Online Library for Study Material | Desklib

Desklib is an online library for study material with solved assignments, essays, dissertation etc. It provides millions of study resources for various courses. The content includes financial accounting, reduction of corporate tax decision, evaluating the performance of NAB and BHP, and more.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Authors Note:

FINANCIAL ACCOUNTING
1
Table of Contents
Question 1:.................................................................................................................................2
a. Calculating the investment needed by Sandy:........................................................................2
b. Detecting Lee’s quarterly payments:.....................................................................................2
c. Dianne’s receiving monthly payment:...................................................................................2
2. Calculating cash flow of the investment:...............................................................................3
Question 3: Examining the reduction of corporate tax decision that was made by Australian
government.................................................................................................................................3
Question 4: Evaluating the performance of NAB and BHP......................................................5
i. Monthly holding period of NAB, BHP and Market:..............................................................5
ii. Calculating the Average monthly holding period return NAB, BHP and Market:................6
iii. Calculating annual period of NAB and BHP:.......................................................................6
iv. Standard deviation of NAB, and BHP:.................................................................................7
v. Plotting graph for NAB and BHP:.........................................................................................7
vi. Expected return of NAB and BHP:.......................................................................................7
vii. Security Market Line graph for NAB and BHP:.................................................................8
viii. Calculating expected return of the portfolio:......................................................................8
ix. Explaining the choice of using assets or portfolio:...............................................................9
Reference and Bibliography:....................................................................................................10

FINANCIAL ACCOUNTING
2
Question 1:
a. Calculating the investment needed by Sandy:
End of year Cash flow ($) Dis rate Dis cash flow
Year 1 $ 400.0 0.9 $ 367.0
Year 2 $ 800.0 0.8 $ 673.3
Year 3 $ 500.0 0.8 $ 386.1
Year 4 $ 400.0 0.7 $ 283.4
Year 5 $ 300.0 0.6 $ 195.0
Interest 9%
Initial investment $ 1,905
b. Detecting Lee’s quarterly payments:
Particulars Value
Payments time 20.0
Loan $ 100,000.0
Int rate % 2.5%
QR payments $ 6,414.7
c. Dianne’s receiving monthly payment:
Particulars Value
Payments time 150.00

FINANCIAL ACCOUNTING
3
Interest rate 10%/12 = 0.8%
Initial Value $ 200,000.000
Value after 2 years $ 244,078.192
Monthly payment $ 2,856.691
2. Calculating cash flow of the investment:
% 8% 6% 7%
Ye
ar
0 1 2 3 4 5 6 7 8 9 10
CFi $6,018.
52
$6,500.
00
$1,500.
00
$9,427.
00
$(2,500.
00)
$10,000.
00
$25,039.
26
Question 3: Examining the reduction of corporate tax decision that was made by
Australian government
The decision regarding projected corporate tax rate that is made by the Australian
government has both advantages and disadvantages, which is projected to the taxpayers of
Australia. In addition, it is estimated that the decision regarding corporate tax rate would only
help in improving the financial position of corporates and multinational companies present in
Australia. Moreover, analyst present in Australia relatively indicated the flaws in the decision
of reducing the corporate tax rate. The reduction in corporate tax rate is conducted on the
grounds of progress and raising both level of revenues that could be generated from
companies and multinational companies. The big four banks are the main gainers of corporate
tax reduction, who has received income of billions in the period fiscal year. There are
multinational companies currently operating in Australia, whose overall net profits are

FINANCIAL ACCOUNTING
4
transferred offshore. This relatively indicates that the corporate tax rate reduction is not
needed, as the companies are effectively generating adequate revenue and income. On the
other hand, Treasury.gov.au (2018) stated that increment in corporate tax rate reduces
revenue of the government, which directly impacts their spending capability for conducting
relevant development within the country.
In addition, the decision has relevant flaws, as the overall tax revenue collection of the
Australian government mainly reduces, due to the decision. Therefore, this reduction in
corporate tax rate decreases the overall benefits and support, which is been provided by the
Australian government in form is Medicare and schools. This cut on corporate tax would
have negative impact on services and support provided by the Australian government. Hence,
it could be estimated that the decision regarding corporate tax cut might not help Australian
tax payers, as it only benefits corporations and multinational companies. According to
Ato.gov.au (2018), the corporate tax rate reduction directly allows the government to
motivate the business class for increasing their operations in the country.
Moreover, the decision regarding the reduction in corporate tax rate would also help
the corporations and multinational companies to increase their retention capacity. This
decision directly impacts their cash outflow, which reduces due to the reduction in corporate
tax rate. This reduction in corporate tax rate could also decrease the dividend imputation
credits, which are transferred by corporations to their shareholders. This relatively benefits
the shareholders of the organisation and allow them to generate high level of returns from
investment. The capability of the corporations also increases with the decision, as they have
more cash, which could be reinvested in the business for improve its profitability and
productivity (Sbs.com.au, 2017). In addition, the decision regarding corporate tax cut could
also help in improving the level of wage rate, reducing unemployment and increase foreign
direct investment in the country. The benefits provided from the decision regarding the tax

