Reference no: EM132773290 , Length: word count:1300
HI5002 Finance for Business - Holmes Institute
Assessment - Research on Financial market and Capital Budgeting Analysis
Assignment Tasks
This assignment task is a written report that include 3 parts:
Part 1: Research and fact finding on Australian financial products.
Part 2: Fact finding of investment analysis tools in Australia.
Part 3: Capital Budgeting and Project Evaluation.
Introduction
A Brief introduction of your group's work: the purpose of assignment, key findings and structure of the assignment (not more than 300 words)
Part 1. Research and Fact finding of Australian Financial Products
Visit the website of Australian Stock Exchange (ASX) to find information about at least ten financial products that are publicly traded on the market and fill in the below table:
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Name and nature of the
product
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What is the income from investment in this product
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What are the risks involved in the investment in this product
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Your answers can include the information gathered from fact finding completed in the ASX website and research about financial markets and financial products.
Part 2. Fact finding of Investment Analysis Tools in Australia
You are required to go to Online Portal of ASX, read the materials of two education courses offered by ASX about fundamental analysis and technical analysis and answer the following questions:
Fundamental Analysis
a. What is fundamental analysis?
b. What are you trying to learn about a company with fundamental analysis?
c. What kind of information from a company's annual reports is useful for your investment?
d. Why dividend per share and dividend yield can be useful for investors to appraise financial condition of a company given the limitations of financial ratio analysis?
Technical Analysis
a. What is technical analysis?
b. What are the three types of charts applying for Technical Assistance?
c. What are uptrend, down trend and how to recognize a change of trend?
d. What are the resistance and support lines?
e. What is moving average? What does it tell investors?
Note that this is fact finding question and all the information need to be taken from the provided source (ASX website). Penalty is applied for secondary data (literature review, research or article done by someone else). However, note that you need to read the course material to get information and use your own wordings to rephrase it, then make a proper intext citation and references to the ASX sources. High similarity index showing the source of ASX with proper references is FINE but copy and paste the content of the courses is plagiarism.
Part 3: Capital Budgeting and Project Evaluation
Case Study: Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product. It will require the company to buy a new equipment that will generate the same revenue for the company each year. The table below shows the initial and annual costs for each option.
Capital Budgeting Decision Making: Perform capital budgeting technique based on Equivalent Annual Cost (EAC) to advise the Company Management which option should be chosen if the relevant discount rate is 9%?
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Costs
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Option A
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Option B
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Initial Investment
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1,400,000
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1,500,000
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Year 1
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35,000
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25,000
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Year 2
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35,000
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25,000
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Year 3
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35,000
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25,000
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Year 4
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35,000
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25,000
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Year 5
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25,000
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Risk Analysis and Project evaluation:
Assume that the company finally chose Option B. It expects to sell 600,000 units of the new product for an average price of $15 per unit. The Equipment in Option B has a residual value of $300 000 at the end of the project. The company will need to add $ 750 000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below:
Depreciation method: straight line
Variable cost per unit: $10.5
Cash fixed costs per year: $25 000
Discount rate: 9%
Tax Rate: 30%
Upon consideration of unexpected economic conditions, the company management requires your Team to prepare a risk analysis to evaluate the outcome of potential project when the values drivers of the project changes by 20%.
Required: identify the value drivers of the project cash flows, do a sensitivity analysis and provide the management with a sensitive analysis report which shows how net present value (NPV) would change with 20% change in the value drivers.
Attachment:- Finance for Business.rar