.g. Yassine
ons and guidelines. They must remain in your assignment when you submit.
erms and Conditions for Students.
ers_EX2
on before answering it. Answer the question fully, but concisely, and as directly as possible.
des, readings, or other sources. The assignment must be your own work only.
s.
ed for correct calculations even if the final answer is incorrect. Do not perform calculations manually and
Plagiarism declaration:
and pretend that it is one’s own.
the intention of passing it off as his or her own work.
t) is wrong, and declare that my assignments are my own work.
inal percentage mark and will not be given individual marks for each question. The mark allocation is
e an office building with this cash. You have a choice between three identical office buildings that are
able regarding the three possible investments:
Building 1
0
1,000
8,000,000
15
Building 2
5
1,500
12,000,000
5
quare metre per month and decreases cumulatively by 5% for each kilometre located away from
metres away from the CBD, rent decreases by 5% for the first kilometre (which gives you SAR 57),
ou SAR 54.
government to renovate by the time you purchase the property. Similar renovations to properties
e the purchase of the property, on the sale of all properties that are not certified as compliant with
uilding assuming that net operating income will be received in perpetuity. Round your calculated net present
two decimal places.
from a financial perspective, which building to invest in.
on measures for two different portfolios. You will use the historical price data that you already used for
f each student in the group). It will help to use the daily return and volatility measures you computed
ute the expected return and standard for each stock (Hint: you already have done this for 4th individual
the average daily return and daily volatility measures for each portfolio:
ock 2, and stock 3
, and 40% Stock 3
Building 3
10
2,000
11,000,000
10
Group:………………………………………………………………
Exercise 1
Q1
Distance from the CBD (km)
Floor space (square metres)
Asking price (SAR)
Management costs (per square metre per month)
Discount rate (%)
Sustainability certification (Yes/No)
Fountain (Yes/No)
Rent per square metre per month
Management costs per square metre per month
Net operating income per square metre per month
Monthly net operating income
Annual net operating income
Present value of net operating income
Asking price
Transfer tax
Initial investment
Net present value
Internal rate of return
Q2
Building 1
Building 2
…………………………
Building 3
For Dr. use
only
Exercise 2
Q1
E(r)
Stock 1
Stock 2
Stock 3
Variance-Covariance matrix
Q2
Stock 1
Stock 1
Stock 2
Stock 3
Q3
Correlation matrix
Stock 1
Stock 1
Stock 2
Stock 3
A portfolio that is equally-weighted between Stock 1, Stock 2, an
Weights
Q4
Stock 1
Stock 2
Stock 3
A portfolio that consists of 40% in Stock 1, 20% Stock 2, and 40%
Weights
Q5
Stock 1
Stock 2
Stock 3
Stock 1:……………………………………………
Stock 2:……………………………………………
Stock 3:……………………………………………
𝝈
Variance-Covariance matrix
Stock 2
Stock 3
Correlation matrix
Stock 2
Stock 3
hat is equally-weighted between Stock 1, Stock 2, and Stock 3
𝝈𝒑
E(rp)
hat consists of 40% in Stock 1, 20% Stock 2, and 40% Stock 3
𝝈𝒑
E(rp)
For Dr. use
only
For tutor use
only
Student 1:
…………………………………………………..
Student 2:
………………………………………………..
Student 3:
………………………………………………..
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