Accounting and Finance - Study Material and Solved Assignments

The article provides study material and solved assignments related to Accounting and Finance. It covers topics such as payment options, investment portfolios, taxation systems, and investment returns. The article also explains the differences between classical taxation and dividend imputation taxation systems and their impact on domestic and international investors. The article does not mention any specific course code or college/university.

Running head: ACCOUNTING AND FINANCE
Accounting and Finance
Name of the Student:
Name of the University:
Authors Note:

ACCOUNTING AND FINANCE 2
Table of Contents
Question 1:.................................................................................................................................4
a.i) Choosing the payment option for Jayne:.............................................................................4
a.ii) Mentioning the time which will be taken with monthly 1000 instalment:.........................4
b.i) Identifying monthly payment of Jenifer:.............................................................................4
b.ii) Identifying the gift value:...................................................................................................5
b.iii) Identifying the monthly loan repayment value:.................................................................5
Question 2:.................................................................................................................................5
i) Stating the timeline of the ordinary shares:............................................................................5
ii) Stating the Kai’s investment portfolio at market value:........................................................6
Question 3:.................................................................................................................................6
i) Stating the differences between the classical taxation system and the dividend imputation
taxation system:..........................................................................................................................6
ii) Mentioning the examples:.....................................................................................................7
iii) Mentioning the impact of dividend imputation taxation system on domestic and
international investors:...............................................................................................................9
Question 4:...............................................................................................................................10
1) WBC, CBA and Market return plotting in line graph:........................................................10
2) Average holding period return for the three investments:...................................................10
3) Annual holding period return for the three investments:.....................................................10
4) Standard deviation for the three investments:......................................................................11
5) Plotting return and risk of the three investments:................................................................11
6) Calculating CAPM returns of CBA and WBC:...................................................................11
7) Using Scatter plot to construct SML:..................................................................................12
8) Portfolio comprising of WBC and CBA:.............................................................................12

ACCOUNTING AND FINANCE 3
9) Mentioning the best available investment option:...............................................................12
Reference and Bibliography:....................................................................................................14
Appendices:..............................................................................................................................15

ACCOUNTING AND FINANCE 4
Question 1:
a.i) Choosing the payment option for Jayne:
Particulars Value
New house $ 500,000
Time 30
Weekly-pay interest rate 4.55%
Fortnight interest rate 4.75%
Weekly Payments $ 587.67
Fortnight Payments $ 1,203.22
Total Payment weekly $ 916,763.44
Total Payment fortnight $ 938,514.28
The above calculation directly indicates that use of weekly pay would be beneficial
for the Jayne, as it incurs lower payment than the fortnight. The use of weekly pay would
reduce the total payment by $21,750.83.
a.ii) Mentioning the time which will be taken with monthly 1000 instalment:
Particulars Value Weekly-pay interest rate Fortnight interest rate
New house $ 500,000 4.55% 4.75%
Time 30 1560 780
PMT 1000 0.000875 0.001826923
Weekly-
pay
415 8
Fortnight 356 14
From the overall evaluation it can be detected that Weekly pay will be completed
within 8 years if per month payment is at the levels of 1,000. In addition, the fortnight
method would eventually increase the level to 14 years with a payment of 1,000.

ACCOUNTING AND FINANCE 5
b.i) Identifying monthly payment of Jenifer:
Particulars Value
Investment $ 200,000
Time 18
Interest rate 2.50%
Per Month Investment $ 734.11
Jennifer monthly payment $ 220.23
b.ii) Identifying the gift value:
Particulars Value
Total Money received $ 200,000.00
Withdrawal $ 100,000.00
Total savings $ 100,000.00
Interest rate 4%
Time 10
Deductions per
month
₹
1,000.00
FV of Total Savings ₹
148,024.43
FV of deductions ₹
52,254.10
Total gift value ₹
95,770.32
b.iii) Identifying the monthly loan repayment value:
Particulars Value
House ₹
800,000.00
Gift amount ₹
95,770.32
Term 30
Interest 4.50%
Monthly
Payment
$ 3,568.23

