Posted: September 18th, 2017
here are the Assignment questions
a. Describe the ‘maximisation of shareholder wealth’ concept and discuss its importance in relation to financial management.
b. ‘Risk aversion implies that only risk-free investments will be undertaken by corporate managers’. Critically evaluate this statement and discuss how the concept of risk aversion may relate to investment decision making.
Question 2 (20 marks)
Your grandparents are interested in getting advice on what is the best outcome at the end of a six-year period for investing a sum of money in the following options. Given an interest rate of 12% per year, what is the preferred option? Justify all relevant calculations.
A. Invest $5,000 as a lump sum today.
B. Invest $2,000 at the end of each of the next five years.
C. Invest a lump sum of $3,000 today and $2,000 at the end of the next five years.
D. Invest $1,000 at the end of year one, end of year three and end of year five.
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