RequirementsHigh level oral and written communication skill is consistently rated the most important attribute of finance and accounting professionals by the professional bodies. It is important that text responses are well written and that the written work (including formulae) have a professional level of presentation and formatting. The Academic Learning Support team can provide guidance of a non-technical nature to assist students who are having difficulty composing grammatically correct text responses.
In the assignment students are expected to write out the appropriate formula that they have selected to solve specific finance problems and show all workings. In terms of presentation for formula a guide to using Microsoft Equation will be available on the subject Interact site and it is recommended that students adopt this tool for completing complex formulae in a professional manner within a Word Document.
As per the CSU Referencing Policy, each assessment item must indicate the style of referencing required for each task. Students should be directed to a single Guide that supports the required referencing style for each assessment task. For those tasks requiring the use of APA, students should be directed to the CSU Referencing website athttp://student.csu.edu.au/study/referencing-at-csu
This assignment must be submitted through Turnitin.
It is recommended that your name and student ID are included in the first page and the pages should be numbered.
Further details about submission in Turnitin are provided in online submission.Assessment 2Value:20%Due date:08-Apr-2018Return date:01-May-2018Submission method optionsAlternative submission method
Task
Assessment 2
Assignment 2 is worth 20% of total assessment and is marked out of 100.
Please show all workings including any formula used.
Question 1(15 marks)
This question relates to material covered in the Topics 1 to 3. This question addresses the 5th and 6th subject learning outcomes.For the following numerical problems, detailed answersmustbe shown. This involves providing a brief description of the problems, formulae used, progressive and final answers to the questions. For assignments you are expected to show your workings using the appropriate formula.a.Sandy expects to receive the following stream of cash flows from an investment over the next 5 years:
End of year | Cash flow ($) |
1 | 400 |
2 | 800 |
3 | 500 |
4 | 400 |
5 | 300 |
If the relevant rate of interest is 9% per annum on this investment, how much should she pay for this investment opportunity? (4 marks)b.Lee has taken out a loan of $100,000 with an interest rate of 10% per annum. The loan is to be paid off by 20 equal quarterly payments; the first payment is due today. How much will Leeâ€™s quarterly payment be?. (4 marks)c.Dianne won a lottery prize of $200,000. She invested the entire amount and expects a yearly return of 10% per annum compounded monthly on her investment. Dianne will receive 150 equal monthly payments with the first payment due to be paid to her in exactly 2 years. Find the size of the monthly payments that Dianne will receive. (7 marks)
Question 2(15 marks)
This question relates to material covered in the Topics 1 to 3. This question addresses the 5th and 6th subject learning outcomes.Following is an example of a cash flow timeline developed using the Table Function within MS Word.Please use this example as a means to develop a similar timeline in your answer to the following question.
Example only:% | | 5% | 6.5% | |
Year | 0 | 1 | 2 | 3 |
| | | | | |
CFi | $0 | $1,000 | $1,000 | $1,000 |
Below are the expected cash flows and interest rates expected from an investment overthe next ten years.Cash flows will occur at the end of the nominated years.
Cash Flows | | Interest Rates | |
Year_{0} | | | Years 1 - 2 | 8% | |
Year_{1} | | | | | |
Year_{2} | +$ 6,500 | | | | |
Year_{3} | +$ 1,500 | | Years 3 â€“ 8 | 6% | |
Year_{4} | | | | | |
Year_{5} | | | | | |
Year_{6} | -$ 2,500 | | | | |
Year_{7} | | | | | |
Year_{8} | | | | | |
Year_{9} | +$ 10,000 | | Years 9 - 10 | 7% | |
Year_{10} | | | | | |
i. Using the Table function within MS Word, draw a time line showing the above cash flows and interest rates (following the example above) (6 marks).
ii. What will be the value of all these cash flows at each of the following times: (9 marks)
- Time_{1}
- Time_{5}
- Time_{10}
Question 3 (20 marks) Australian Corporate Tax CutsThis question relates to material covered in the Module 1 particularly the Australian taxation system and the dividend imputation. credits. This question addresses the 1st, 2nd, 3rd and 4th subject learning outcomes.
