Question 1: (10 marks)Given the following information, calculate how many years this project should be run before it is retired. Assume the cost of capital is 10% p.a. Please Show your detail calculation steps.
Question 2: (10 marks)Part A: What is the expected return on this portfolio? What is the beta of this portfolio? Does the portfolio have more or less systematic risk than an average asset? (5 marks)
Part B: An investor would like to evaluate the performance of her portfolio using the Treynor ratio. The past year realized return and systematic risk of the portfolio, the benchmark portfolio, given by the S&P/ASX share price index, and government bonds are:Realised Return Systematic risk estimate (% p.a.) (3) Portfolio 11 1.2 S&P/ASX share price index 9 1.0 Government Bonds 5 0
The portfolio has outperformed or underperformed the market benchmark? Please illustrate your answers. (5 marks)
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