ACCOUNTING AND FINANCE 6
Question 2:
i) Stating the timeline of the ordinary shares:
Dividend 0 Dividend 1 Dividend 2 Dividend 3 Dividend 4
1.20 1.56 2.03 2.64 2.79
Year 0 Year 1 Year 2 Year 3 Year 4
ii) Stating the Kai’s investment portfolio at market value:
Particulars Value
Bond market return 7%
Share market return 20%
Preference market return 11%
Kai's Investment (Market
return)
13%
Question 3:
i) Stating the differences between the classical taxation system and the dividend
imputation taxation system:
The imputation taxation system and classical taxation system has difference, which
allows the organisation to alter their dividend policy. The taxation system has adequate
implications over the period of time, which can benefit the investors and increase their
income from investments. The major difference between the imputation taxations system and
classical taxation system are stated as follows.
Alterations in tax charges:
The alteration in the tax charges are relevantly conducted difference under both the
taxation system. In addition, from the evaluation it can be detected that under the classical

ACCOUNTING AND FINANCE 7
taxation system both company paying the dividend and investors receiving the dividend
needs to pay the taxes for income. However, from the evaluation it can be detected that under
the imputation taxation system the organisation only pays tax once, while the investors are
barred from paying the relevant taxes. This system eventually helps in minimising the excess
payments, which can be conducted by the investors. Melia, Docherty & Easton (2016) stated
that taxation system is an adequate measure, which allows the government to acquire the
required funds for development.
Taxation system:
The imputation taxation system reduces the occurrence of double taxes, which can be
conducted by the investors reducing the dividends from the organisation. However, the
classical taxation system relevantly utilises the same level, where the double taxation system
is not omitted. This increases the level of taxes that is borne by the investors receiving the
dividends form an organisation. On the contrary, McClure et al., (2018) argued that the
imputation system only benefits the investors, as no benefit is provided to the organisation
providing the dividends.
Alternations in usage:
Due to the significance of imputation taxation system investor are keen on utilising
the method for raising the level of retunes from investment. However, due to the reduction on
the overall government revenues the usage of imputation is not being imposed by all the
countries. With the use of imputation taxations system, the internal investors are attracted by
the country, as this method increases their level of returns from investment.
ii) Mentioning the examples:
Classical Tax system

ACCOUNTING AND FINANCE 8
Particulars Individual 1 Individual 2
Tax rate (Marginal) 45% 25%
Corporate level
Net Profit before tax $2.500 $2.500
Tax@30% $1.750 $1.750
Shareholders level
Dividends (Cash) $1.750 $1.750
Tax on dividends $0.788 $0.438
Dividend tax after
taxes
$0.963 $1.313
The calculations conducted under the classical method relevantly forces both the
individual to reduce dividends after tax at the levels of $0.963 and $1.313. The actual
dividends for both the individual is mainly at the levels of $2.50, which is due to the change
in marginal taxation. The overall change in the taxes that is being reduced by the individual is
due to the implications of the classical tax system.
Imputation Tax system
Particulars Individual 1 Individual 2
Tax rate (Marginal) 45% 25%
Corporate level
Net Profit before tax $2.500 $2.500
Tax@30% $1.750 $1.750
Shareholders level
Dividends (Cash) $1.750 $1.750
Gross-up adjustments $0.750 $0.750
Grossed up dividends $2.500 $2.500
Tax on dividends $1.125 $0.625
Franking credit $0.750 $0.750
Tax payable ($0.375) $0.125
Dividend tax after
taxes
$1.375 $1.875
The calculations conducted in the above table directly indicates the level of savings,
which can be conducted by investors after receiving the dividends. The calculation has
directly indicated that the imputations system reduces the level of cash outflows in terms of

ACCOUNTING AND FINANCE 9
tax. The imputation system has allowed both the individual to get dividends after taxes at the
level of $1.375 and $1.875. This is mainly conducted with the help of franking credits, which
allows the investors to get back the taxes, which is being paid by the company. Hence, from
the evaluation it can be detected that the dividend imputation system has relevantly allowed
the investors to get higher level of dividends back from the system in comparison to the
classical taxation system.
iii) Mentioning the impact of dividend imputation taxation system on domestic and
international investors:
From the evaluation it can be detected that dividend imputation taxation system
directly have impact on both the domestic and international investors. Therefore, from the
evaluation it can be detected that the investors are keen on investing in countries having the
dividend imputation taxation system, as it helps them to reduce the level of cash outflow in
terms of tax and maximising the level income from investments. This method directly helps
motivate the investors to increase their investment scope in the country. The impact of
dividend imputations system is depicted as follows.
Increase in investment from domestic and international investors:
The dividend imputation system directly increases the level of investments from
domestic and international investors, as investors will get higher income in form of
dividends. The dividend franked credit that is generated for the investors would eventually
minimise the level of tax payments that needs to be conducted for the dividends. This
reduction in taxation will eventually raise the level of income for the investors. The method
also helps in altering the dividend policy of the company, as higher payments are being made
to the investors. Melia, Docherty & Easton (2016) indicated that dividend imputations system

