Corporate Finance

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Individual Assignment
Corporate Finance
FIN 420
Individual Assignment must be completed individually. This assignment is due on December 6,
2021 at 11:00am. A 50% penalty will be incurred for each business day the assignment is late.
This assignment must be submitted electronically via Blackboard (Instructor’s Assessments).
Plagiarism:
‐ The grade for an assignment with plagiarized content will be zero.
File Uploading Issue:
‐ If there is an issue with uploading files in BlackBoard, the assignment file must be sent to
my email before the due date/time to avoid a late submission penalty.
Assignment File Format
‐ Follow the format on Page 3.
‐ The assignment must be submitted in PDF format. (If there is an issue with opening a nonpdf file, the assignment will not be graded and will be penalized.)
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INSTRUCTION:
Suppose that you are a senior financial analyst at a large global company. Your CEO (Rachel
Williamson) has recently sent you the following email.
From: Rachel Williamson
To: [your name] Subject: Finance questions
Dear [your name],
A lot of employees of our firm have told me that you are an expert in finance. So, I would like to ask you a few
questions related to finance. I would greatly appreciate your help.
– (QUESTION 1) As you know, our firm uses NPV for capital budgeting. I have heard that PI
(profitability index) is a useful capital budgeting technique. What is PI? What is the PI rule? How
different are the NPV rule and PI rule from each other? Please explain briefly.
– (QUESTION 2) Suppose that Stock A has a beta of 0.7 and Stock B has a beta of 1.2. Which stock
must have a higher actual return next year according to the capital asset pricing model? Please explain
briefly.
(Please answer my questions clearly in simple terms. I will be ok with some formulas, but please try to minimize
the use of them. Please do not copy and paste sentences from other sources. I would like to know your thoughts
and see your writings on the above issues.)
Kind Regards,
Rachel Williamson
Answer your CEO’s questions in a formal email to the CEO. Please follow the instructions
below:
✓ The font size of 11 and the line spacing of “single” must be used.
✓ The maximum length of your email is 1 page (Your CEO likes 1-page reports); Assignments exceeding
the page limit will be penalized; There is NO minimum length.
✓ No reference is required.
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Please answer the questions using the following format.
Subject: RE: Finance questions
Dear Rachel Williamson,
Kind Regards,
[Your Name]