Content Writing financing

please find the following attachment and answer every question in step by step process with clear working process and formulas Question 3 You are given the following data on three company shares: Year Returns Smart Mining Start Films Longford Automotive 2013 40% 24% -20% 2014 12% 10% 12% 2015 -20% -12% -40% a Calculate the expected return and standard deviation of return for each share. [2 Marks] b Calculate the expected return and standard deviation of return for a portfolio invested equally in Smart Mining and Start Films (portfolio one). [2 Marks] c Calculate the expected return and standard deviation of return for a portfolio invested equally in Smart Mining and Longford Automotive (portfolio two). [2 Marks] d Compare the results obtained from a, b and c, what is your preferred investment among the five options i.e. Smart Mining, Start Films, Longford Automotive, portfolio one and portfolio two? Justify your answer. [2 Marks] Question 5 PanPac Shipping is considering replacing an existing ship with a newer and efficient one. The existing ship is three years old; it cost $32 million and is being depreciated under the prime cost method at a rate of 10%. The existing ship has a remaining useable life of five years. The new ship costs $40 million to purchase and $8 million to outfit for service. It has a five-year useable life and will be depreciated under the prime cost method at a rate of 10%. The existing ship can currently be sold for $18 million and will not incur any removal or cleanup costs. At the end of five years, the existing ship can be sold for net $1 million before tax. The new ship can be sold for net $12 million before tax at the end of the five-year period. The company is subject to a 30% tax rate on both ordinary income and capital gains. Purchase of the new ship would result in a $4 million increase in net working capital. The projected profits before depreciation and taxes for the new ship and the existing ship are given in the following table. Year New Ship Existing Ship 1 $21,000,000 $14,000,000 2 21,000,000 14,000,000 3 21,000,000 14,000,000 4 21,000,000 14,000,000 5 21,000,000 14,000,000 The required rate of return used for evaluating each option is the company’s Weighted Average Cost of Capital (WACC), which can be calculated according to the following information on the company’s capital structure. Capital structure Book value Debentures ($100 par, 6% coupon-annual) $2,000,000 Ordinary shares ($1 par) $5,000,000 Additional information: • The ordinary shares are currently traded at $3.00 per share. • The beta coefficient of PanPac Shipping is 1.5. • The risk free rate (a 10-year government bond) in the market is 2%. • The average historical market return for the past 10 years is 8%. • The debentures are priced at $102.00. • The current return (Market yield) on the company’s debentures is 4% (i.e. cost of debenture). • The existing capital structure is unlikely to change. Required: a Using a table in Word or an Excel spreadsheet, set up the cash flows for each option, i.e. purchase the new ship and continue using the existing ship. [8 Marks] continued …..... b What is the Weighted Average Cost of Capital (WACC) of PanPac Shipping? [2 Marks] c Calculate each option’s Net Present Value (NPV). [2 Marks] d Which option would PanPac Shipping choose? Justify your answer. [1 Mark]