ACCOUNTING AND FINANCE 10
minimises the chance of double taxation, which was previously conducted on investors under
the classical taxation method.
Question 4:
1) WBC, CBA and Market return plotting in line graph:
7/1/2017
8/1/2017
9/1/2017
10/1/2017
11/1/2017
12/1/2017
1/1/2018
2/1/2018
3/1/2018
4/1/2018
5/1/2018
6/1/2018
-12.000%
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
Market and Stocks Return
CBA.AX WBC.AX AORD
Particulars CBA.AX WBC.AX AORD
Holding period return -12.003% -3.966% 9.120%
2) Average holding period return for the three investments:
Particulars CBA.AX WBC.AX AORD
Average Holding period return -0.984% -0.277% 0.752%
3) Annual holding period return for the three investments:
Particulars CBA.AX WBC.AX AORD
Annual Holding period -11.808% -3.320% 9.019%

ACCOUNTING AND FINANCE 11
return
4) Standard deviation for the three investments:
Particulars CBA.AX WBC.AX AORD
Standard deviation 4.018% 3.604% 2.169%
5) Plotting return and risk of the three investments:
2.000% 2.500% 3.000% 3.500% 4.000% 4.500%
-15.000%
-10.000%
-5.000%
0.000%
5.000%
10.000%
15.000%
9.019%
-3.320%
-11.808%
Scatter plot
CBA.AX WBC.AX AORD
6) Calculating CAPM returns of CBA and WBC:
Particulars CBA.AX WBC.AX
Expected return = Rf +Beta * (Rm-Rf)
10-year government
bond
2.780% 2.780%
ASX return 5.850% 5.850%
Beta 1.230 1.260
Expected return 2.780%+1.230 * (5.850%-
2.780%)
2.780%+1.260 * (5.850%-
2.780%)
Expected return 6.556% 6.648%

ACCOUNTING AND FINANCE 12
7) Using Scatter plot to construct SML:
0.000 0.200 0.400 0.600 0.800 1.000 1.200 1.400
0.000%
1.000%
2.000%
3.000%
4.000%
5.000%
6.000%
7.000%
SML Line
Return Linear (Return)
CBA.AX WBC.AX
8) Portfolio comprising of WBC and CBA:
Particulars CBA.AX WBC.AX
Weight 60.0% 40.0%
Beta 1.230 1.260
Expected return 6.556% 6.648%
Portfolio Beta (60.0% * 1.230) + (40.0%*1.260)
Portfolio Beta 1.242
Portfolio Return (60.0% * 6.556%) + (40.0%*6.648%)
Portfolio Return 6.593%
9) Mentioning the best available investment option:
The calculation has helped in detecting the level of risk and returns, which is being
generated by the three investment options. The evaluation has indicated that the created
portfolio can eventually help in generating high level of income over the period of time,
while the improvements can eventually increase the level of income from operations. Vecco,
Chang & Di (2015) argued that use of portfolio can eventually allow the investor for
adequately improve the level of income investment by reducing the risk factors.

ACCOUNTING AND FINANCE 13

ACCOUNTING AND FINANCE 14
Reference and Bibliography:
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 16 December 2018, from
https://au.finance.yahoo.com/quote/CBA.AX/history?
period1=1464719400&period2=1498761000&interval=1mo&filter=history&frequenc
y=1mo
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 16 December 2018, from
https://au.finance.yahoo.com/quote/WBC.AX/history?
period1=1464719400&period2=1498761000&interval=1mo&filter=history&frequenc
y=1mo
McClure, R., Lanis, R., Wells, P., & Govendir, B. (2018). The impact of dividend imputation
on corporate tax avoidance: The case of shareholder value. Journal of Corporate
Finance, 48, 492-514.
Melia, A., Docherty, P., & Easton, S. (2016). Net share issues and the cross‐section of equity
returns under a dividend imputation tax system. Accounting & Finance, 56(4), 1097-
1117.
Vecco, M., Chang, S., & Di Benedetto, G. (2015). Art as an investment: Return, risk and
portfolio diversification in Chinese contemporary art. Working paper.

ACCOUNTING AND FINANCE 15
Appendices: