Financial & Risk Analysis

Instructions
Students are to write an individual essay of 1,500 to 2,500 words.
The essay has to contain a cover page, content page, introduction, main body, conclusion and references (see Part 5a Academic Writing handbook “Essay and its academic structure).
Students must submit their essay on or before the deadline through Turnitin submission online areas.
All submitted files should be in a digital editable format preferably MS Word. Font type: Times New Roman Font size: 12 for the main body with exceptions for the Title page and the Headings if any. All pages should be numbered consecutively.
The purpose of this assignment is to provide the student with an opportunity to demonstrate his/her ability to analyse, present and use financial data in evaluating investment decisions. The student will have the opportunity to show mastery of the topics discussed during this module and apply them in the context of the topic of this assignment.
Students have studied concepts, models and topics set out in the module guide. If you wish to improve your learning before embarking on this assignment, you may want to conduct a systematic search of relevant scholarly literature material. This is strongly advised.
The student should make this assignment as per the following headings:
1. Cover page: including the following information.
1. Title of the research
2. Student name and student ID number
3. Lecturer’s name
4. Course ID and Title
5. Date and campus location
2. Table of Content (formatted in Word).
1. Table of Figures (if applicable)
2. Table of Tables (if applicable)
3. The completed analysis.
1. Introduction (state the objectives)
2. Main body (analysis of the 5 components)
3. Conclusion (summarize findings and/or make a recommendation)
4. References
Students should list the academic sources they have used in answering the questions. [A minimum of 3 citations of scholarly sources is recommended].
5. Appendices (if applicable)

Assignment:
Write a Financial & Risk Analysis of the following Investment proposal.
Assume you are considering a proposal to buy an old house in the Netherlands to convert into 5 luxury rental apartments and hold it as an investment so that you create regular income for the next 5 years. The estimated cost of the house and the renovations would be about €400,000.
In your paper you should include the following components (in de main body):
1. Cash flow analysis. Use the direct or indirect method. Present your calculations and discuss the findings.
2. Capital structure & cost of capital analysis: estimate the overall rate of return (WACC). Make assumptions about your capital structure mix. How are you going to finance the investment? Determine which financing sources you’ll use and discuss how the capital structure mix affects the WACC. Present your calculations and discuss the findings.
3. Capital budgeting analysis: Discuss which methods of Investment appraisals (at least 2) you will use to evaluate your project and why you have chosen those (advantages and disadvantages). Present your calculations and discuss the findings.
4. Shareholder value analysis: Assume that after 5 years, you want to sell the property. How will you measure your company’s commitment to value? Which method will you use and why? What would be the minimum price or rate of return you’ll accept? Present your calculations and discuss the findings.
5. Risk analysis: every investment is exposed to significant risks. Name and discuss the risks (at least 2 risks) associated with this specific investment and your strategy towards these risks.
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Do not consider taxation in your calculations.
Assume banks charge 3% interest on borrowings
Make assumptions and/or research for the main elements you want to include in your calculations e.g. your own expected return on equity, rent prices, monthly costs, risk factors, growth rates etc.
Please note!!! This is an essay so do not only present your calculations. A system of logic should be used in writing where you discuss your findings (on calculations) and make recommendations.