Reference no: EM132378046
PFM 201 PRINCIPLES OF FINANCIAL MANAGEMENT
Group Assignment Semester 2 2019
Type: Application of Financial Management Principles
Students are required to use the Assessment Cover Sheet, which is downloadable from General Information Section in Moodle, as the front page of their assignment submission file.
Background
The purpose of this assignment is to provide you with an opportunity to demonstrate your understanding of fundamental concepts we have discussed in areas up to Week 9 topics. You will apply these financial management concepts to practical application you have been assigned in the tutorial classes.
Group Assignment Instructions
It can be done in groups of 2 to 4 students, but not more than 4.
You should give careful consideration to the selection of members comprising the group. All groups formed are to provide the names of members to the Lecturer. It is very important for all members to take an active part in completing the assignment and make an equal contribution.
Presentation
Assignments must be typed. It is perfectly fine to manually draw in the diagrams, by leaving spaces in your typing or by adding them as Appendixes. Diagrams can be time consuming and difficult to draw on the computer. Scan your final manual version and upload to the Assignment site. Make sure you keep a copy. In general, you should not copy and paste diagrams from the internet. If you do, you must acknowledge your sources
Task 1: INTERNATIONAL FINANCIAL MARKETS
Your boss has asked you to assess the company's new financial management requirements because of new businesses the company wants to engage in. Please provide recommendations to assist him.
Since your boss is a busy person and has little time to read lengthy reports, your submission for this task should be concise. You can also use graphs and charts to illustrate your points.
You are an Australian based clothing and fashion retailer in Melbourne.
Your boss intends to establish two retail outlets in Vietnam, one in Ho Chi Minh City (HCMC) and another in Hanoi. Vietnam is a fast-growing market and growing affluence. These outlets will be large, and their inventories will be imported primarily from Australia and China, but also from the rest of the world in addition to the products purchased locally. As the outlets are expected to make good earnings and there is also a need to remit the profits back to Australia. Your boss is likely to start additional outlets in other major cities in Vietnam e.g. Danang, Hue etc. in the future.
For your boss, you need to explain: -
1. How the retail outlets in Vietnam would need to use the spot market in foreign exchange for the business
2. How the retail outlets in Vietnam would use the forward markets in foreign exchange for the business
3. Which are the possible payment mechanism which you can put in place for those outlets? Please elaborate why they are done as such.
4. Explain how the foreign exchange quotation works between AUD and Vietnamese Dong. If he sends some Australian goods over from Vietnam to Thailand, how would your advice of the settlement currency best to be and why?
5. Advice your boss how he could use the local and international banking / financial markets, including money and bond markets to finance the establishment and expansion of new outlets in Vietnam
Task 2: INVESTING RISKS AND RETURNS - EQUITIES
Your Aunty Stottie has some savings which she wants to invest in shares.
She has asked for your advice because she knows you are doing a financial management unit in your university degree. Aunty thinks you are brilliant.
She wants to invest all her savings in shares of the company on which you have surveyed and done some research (use any listed company on Australian Stock Exchange (ASX) - selected share's name to be furnished to lecturer prior to the commencement of assignment)
Your Aunty is ignorant on what and how to invest. You also know that investing in only one asset can be risky. You will need to explain this to Aunty. Your explanation to her should cover:
1. Possible macro-economic(country) and industry factors and risks of your (share) selection
2. Firm specific factors and risks that may be associated with the performance of your (share) selection
3. Indicate the historical and the expected return of your selection (try to distinguish between capital and yield or dividends components, if any)
4. What is the past trend (3, 5 or 10 years) of your selection?
5. Is your selection volatile over the period? Indicate the high-low price variation for the selection over the period
6. Explain the concept of diversification to Aunty.
[In doing so, you should also explain using examples and refer to relevant charts or graphs to illustrate your point. Quote your sources of reference. You can use recent news releases about the company from Internet.]
7. Indicate to Aunty she can also invest in other asset classes; you need to tell her the other alternatives.
8. Beta Coefficient is the measure of a share's volatility relative to the overall market. Indicate the selection's Beta. Briefly explain to your Aunty what it means and give an example, assuming the expected market return is forecast to fall by 10% in the coming year.