FINANCIAL ACCOUNTING
5
cut rate is relatively higher, which might help in improving living standard of the Australian
citizens. The decision would increase the rate of employment and tax payers in the country,
which might help in gathering higher tax amount.
However, the decision regarding corporate tax cut is not viable, as the benefits of the
decision will only be taken by corporations, who are making adequate profits to survive the
competitive market. In addition, the reduction in corporate tax rate must not be conducted, as
the actual benefits that is needed by the taxpayers of Australia will not be provide by the
government. Nevertheless, for boosting the small and medium scale industry the government
could use different tax rate, which might help in reducing the burden on small industries and
provide them adequate space to compete in the business world.
Question 4: Evaluating the performance of NAB and BHP
i. Monthly holding period of NAB, BHP and Market:
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
6/1/2016
7/1/2016
8/1/2016
9/1/2016
10/1/2016
11/1/2016
12/1/2016
0.45%
6.51%
22.80%
-6.97%
0.65%
2.63% 4.23%
12.46%
2.03%
6.55%
-1.76%
6.30%
BHP Billiton Return

FINANCIAL ACCOUNTING
6
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
6/1/2016
7/1/2016
8/1/2016
9/1/2016
10/1/2016
11/1/2016
12/1/2016
-10.21%
8.47%
3.62%
-0.15%
-6.34%
4.36%
3.01% 1.94%
0.47%
3.32% 2.66% 2.12%
National Australia Bank Return
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
6/1/2016
7/1/2016
8/1/2016
9/1/2016
10/1/2016
11/1/2016
12/1/2016
-5.39%
-2.15%
4.12%
3.19%2.48%
-2.52%
6.28%
-2.03%
-0.08%
-2.22%
1.85%
3.94%
AORD Return
ii. Calculating the Average monthly holding period return NAB, BHP and Market:
Particulars Average monthly holding period return
National Australia Bank 1.11%
BHP Billiton 4.66%
AORD 0.62%
iii. Calculating annual period of NAB and BHP:
Particulars Annual holding period return

FINANCIAL ACCOUNTING
7
National Australia Bank 12.59%
BHP Billiton 71.87%
AORD 7.01%
iv. Standard deviation of NAB, and BHP:
Particulars Standard deviation
National Australia Bank 4.95%
BHP Billiton 7.52%
AORD 3.52%
v. Plotting graph for NAB and BHP:
4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Risk & return
National Australia Bank BHP Billiton
vi. Expected return of NAB and BHP:
Particulars NAB BHP
Rf 2.9500% 2.9500%
Beta 1.2300 0.9000
Rm 6.5000% 6.5000%
CAPM 2.95%+((1.23*(6.5%-2.95%))) 2.95%+((0.9*(6.5%-2.95%)))
CAPM 7.3165% 6.1450%

FINANCIAL ACCOUNTING
8
vii. Security Market Line graph for NAB and BHP:
0 0.2 0.4 0.6 0.8 1 1.2 1.4
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
SML of BHP and NAB
viii. Calculating expected return of the portfolio:
Particulars BHP NAB
Rf 2.950% 2.950%
Beta 0.9 1.23
Rm 6.500% 6.500%
Weight 70.000% 30.000%
CAPM 6.150% 7.320%
Portfolio (beta) (30% * 1.23) + (70% * 0.9)
Portfolio (beta) 1.00
Portfolio (return) (30% * 7.32%) + (70% * 6.15%)
Portfolio (return) 6.500%

FINANCIAL ACCOUNTING
9
ix. Explaining the choice of using assets or portfolio:
The plotting conducted in SML mainly helps in detecting the overall viability the
investment, which will be conducted in portfolio and stock. In addition, the CAPM value of
portfolio and stocks are relevantly by adequate, which could help in understanding the return
from investment. The calculation directly indicates that investment in portfolio is a viable
investment criterion, which could help in generating high level of returns from investment
(Christoffersen & Simutin, 2017). The portfolio has beta of 1, while the returns is at the level
of 6.5%. On the other hand, the BHP returns are 6.15% with beta 0.9, while the returns of
NAB is 7.32% with a beta of 1.23. Therefore, the investment in portfolio could help in
getting higher returns from investments, while curbing the risk.

FINANCIAL ACCOUNTING
10
Reference and Bibliography:
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 4 April 2018, from
https://au.finance.yahoo.com/world-indices
Treasury.gov.au. (2018). Chapter 1: The case for a cut in the company tax
rate. Treasury.gov.au. Retrieved 7 April 2018, from
https://treasury.gov.au/publication/business-tax-working-group-final-report/business-
tax-working-group-final-report/chapter-1-the-case-for-a-cut-in-the-company-tax-rate/
Ato.gov.au. (2018). Ato.gov.au. Retrieved 7 April 2018, from
https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-
for-businesses/Reducing-the-corporate-tax-rate/
Sbs.com.au. (2017). SBS News. Retrieved 7 April 2018, from
https://www.sbs.com.au/news/australia-must-follow-us-by-slashing-corporate-taxes-
cormann
Christoffersen, S. E., & Simutin, M. (2017). On the demand for high-beta stocks: Evidence
from mutual funds. The Review of Financial Studies, 30(8), 2596-2620.