Accounting and Finance

Running Head: Accounting and Finance
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Project Report: Accounting and Finance

Accounting and Finance
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Contents
Que 1.................................................................................................................................4
1.1 Calculation of monthly deposit........................................................................4
1.2 Investment decision..........................................................................................4
1.3 Assets calculations............................................................................................5
Que 2.................................................................................................................................6
2.1 Real rate of interest...........................................................................................6
2.2 Australian housing market................................................................................7
Que 3.................................................................................................................................8
3.1 Risk definition........................................................................................................8
3.2 Australian credit system.........................................................................................8
3.3 Calculation of BHP monthly return........................................................................9
3.4 Average monthly return of BHP...........................................................................10
3.5 Annual holding period for global stakeholders....................................................10
3.6 Annual holding period for Australian stakeholders..............................................10
3.7 Monthly return of MKT........................................................................................10
3.8 Average monthly return of MKT..........................................................................11
3.9 Calculation of Annual holding period return........................................................12
3.10 BHP and MKT graphical representation............................................................12
3.11 Risk of BHP........................................................................................................12
3.12 Identifying the risk level of BHP........................................................................13
3.13 Calculation of CAPM.........................................................................................13
3.14 SML graph..........................................................................................................14
3.15 SML graph (BHP and MKT)..............................................................................14

Accounting and Finance
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3.16 Portfolio’s return and beta..................................................................................15
References.......................................................................................................................16

Accounting and Finance
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Que 1:
1.1 Calculation of monthly deposit:
Particulars Value
Face value $ 20,000
Interest 6%
Monthly interest
rate 0.005
Time (months) 15
Deposit amount $ 1,287.29
The above calculations explain that if $ 20,000 is required after 15 months then the
deposit amount should be $ 1287.29 monthly.
1.2 Investment decision:
a. NPV calculations:
In order to identify the investment opportunity in the mining business, net
present value calculations have been conducted on the project. Below are the
calculations:
Calculation of Net present value
Year
Cash Flow (Amt in
$'000)
Rate
(15%) NPV
0 $ (16,000.0) 1.00 $(16,000.0)
1 $ (2,500.0) 0.87 $ (2,173.9)
2 $ - 0.76 $ -
3 $ 5,000.0 0.66 $ 3,287.6
4 $ 6,800.0 0.57 $ 3,887.9
5 $ 7,000.0 0.50 $ 3,480.2
6 $ 7,000.0 0.43 $ 3,026.3
7 $ 9,500.0 0.38 $ 3,571.4
8 $ 5,500.0 0.33 $ 1,798.0
9 $ 2,000.0 0.28 $ 568.5
10 $ (4,500.0) 0.25 $ (1,112.3)
NPV $ 333.7
On the basis of above table, it has been recognized that NPV of the project is $ 333.7
which defines that the proposal must be accepted by the business.