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HI5002 - Finance for Business Assignment

   

Added on  2021-05-28

11 Pages1741 Words89 Views
1Faculty of Higher EducationAssignment Cover SheetUnit Code HI5002 Unit NameFinance for BusinessAssignmentTutorial Question AssignmentDue Date 26/02/2021DeclarationComplete this and attach as a front cover sheet to your Blackboard submission, I certify that: 1.This assignment is my own work. I have not used any assistance in its preparation. 2.The formulas and templates of calculations and presentation of answers in this assignment comply strictly with the instructions and learning resources provided in this subject3.This assignment was prepared specifically for this unit only. Student name and IDCampus and Interactive Tutorial Group NumberLecturerNumber of questions submittedGurlabh Singh Dhaliwal / IVA2046Sydney CampusGroup 2Phuong Duong6 (All Questions)HI5002 Tutorial Questions Assignment – T3 2020

2Answer 1A a)Primary Market is where firms issue new financial instruments (securities) to raise fundsfrom public investors for the first time. Secondary Market is where owners of outstanding securities can sell or resell them to other investors. They can be stock exchanges or over-the-counter (OTC) markets. It allows investors to buy and sell previously owned or existing securities. An Initial Public Offerings (IPO) is undertaken on primary market.b)Investment Bank is wholesale securities dealer that help public companies to issue shares or bonds to public through their underwriting service.c)In stock exchange transactions are conducted through electronic trading system same like in auction market where public investors buy and sell securities through services of securities brokers. d)Five basic principles of finance are: 1.Money has a time value.2.There is risk-return trade-off.3.Cash flows are the source of value.4.Market prices reflect information.5.Individuals respond to incentives.Answer 1B Income Statement Items Provided: Net profit margin: 0.35; Sales: $5,000,000; Total assets: $4,500,000; a)What was New Age IT Solutions’ return on equity in 2020?Net Income = Net Sales* Net profit Margin = 5,000,000* 0.35 = $1,750,000Finding Equity:Total Asset = Total Liabilities + Equity = 4,500,000Debt/Equity = 0.45Debt = 0.45 Equity0.45 Equity + Equity = 4,500,0001.45 Equity = 4,500,000HI5002 Tutorial Questions Assignment – T3 2020

3Equity = 3,103,448.276Return on Equity = Net Income/Equity = 1,750,000/3,103,448.276 = 0.56388ROE = 56.39%b)What was ROA of the company in 2020?Return on Asset = Net Income/ Total AssetsROA = 1,750,000/4,500,000 = 0.38888889ROA = 38.89% (rounded off)c)Calculate EPS and PE of the company if it has total shares outstanding of $50,000 with a market price of $85 per share?EPS = Net Income/Total outstanding shares= 1,750,000/50,000 = 35PE = Share Price/ Earnings per share= 85/35 = 2.428 timesAnswer 2.a)PV = $50,000FV = $150,000Rate of return = 7.6%PV=FV(1+r)tt=ln⁡(FVPV)ln⁡(1+r)t=ln⁡(15000050000)ln⁡(1+0.076)t=1.098610.07325t = 15 yearsb)T = 10 yearsPV =?PV=FV(1+r)tHI5002 Tutorial Questions Assignment – T3 2020

4PV=150000(1+0.076)10PV = $72,105.52c)Rate of return =?T = 12 yearsFV = $500,000PV=FV(1+r)tr=¿r=¿r = 0.1055 = 10.55%d)Formula for EAR is: EAR=(1+Quotedinterestratem)m−1For ANZ bankGiven Datam = 2 (semi-annually)quoted rate = 4.85%EAR=(1+0.04852)2−1EAR = 4.908% per yearFor Commonwealth BankGiven Datam = 12Quoted rate = 4.83%EAR=(1+0.048312)12−1EAR = 4.938% per yearHI5002 Tutorial Questions Assignment – T3 2020

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