Comprehensive Financial Project: Analysis of Investment and Taxation

This finance project report includes a comprehensive analysis of various financial concepts and calculations. It begins with calculating the present value of cash flows, followed by determining the monthly EMI for a loan. The project then explores future value calculations for single and monthly investments, along with the estimation of pension amounts. Furthermore, it discusses the impact of corporate taxation, particularly in the Australian context, and analyzes stock returns for WOW and WES, including cost of equity using the CAPM model and portfolio beta calculations. The report concludes with an overview of the CAPM and SML calculations, providing insights into investment decisions and portfolio management. Desklib offers a wealth of similar solved assignments and study resources for students.

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

Accounting and Finance
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Question 1:
Que 1.1 Calculation of present cash flow
Interest rate 6%
Year
Future Cash
Flow
P.V.
factor
Present cash
flow
1 $ 3,000 0.943 $ 3,180.000
2 $ 6,500 0.890 $ 7,303.400
3 $ 280 0.840 $ 333.484
4 $ 1,400 0.792 $ 1,767.468
5 $ 3,000 0.747 $ 4,014.677
6 $ - 0.705 $ -
7 $ 10,000 0.665 $ 15,036.303
Present cash flow $ 31,635.332
The present value of all of the above cash flows would be $ 31,635.332.
Que 1.2 Calculation of
monthly instalment
Loan amount 1800000
Term (monthly) 360
Interest rate 5%
Monthly interest
rate 0.42%
EMI $9,662.79
Que 1.3.1 Calculation of total future value at the age of 65 years
Monthly
Single
investment
Deposit amount 1500 50000
Term 420 35
Interest rate 7% 7%
Monthly interest
rate 0.005833333
Future value $2,701,581.90 $533,829.07 $3,235,410.98
Que 1.3.2 Calculation of pension amount
Future value at the age of 65 $3,235,410.98
Amount after 25 years 200,000.00

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P. V. of the amount $59,060.55
Actual amt $3,176,350
Term 25
Nominal rate 5%
Pension amount $225,369.87
Question 2:
Question 2.1
% Year 1 to 4 = 4.5% Year 5-6= 6% Year 7-10 = 7%
CFi 2500 2500 2700 -1500 7000 10000
Year
1 2 3 4 5 6 7 8 9 10
Question 2.2
% Year 1 to 4 = 4.5% Year 5-6=
6%
Year 7-10 = 7%
CFi 2500 2500 2700 -1500 7000 10000
Year
1 2 3 4 5 6 7 8 9 10
P.V. of
cash flow
2392.
34
0 2190.
74
0 2017.
6
-
1057.
44
0 0 3807.
54
5083.
49
Accumulat
ed value
$ 4583.09 $ 960.15 $ 8891.03
Total value $ 14,434.27

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Question 3:
Taxation is a significant factor for an economy to improve the performance and the
management of the expenditure of the country. This is the main source for a country to raise
the funds to spend on the country’s expenditure. This amount is used by the countries for the
society and economy improvement. However, the people and the corporate denied to pay the
tax amount because it affects their profitability level. In the Australian market, the taxation
rate is 30% which is world’s top 5th highest corporate taxation rate (Campbell & Bond, 2017).
The Australian federal government and the business union have argued several times to
reduce the Australian taxation rate as it affects very high on the total profitability level of the
business.
The conversation (2018) has argued in its article that the Australian corporate taxation
rate is 30% which is higher and due to which country enables to get higher revenue from the
Australian people and use it for the improvement of the economy. Against the above
statement, the Australian (2018) has stated that the especially the rich people never pay the
fair amount of taxation and due to which; the total tax revenue of the government is affected.
If the tax rate is reduced than a fair amount would be paid by the tax payers and it would
improve the tax revenue and ultimately the economical performance of the business. Thus, it
has been found that the Australian corporate taxation rate is not economically competitive
and the Australian government should reduce the level of the taxation rate to manage the
performance.
Further, the statement of Saad (2014) has been read and it has been measured that a
reduced taxation % attracts the tax payers of a country to pay the fair amount of taxation
which leads to the better revenue of the country. In concern with the Australian taxation rate,
it has been measured that the taxation rate of Australia is 30% which is world’s top 5th highest
corporate taxation rate. And due to it, the people try to save their money from the taxation
through various tactics which leads to the reduction in the economical performance of the
business. the reduction in the taxation rate to 25% would attract the tax payers of the country