Students are expected to conduct their own research and develop their own opinions about the merits of this topic. There is no single correct answer and students will be marked on the depth of their research, the quality of their arguments (for and against), and their demonstrated understanding of the issues involved. In this complex area of financial policy
Write an essay of between 600 and 1,000 words discussing the following topic.
The Australian federal government plans to eventually lower the Australian corporate tax rate to 25%. The government believes that this will improve the economy and ultimately taxpayers by stimulating business investment and creating jobs. Internationally, many countries are lowering their corporate tax rates including, most recently, Donald Trumpâ€™s United States.
Is lowering the Australian corporate tax rate good policy? Discuss. Give particular consideration to the Australian dividend imputation system and how the Australian corporate tax rate impacts on Australian taxpayers.
There is a large number of resources available for students to access reflecting a variety of views on this topic. There are many items in the mainstream online media which canvas the Governmentâ€™s view and also items that support the view of those opposing. However, students should research widely and not limit themselves to any particular source for their information. For example, community activist group Get Up! produced this humorous advertisement querying the value of providing such a large tax break to large multinational companies: https://www.facebook.com/GetUpAustralia/videos/ XXXXXXXXXX/?hc_ref=ARQcaLC4GaIaKB94Z_J_iQgnVS66WwEft6R_SnTxBjiOPrdWCxUI-zaTg3d-jyPKiJY&pnref=story.
Remember, there is no correct answer and individual students will be assessed on their demonstrated understanding of the issues and the depth and quality of their individual research.
Question4(50 marks)
This question relates to material covered in Topics 1-5. This question addresses the 1st, 2nd and 3rd subject learning outcomes.
i. Find the monthly holding period returns for 2016 for National Australia Bank (NAB), BHP Billiton (BHP) and the market (MKT) as proxied by the All Ordinaries index. The monthly holding period return is the return you would receive if you bought an asset on the first day of the month (opening price) and sold it on the last day of the month (closing price). Using Excel, graph your % return results on one graph with returns on the y axis and time on the x axis to enable comparison between options. (Use 'Close' rather than 'Adjusted Close' for the selling price.) Note: Opening price MUST equal previous month closing price (12 marks).
ii. For each investment, what is the average monthly holding period return? (4 marks)
iii. For each investment, what is the annual holding period return? (4 marks)
iv. Calculate the standard deviation of the monthly rates of return for each share and the market (9 marks).
v. Using Excel plot your results from (iii) and (iv) above with risk on the x axis and return on the y axis (3 marks).
vi. If the 10 year government bond rate is 2.95% and the long term return on the market is 6.5%, assuming the beta (Î²) for NAB is 1.23 and for BHP is 0.90, use the Capital Asset Pricing Model (CAPM) to find the expected returns for NAB and BHP (4 marks).
vii. Construct and graph the Security Market Line (SML) showing where NAB and BHP lie (5 marks).
viii. Based on your findings construct a portfolio made up of 30% CBA and 70% RIO. Calculate the estimated return and Î² for this portfolio (4 marks).
ix. Based on your understanding of the CAPM and the SML, which of these asset(s) or portfolio(s) would you invest in and which would you not invest in. Explain your choice (5 marks).
Rationale
This assignment directly addresses some of the key learning outcomes for ACC515 including that on successful completion of the subject students will:
- be able to evaluate and explain the congruence of accounting, finance and treasury functions;
- be able to explain and critique the objectives of financial management in contemporary organisations;
- be able to critically evaluate mainstream financial theory and concepts;
- be able to discuss and evaluate ethical considerations in financial dealings;
- be able to demonstrate appropriate communication skills in the context of corporate finance; and
- be able to demonstrate specific technical competencies and skills in utilising quantitative techniques in financial analysis.
The requirements of this assignment cover up to and including Topic 5 of the Online Learning materials. The assignment is designed to develop your financial analysis and problem solving skills and develop your written communication skills. The questions require you to apply the knowledge and tools covered in the subject topics in order to demonstrate your understanding of the subject content. This first assignment has a heavy focus on fundamental financial mathematics which is a critical building block to develop your capacity to understand and resolve complex finance problems.