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Deakin's Bachelor of Commerce and MBA are internationally EPAS accredited. Deakin Business School is accredited by AACSB. Group Assignment MAF203 – Business Finance Trimester 1 2018 DUE DATE AND TIME:...

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Deakin's Bachelor of Commerce and MBA are internationally EPAS accredited.
Deakin Business School is accredited by AACSB.
Group Assignment
MAF203 – Business Finance
Trimester 1 2018

DUE DATE AND TIME: Week 9, Friday 11th May, 2018, 5:00pm
PERCENTAGE OF FINAL GRADE: 30%
Learning Outcome Details
Unit Learning Outcome (ULO) Graduate Learning Outcome
(GLO)
ULO 1: Comprehend conceptual foundation for financial
decision-making in a typical business firm.
GLO1: Discipline specific
knowledge and capabilities
ULO 2: Evaluate risk-return trade-off in firm's financial
decisions
GLO1: Discipline-specific
knowledge and capabilities
GLO4: Critical thinking
ULO 3: Apply relevant analytical techniques for valuation of
ond and share, short-term and long term investment and
financing decisions and working capital management.
GLO1: Discipline-specific
knowledge and capabilities
GLO4: Critical thinking
GLO5: Problem Solving
Assessment Feedback:
Students who submit their work by the due date will receive their marks and feedback on
CloudDeakin on 1st June 5pm.
https:
www.efmd.org/index.php/accreditation-main/epas
http:
www.aacsb.edu
Page 2 of 8


Description / Requirements
a) The assignment has a weighting of 30% of your overall mark for the unit. The assignment
allocates 100 marks across the two parts A and B. Your group mark will be converted to a
score out of 30. All members of the group will receive the same mark if they contribute
equally.
) The focus of part A is the relationship between risk and return. This part is worth 46 marks
allocated across 4 questions. The questions are designed to enhance your technical skills in
the context of risk and return. You will need to be familiar with Excel spreadsheet to do this
part. Please
c) The focus of part B is on capital budgeting. This part is worth 54 marks allocated across 3
questions. The questions are designed to enhance your analytical skills on evaluating capital
projects and your understanding on how firms make investment decisions based on
incremental cash flows of the project.

Group Enrolments Instruction
a) Please go to ‘Group Formation’ discussion forum to initiate a discussion to find group
members, or students can discuss with fellow students in their classes/seminars. It is highly
ecommended all group members exchange their names, student ID numbers, and contact
details (email addresses, mobile numbers, Facebook, twitter and etc.)
) All students need to enrol in a group of 3 or 4 students to submit the assignment on
CloudDeakin. Individual group is not permitted and won’t be marked. You can form a group
with any student from any seminar group (On-Campus or Cloud). The only requirement is that
all members should be cu
ently enrolled in MAF XXXXXXXXXXTrimester 1.
c) It is up to the group to manage the group dynamics and get equal contribution from all
members. It is a good idea to appoint a leader to direct and coordinate the activities of the
group, including allocating tasks (questions) among the group members. All group members
are expected to discuss the assignment as a whole and contribute to preparing answers to all
questions. Before the final submission of the assignment all group members are expected to
eview and edit all questions, as appropriate.
d) If you are using an Excel spreadsheet for analysis, you need to explain which formula you
are using to work out the question, and copy and paste important output of the spreadsheet
to the body of your Word document. Alternatively, print out the na
ative pages (from Word
doc) and the spreadsheets (from Excel file) and scan them into a single PDF which can be
uploaded. Please do not upload Excel spread sheets as a separate file.
e) The deadline for group enrolment is 5 pm 4 May 2018. Late penalty will apply for late
enrolment. Please email Ms. Luna Lu ( XXXXXXXXXX) if you didn’t enrol into a group
on time
Page 3 of 8


Submission Instructions
a) You need to attach a Statement of Contribution which indicates the work done (in
percentage) by each student. Mark is allocated according to individual contribution.
The following declaration relating to academic honesty must be made after the title page of
the assignment.
"I/We certify that the attached work is entirely my/our own except where material quoted
or paraphrased is acknowledged in the text. I/We also declare that it has not been
submitted for assessment in any other unit or course."
) Only one file (Word document or PDF) should be uploaded for your group on the MAF203
CloudDeakin site. List the names and ID numbers of all group members on the first page of
your Word document. Only one member of the group should submit the assignment on
CloudDeakin on behalf of all the group members. Assignments sent as e-mail attachments or
y mail will not be accepted under any circumstances.
ONE WORD file containing
• Title page: Group number, student name, student ID
• Body/content of the assignment: all questions should be answered in order
With quantitative questions, please show your working out clearly and have a
ief
explanation of each answer.
With qualitative questions, please follow the stated word count.
References: Harvard referencing style
• Statement of contribution
• Executive Summary, Introduction and Conclusion is NOT required
c) You must keep a backup copy of every assignment you submit, until the marked assignment
has been returned to you. In the unlikely event that one of your assignments is
misplaced, you will need to submit your backup copy.
d) Any work you submit may be checked by electronic or other means for the purposes of
detecting collusion and/or plagiarism.
e) When you are required to submit an assignment through your CloudDeakin unit site, you
will receive an email to your Deakin email address confirming that it has been submitted. You
should check that you can see your assignment in the Submissions view of the Assignment
dropbox folder after upload, and check for, and keep, the email receipt for the submission.
e) Extension of assignment submission has to be applied in writing and approved by Unit
Chair. Conditions under which an extension will be approved include:
i) Medical conditions of a serious nature, e.g. hospitalization, serious injury or chronic illness.
Note: Temporary minor ailments such as headaches, colds and minor gastric upsets are not
serious medical conditions and are unlikely to be accepted. However, serious cases of these,
with medical certificate, may be considered. ii) Compassionate e.g. death of close family
Page 4 of 8