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to pay the fair amount due to which the total taxation revenue would be improved as well as it
would lead to the improvement and growth in the economy of Australia (Spilimbergo,
Schindler & Symansky, 2009). Thus, it is concluded that the Australian corporate taxation
rate must be lower; it would convert the Australian taxation policy as better one.
Dividend imputation system express in the Australian corporate taxation policy, the
tax amount on the dividend amount is paid back by the government to the shareholders. It is
one of the good policies of corporate taxation which is not followed by the other countries
and thus foreign direct investment gets attracted towards the economy. But in the total
scenario, it hardly affects the shareholders because various other factors are also considered
by them. It further explains that the Australian taxation rate and the dividend imputation
policy of the taxation system make it little competitive and it attracts the tax payers of the
country a bit (Braithwaite, 2009). But each of the tax payers doesn’t know much about the
process and thus they try to save their profit from tax amount through various tactics. It
explains that the dividend imputation system only affect a bit to the corporate taxation policy
of Australia.
To conclude, it has been found that the Australian corporate taxation rate is not
economically competitive as well as the Australian taxation rate is quite higher and due to it,
it is recommended that the Australian government should reduce the level of the taxation rate
to manage the performance.
Question 4:
Question 4.1
Stock price Return
Date WOW WES MKT WOW WES MKT
31/08/2017 25.21 41.33 5744.9
30/09/2017 25.88 41.8 5976.4 2.66% 1.14% 4.03%
31/10/2017 26.91 43.92 6057.2 3.98% 5.07% 1.35%
30/11/2017 27.3 44.42 6167.3 1.45% 1.14% 1.82%
31/12/2017 26.95 43.81 6146.5 -1.28% -1.37% -0.34%
31/01/2018 27.61 41.33 6117.3 2.45% -5.66% -0.48%
28/02/2018 26.29 41.56 5868.9 -4.78% 0.56% -4.06%
31/03/2018 27.86 43.77 6071.6 5.97% 5.32% 3.45%
30/04/2018 28.46 45.56 6123.5 2.15% 4.09% 0.85%
31/05/2018 30.52 49.36 6289.7 7.24% 8.34% 2.71%
30/06/2018 30.09 49.46 6366.2 -1.41% 0.20% 1.22%
31/07/2018 28.8 51.49 6357.9 -4.29% 4.10% -0.13%

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24/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Question 4.2
Stock price Return
Date WOW WES MKT WOW WES MKT
31/08/2017 25.21 41.33 5744.9
30/09/2017 25.88 41.8 5976.4 2.66% 1.14% 4.03%
31/10/2017 26.91 43.92 6057.2 3.98% 5.07% 1.35%
30/11/2017 27.3 44.42 6167.3 1.45% 1.14% 1.82%
31/12/2017 26.95 43.81 6146.5 -1.28% -1.37% -0.34%
31/01/2018 27.61 41.33 6117.3 2.45% -5.66% -0.48%
28/02/2018 26.29 41.56 5868.9 -4.78% 0.56% -4.06%
31/03/2018 27.86 43.77 6071.6 5.97% 5.32% 3.45%
30/04/2018 28.46 45.56 6123.5 2.15% 4.09% 0.85%
31/05/2018 30.52 49.36 6289.7 7.24% 8.34% 2.71%
30/06/2018 30.09 49.46 6366.2 -1.41% 0.20% 1.22%
31/07/2018 28.8 51.49 6357.9 -4.29% 4.10% -0.13%
24/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Average monthly return 1.18% 1.91% 0.87%
Question 4.3
Stock price Return
Date WOW WES MKT WOW WES MKT
31/08/2017 25.21 41.33 5744.9
30/09/2017 25.88 41.8 5976.4 2.66% 1.14% 4.03%
31/10/2017 26.91 43.92 6057.2 3.98% 5.07% 1.35%

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30/11/2017 27.3 44.42 6167.3 1.45% 1.14% 1.82%
31/12/2017 26.95 43.81 6146.5 -1.28% -1.37% -0.34%
31/01/2018 27.61 41.33 6117.3 2.45% -5.66% -0.48%
28/02/2018 26.29 41.56 5868.9 -4.78% 0.56% -4.06%
31/03/2018 27.86 43.77 6071.6 5.97% 5.32% 3.45%
30/04/2018 28.46 45.56 6123.5 2.15% 4.09% 0.85%
31/05/2018 30.52 49.36 6289.7 7.24% 8.34% 2.71%
30/06/2018 30.09 49.46 6366.2 -1.41% 0.20% 1.22%
31/07/2018 28.8 51.49 6357.9 -4.29% 4.10% -0.13%
24/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Average monthly return 1.18% 1.91% 0.87%
Annualized holding return 15.09% 25.49% 10.95%
Question 4.4
Stock price Return
Date WOW WES MKT WOW WES MKT
31/08/2017 25.21 41.33 5744.9
30/09/2017 25.88 41.8 5976.4 2.66% 1.14% 4.03%
31/10/2017 26.91 43.92 6057.2 3.98% 5.07% 1.35%
30/11/2017 27.3 44.42 6167.3 1.45% 1.14% 1.82%
31/12/2017 26.95 43.81 6146.5 -1.28% -1.37% -0.34%
31/01/2018 27.61 41.33 6117.3 2.45% -5.66% -0.48%
28/02/2018 26.29 41.56 5868.9 -4.78% 0.56% -4.06%
31/03/2018 27.86 43.77 6071.6 5.97% 5.32% 3.45%
30/04/2018 28.46 45.56 6123.5 2.15% 4.09% 0.85%
31/05/2018 30.52 49.36 6289.7 7.24% 8.34% 2.71%
30/06/2018 30.09 49.46 6366.2 -1.41% 0.20% 1.22%
31/07/2018 28.8 51.49 6357.9 -4.29% 4.10% -0.13%
24/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Average monthly return 1.18% 1.91% 0.87%
Annualized holding return 15.09% 25.49% 10.95%
Standard deviation 0.029717 0.030026 0.020986
Question 4.5

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Question 4.6
WOW WES
Calculation of cost of equity
(CAPM)
Calculation of cost of equity
(CAPM)
Risk free rate 2.00% Risk free rate 2.00%
RM 5.75% RM 5.75%
Beta 0.770 Beta 0.810
Required rate of return 4.89% Required rate of return 5.04%
Que 4.7
Beta CAPM
WOW 0.77 0.049
WES 0.81 0.050

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Question 4.8:
Particulars WOW WES
Weightage 30% 70%
Beta 0.77 0.81
Portfolio Beta 0.80
Market Risk Premium 5.75%
Risk Free Rate 2.00%
Portfolio Expected Return 6.59%
Question 4.9:
The CAPM and SML calculations brief 0.77 and 0.81 beta of Woolworths and
Wesfarmers respectively. It also explains that the return level of both the stock is 4.89% and
5.04% of Woolworths and Wesfarmers respectively. Thorough the SML line, it has been
observed that the higher the return the higher the risk. In addition, it has been measured that
the return from the portfolio is 6.59% and the risk is 0.80. It explains that the risk is average
and return is higher of portfolio than the individual asset and thus the investors should invest
into the portfolio.

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References:
Braithwaite, V. A. (2009). Defiance in taxation and governance: Resisting and dismissing
authority in a democracy. Edward Elgar Publishing.
Campbell, H. F., & Bond, K. A. (2017). Effective marginal tax rates in Australia. Economic
Analysis and Policy, 27(2), 151-158.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 3 (ii), 109, 1069-1075.
Spilimbergo, M. A., Schindler, M. M., & Symansky, M. S. A. (2009). Fiscal multipliers (No.
2009-2011). International Monetary Fund. Retrieved from:
https://forschung.snb.ch/files/Sutter/IMF_FiscalMultipliers.pdf
The Australian. (2018). No, the rich don’t pay a ‘fair share’ of tax. They pay all of it?
[online]. Retrieved from: https://www.theaustralian.com.au/national-affairs/opinion/no-
the-rich-dont-pay-a-fair-share-of-tax-they-pay-all-of-it/news-story/
75bb6cf38d551cc949467103ab474aa8
The conversation. (2018). FactCheck: is Australia’s corporate tax rate not competitive with
the rest of the region?. [online]. Retrieved from: https://theconversation.com/factcheck-
is-australias-corporate-tax-rate-not-competitive-with-the-rest-of-the-region-37226