Finance Answers

An investment firm supports the coal-mining industry with infrastructure funds and also invests in tree plantations for paper-pulp production. Are the environmental ‘goods’ attached to the plantations cancelled out by the environmental ‘bads’ of the coal mining?

Genuine Used Cars is a second-hand car dealer with a landscaped yard on a busy highway serving Sydney. The plants used to ‘decorate’ the yardare all high water users. Drought is setting in and the local council has asked businesses to conserve as much water as possible. Town water is still available, bore water may be accessed in fairly shallow bores and the council is encouraging businesses to install underground tanks to conserve rain water. Which source of water should be used to gain the most browniepoints ethically? Should the firm change the plants for more efficient water users? 

What are some of the reasons that might motivate a corporate chief executive officer (CEO) not to try to maximise his shareholders’ wealth in relation to the firm’s activities?

Why would a firm not want to keep more working capital than necessary in a cheque account?

Internal auditors normally report to the chief financial officer. (a) What do you think are the roles of the internal auditor? (b) Is there likely to be an adversarial or collegial relationship between the internal auditor and the chief financial officer? (c) Which type of relationship is likely to be most beneficial to the firm?

Would a manager confronted with given circumstances necessarily make the same decision when pursuing either profit- or wealth-maximising objectives? Explain with an example.

time value and discount rates You just won a lottery that promises to pay you $1,000,000 exactly 10 years from today. Because the $1,000,000 payment is guarnteed by the state in which you live, opportunities exist to sell the claim today for an immediate single cash payment. a. What is the least you will sell your claim for if you can earn the following rates of return on similar-risk investments during the 10-year period? (1) 6% (2) 9% (3) 12% b. Rework part a under the assumption that the $1,000,000 payment will be received in 15 rather than 10 years. c. On the basis of your findings in parts a and b, discuss the effect of both the size of the rate of return and the time until receipt of payment on the present value of a future sum.