Reference no: EM132583334 , Length: 2000 Words

HI5002 Finance for Business - Holmes Institute

Research on Financial market and Capital Budgeting Analysis

Assignment Tasks
This assignment task is a written report that include 3 parts: Part 1 is a research and fact finding on Australian financial market. Part 2 is a fact finding of financial market regulation in Australia and Part 3 is a risk analysis and project evaluation. To complete the assignment, groups are recommended to obtain data and information from relevant web sites, especially websites of Australia Stock Exchange: Australian Securities and Investment Commission: and the Australian Prudential Regulation Authority (APRA) for their research and fact finding.

Assignment Structure

Introduction
Briefly 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 market

1.1 Comparison of four key financial institutions: commercial banks, insurance companies, investment banks and investment funds in Australia from the perspective of a potential investor who would like to invest into the institutions

Criteria for comparison include: (1) classification (the group of financial institutions it belongs to); (2) market sector of operation; (3) key business activities; and (4) main source of income. Organize your group's comparison in a relevant table. Your group's research should be supported by a fact finding of real life examples of a commercial bank, insurance company, and investment bank and investment fund in Australia. Your group's discussion on each example should reflect the above mentioned criteria and the following information: (i) what is the code of stock listed, (ii) when was the company's stock was first listed, (iii) what is the current market capitalization of that stock, (iv) the current total share outstanding, (v) who is the chairman and who is the CEO of that company, (vi) a graph of five year dividend payment for each company and (vii) next dividend date. Using ASX and ASIC websites for the fact finding. Your group is not allowed to choose the cases I have used as examples in this assignment instruction. in banking market sector. Its key business is taking deposit from individuals as well as businesses, and then lend those pooled savings to other individuals and businesses. Its main source of income is the difference between the interest rates it charges the borrowers and the interest rates it pays the depositors. The code of listed commonwealth bank stock on Australian Stock Exchange is CBA. The stock was first listed on 12/09/1991. The total outstanding share 1,770,239,507. As of 18 February 2020, CBA market cap is 158.37bn, Ms Catherine Livingstone is the CBA's Chairman, Non Exec. Director and Mr Matthew Comyn is the Managing Director, CEO, Director. The next dividend payment date is 31 March 2020.

1.2 Analysis of three financial management questions: (i) capital budgeting, (ii) capital structure and (ii) working capital management

Define the three financial management questions and justify your group's analysis by illustrating examples: Choose one or more events described by media (CNN Business, Financial Times, Dow Jones financial news etc.) about a company who is doing one or more activities related to the three financial management questions. Analyse that event (s) applying the three financial management questions. Note: Each question is to be illustrated by at least one event.

Part 2. Fact Finding of Australian financial market regulation

2.1 Fact finding of the listing on ASX
Assuming your group is working for a company that is considering to be listed on ASX in the near future. Go to the website of Australian Stock Exchange (ASX), do a fact finding and present an analysis of Australian Stock Exchange Listing Requirements and process. The following questions should be addressed:
(1) What are the advantages of being a listed company on ASX?
(2) What are the problems that need to be taken in consideration for being listed company on ASX?
(3) What are the requirements for listing on ASX?
(4) What are the steps of listing procedures on ASX?
(5) How listing fee is applied. Using ASX listing fee calculator to identify your selected company listing fee, choosing any random number for the ranges of market cap: 10 million -50 million; 50 million-100 million; 100 million-500 million.

2.2 Fact Finding of requirements on Financial advisory service registration in Australia Assuming after graduation you would like to work as a financial adviser. Go to the website of Australian Securities and Investment Commission, do a fact finding and present an analysis of financial advisor registration to identify whether you are qualified and what steps should be taken to be a financial adviser in Australia. The following questions should be addressed:
(1) What is the ASIC's Financial advisers register?
(2) Who should be on the Register, who are not on the Register and who updates the register?
(3) What information should be on the Register?
(4) What are the relevant financial products for a financial advisor?
(5) What are the professional standards applied for a financial advisor.

Part 3. Risk analysis and project evaluation

3.1 Perform a scenario analysis with data provided

Assume that your selected company is considering a potential project with a new product that is expected to sell for an average price of $30 per unit and the company expects it can sell 350,000 units per year at this price for a period of 4 years. Launching this project will require purchase of a $3,500,000 equipment that has residual value in four years of $500,000 and adding $ 1,000,000 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: $20
Cash fixed costs per year $450,000 Discount rate: 12%
Tax Rate: 35%

Do a SCENARIO ANALYSIS with cash flows of the assumed project to determine the sensitivity of the project's NPV to different scenarios that are defined in terms of the estimated values for each of the project's value drivers. Please work on two scenarios corresponding to the worst- and best-case outcomes for the project. Your group needs to provide the results in (a) relevant tables:

Worst case: Unit sales decrease by 20%; price per unit decreases by 20%; variable cost per unit increases by 20 %; cash fixed cost per year increases by $200,000

Best case: Unit sales increase by 20%; price per unit increases by 20%; variable cost per unit decreases by 20%; cash fixed cost per year decreases by $200,000

Based on the scenario analysis outcome, draw relevant conclusion about project NPV's sensitivity.

Perform an NPV break even analysis for the case where price per unit decreased by 20%, variable cost per unit increases by 20%, cash fixed costs decreases by $200,000 to identify the number of unit sales that is needed for the project to get break-even Trial and error method is to be used with excel spread sheet.

Conclusion
Summarize the outcomes of your group's works (not more than 300 words)

Attachment:- Capital Budgeting Analysis.rar