Principles of Finance

Running head: PRINCIPLES OF FINANCE
Principles of Finance

1PRINCIPLES OF FINANCE
Table of Contents
Task 1: Ethics in Finance...........................................................................................................2
Task 2(a): Application in Capital Budgeting.............................................................................3
i. Relevant Assumption:.............................................................................................................3
ii. Treatment of depreciation:.....................................................................................................3
iii. Treatment of working capital:...............................................................................................4
iv. Calculation of initial cash outlay, operating cash flows per year and terminal cash flows:. 5
v. Calculation of NPV and IRR:................................................................................................7
vi. Providing conclusion:...........................................................................................................7
Task 2(b): Project Risk Analysis................................................................................................7
References..................................................................................................................................9

2PRINCIPLES OF FINANCE
Task 1: Ethics in Finance
Sustainability and social responsibility are an integral part of all the business
integration in today are an interconnected, complex and competitive market. These kinds of
responsibilities are an ethical aspect that creates a social, economic and environmental value
for the entire organisation. The optimum usage of resources without wastage and the
corporate social responsibility increases the goodwill of the company and the customer feels
satisfied and remains loyal to the organisation (Cheng, Ioannou and Serafeim 2014). Ethics in
finance is therefore noteworthy. The following paragraph discusses in details about one such
ethical issue in the financial organisations.
The Royal Commission into Misconduct in the Banking, Superannuation and the
Financial Services Industry was founded in the year 2017 in order to inquire into the
misconducts and unethical practices of the banks (Matthews 2016). This commission has
conducted several public hearings and reviewed many public submissions. It reviewed many
Australian banks out of which the National Australia Bank is not an exception.
The Royal Commission stated that the National Australia Bank was involved in a
number of scandals in relation to financial planning. It was revealed that the bank gave false
financial advice to its clients. Falsifying the customers in order to make profits is a serious
crime and is unethical in nature. The bank did not follow proper financial planning and was
also involved in improper foreign exchange trading. It was also engaged in misconduct
relating to personal loans, home loans, credit cards and several other fees. It engaged itself
with providing loans without proper documentation and that was unsuitable.
The customer’s signatures were duplicated and were misused, the loan statements
were misstated and incorrect income figures were being used. This conduct was not just
misconduct but was beyond that and was purely unethical. Superannuation customers were