Demonstrate strong conceptual corporate finance

Assignment Help Finance Basics

Reference no: EM132986848 , Length: word count:1400

MA514 Business Finance - Melbourne Institute of Technology

Learning Outcome 1: Demonstrate knowledge of time value of money (TVM) concepts and techniques, capital market theories, and methods of financing businesses, and critically apply the concepts to evaluate economic and investment decisions, including the valuation of bonds and shares and the assessment of capital budgeting decisions.

Learning Outcome 2: Demonstrate strong conceptual corporate finance knowledge to analyse and interpret advances in theory for professional practice.

Learning Outcome 3: Communicate relevant high level finance knowledge with other professionals.

Assessment Task Description

Julie Tran, a recent finance graduate, has just begun her job with the investment firm Macquarie Bank. Paul Heath, one of the firm's directors, has been talking to Julie about the firm's investment portfolio. As with any investment, Paul is concerned about the risk of the investment as well as the potential return. Because the company holds a diversified portfolio, Paul is concerned about the systematic risk of current and potential investments. One position the company currently holds is shares in Mining companies. The Macquarie Bank is now considering diversifying its investments into other sectors because Australian mining operations have grappled with challenges like supply chain and labour disruptions, liquidity risk, and cyber-attacks.

The Australian Mining Risk Forecast 2021/2022, which is the leading market report on mining risk, providing vital insights into one of Australia's most important industries. It forecasts that already jolted by COVID-19, Australian mining sector will face global risks like trade wars, economic downturns, and future pandemics, and these risks will continue to persist and even amplify in the medium to long term. Due to the crisis in the mining sector, the Macquarie Bank now considers changing the firm's investment portfolio.

Macquarie Bank currently uses a commercial data vendor for information about its positions. Because of this, Paul is unsure exactly how the numbers provided are calculated. The data provider considers its methods proprietary, and it will not disclose how share betas and other information are calculated. Paul is uncomfortable with not knowing exactly how these numbers are being computed and also believes that it could be less expensive to calculate the necessary statistics in-house. To explore this question, Paul has asked Julie to find the best stocks/shares in Australia to buy. The Macquarie Bank is interested in investing in either consumer staples or the pharmaceutical sector. Julie Tran asked your support to prepare a report.

Required:

Analyse the followings for any two companies from the consumer staples and the pharmaceutical sectors (one company from each sector) listed in the Australian Securities Exchange (ASX Top 100) and submit a detailed report discussing your findings as to how you should advise the client in connection with the portfolio investment. You need to justify your arguments with your findings when recommending one sector over another.

1. Risk
Calculate and comment on the risk (both systematic risk and unsystematic risk) of two companies.
Go to finance.yahoo and download the monthly share prices for two companies you selected for 5 years commencing from 2015 to estimate/calculate Beta. Be sure to use the adjusted closing price to account for shares and dividend payments. Next, download the ending value of the S&P/ASX All Ordinaries Index over the same period. Download the risk free rate of return from government websites and get the 5 years' average.

2. Expected return
Calculate expected return on shares based on CAPM and explain.
Go to finance.yahoo and download the monthly share prices for two companies you selected for 5 years commencing from 2015 to estimate/calculate average return (?).

3. Dividend policy
Describe the dividend pattern and policy using the dividend data.
Go to finance.yahoo and download the half-yearly or yearly dividend data for two companies you selected for 5 years commencing from 2015 to find the dividend trend. (Draw graphs). Download 2018 and 2019 annual reports of the selected two companies and make comments on company's dividend policy.

This assignment must be written/structured in the form of a ‘business report'. That is, it must have a/an;
(a) Executive summary (between 100 to 150 words),
(b) Introduction that succinctly summarises this assignment's topic and its key issues, controversies, etc. (no more than 200 words), and
(c) Body that addresses all the requirements - see above 1-4 (no more 1000 words),
(d) Conclusion that sums up the mains issues of this assignment (no more than 200 words), and
(e) Reference list containing all cited works.
(f) Proper English Grammar, appearance, format, etc.

At least 4 recognised journal article should be cited.

Attachment:- Business Finance.rar

Reference no: EM132986848

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