member, family
eakdown. iii) Hardship/Trauma e.g. sudden loss or gain of employment,
severe disruption to domestic a
angements, victim of crime. Note: late group formation will
not be accepted as grounds for extension.
Notes
• Penalties for late submission: The following marking penalties will apply if you submit
an assessment task after the due date without an approved extension: 5% will be
deducted from available marks for each day up to five days, and work that is submitted
more than five days after the due date will not be marked. You will receive 0% for the
task. 'Day' means working day for paper submissions and calendar day for electronic
submissions. The Unit Chair may refuse to accept a late submission where it is
unreasonable or impracticable to assess the task after the due date.
• For more information about academic misconduct, special consideration, extensions,
and assessment feedback, please refer to the document Your rights and
esponsibilities as a student in this Unit in the first folder next to the Unit Guide of
the Resources area in the CloudDeakin unit site.
• Building evidence of your experiences, skills and knowledge (Portfolio) - Building a
portfolio that evidences your skills, knowledge and experience will provide you with a
valuable tool to help you prepare for interviews and to showcase to potential
employers. There are a number of tools that you can use to build a portfolio. You are
provided with cloud space through OneDrive, or through the Portfolio tool in the
Cloud Unit Site, but you can use any storage repository system that you like.
Remember that a Portfolio is YOUR tool. You should be able to store your assessment
work, reflections, achievements and artefacts in YOUR Portfolio. Once you have
completed this assessment piece, add it to your personal Portfolio to use and
showcase your learning later, when applying for jobs, or further studies. Curate your
work by adding meaningful tags to your artefacts that describe what the artefact
epresents.
Page 5 of 8


Assignment Questions
Part A: Risk and Return (46 marks)

1. From the risk and return lectures we know that when a stock has high stock price
volatility then it is a risky stock. ABC stock prices have very high volatility. However, the
eta of the stock is only 0.25. Given the high volatility of ABC stock price explain why
ABC has low beta and what kind of risk ABC has? XXXXXXXXXXwords) (6 marks)

2. The following table shows the return on Asset A and the market index. The beta of Asset
A is XXXXXXXXXX = 5 x 4 marks)
Year Asset A Return Market Return
1980 10% 5%
1981 5% 15%
1982 -6% 9%
1983 18% 11%
1984 -5% -5%
1985 7% 10%

a. Assume the risk free rate is 5%. Using the CAPM model what is the expected return
of Asset A?
. Compute return per unit risk for asset A and the market. How do you think Asset A
has performed compared to the market?
c. If you invest all your money in Asset A, what would be a good measure of risk that
you are taking on? XXXXXXXXXXwords)
Answered Same Day May 08, 2020 MAF203 Deakin University

Solution

Pulkit answered on May 10 2020
150 Votes
Part B
Solution to Question 5-
    Project
    Initial investments (Million $) (A)
    NPV (Million $) (B)
    NPV / Initial Investment (B / A)
    Investment Preference
    Total Investment (Million $)
    A
    25
    10
    0.4
    6
    10**
    B
    30
    25
    0.83
    3
    30
    C
    40
    20
    0.5
    5
    40
    D
    10
    10
    1
    1
    10
    E
    15
    10
    0.67
    4
    15
    F
    60
    20
    0.33
    7
    
    G
    20
    10
    0.5
    5
    20
    H
    25
    20
    0.8
    2
    25
    I
    35
    10
    0.29
    8
    
    J
    15
    5
    0.33
    7
    
    
    
    
    
    
    150
Projects selected in preference order: D, H, B, E, C, G, A (partial)
**Project A will be selected only if partial investment is possible in it. Since funds up to 140 million $ have been utilized up to project G.
Capital rationing requires the firm to choose most beneficial project amongst the given options and invest in that option. In the given case, the firm will select the options that provide the highest NPV at the lowest initial investment. For this purpose, the NPV will be divided by the Initial investment and the projects having highest NPV on its initial investment will be selected.
Solution to Question 6
Sub-Part a
    Amount in million $
    Yea
    1
    2
    3
    4
    5
    Revenues
    20
    22
    24.2
    26.62
    29.282
    Cost of Goods Sold
    10
    11
    12.1
    13.31
    14.641
    Depreciation
    6
    4.8
    2.88
    2.66
    2.2
    Profit Before Tax
    4
    6.2
    9.22
    10.65
    12.441
    Tax
    1.2
    1.86
    2.766
    3.195
    3.7323
    Profit After Tax
    2.8
    4.34
    6.454
    7.455
    8.7087
    Depreciation
    6
    4.8
    2.88
    2.66
    2.2
    Operating Cash Inflows
    8.8
    9.14
    9.334
    10.115
    10.9087
    Salvage Value of Asset
    
    
    
    5**
    Total Cash Inflows
    8.8
    9.14
    9.334
    10.115
    15.9087
    PVF@14%
    0.87719
    0.76947
    0.67497
    0.59208
    0.51937
    PV of Cash Inflows
    7.72
    7.03
    6.30
    5.99
    8.26
**We have ignored capital gains on disposal of machine since no specific tax rate is given in the question.
    Total PV of Cash Inflows
    35.30
     - Initial Investment
    20
    NPV
    15.30
Since NPV is positive and is $15.30 million, the project can be accepted.
Sub-Part
    Let us assume IRR to be...
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