Accounting and Finance Project: Investment, Loan & Tax Analysis

This project report on Accounting and Finance covers several key areas including investment analysis, loan calculations, retirement planning, and stock valuation. It begins by calculating the present value of an investment opportunity with a 6% required rate of return, determining the monthly repayment for a home loan, and projecting the total investment amount after retirement, along with the sustainable pension amount. The report then analyzes the percentage change in cash flow, calculates the present value of cash flows, and discusses the impact of Australian corporate taxation rates, considering arguments for and against changes to the current policy. Furthermore, the project evaluates the monthly returns, average monthly returns, annualized holding returns, and standard deviation for WOW, WES, and market stocks. Finally, it calculates the cost of equity using the Capital Asset Pricing Model (CAPM) for WOW and WES, determines portfolio beta, and recommends investment in the portfolio based on risk and return analysis. Desklib provides access to similar solved assignments 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:
Part a:
In case of 6% rate of return, the investment of Scotty would be $ 31,635.33. the
calculations of the investment is as follows:
Calculation of present cash flow
Interest rate= 6%
Year Cash Flows
Present value
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
Part b:
If the Jarrad Waite take the home loan than the total monthly repayment amount for
30 years would be $ 6992.79.
Loan amount 1800000
Term (annual) 360
Interest rate 5%
annual nominal rate 0.004166667
EMI $9,662.79
Part c:
i) According to Ben’s will, the total investment amount after the 65th birthday would be
$3,235,410.98.
Calculation of total value at the age of 65
Term Interest rate Value at the age of 65
Deposit amount annual 1500 420 7% $2,701,581.90
Single deposit amount 50000 35 7% $533,829.07
Total value at the age of 65 $3,235,410.98

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After the retirement, Ben wish to get pension amount as well as he want to get $
2,00,00 at the age of 90 years. So the pension amount would be $ $225,369.87.
After the age of 65, invetsor wish to get annual pension as well $ 2,00,000 at the age of 90.
so,
The present value of $ 2,00,000 $59,060.55
The balance amount = 32,325,411 - $ 56,061 = $3,176,350.42
Calculation of annual pension for 25
years
Present value $3,176,350.42
Term 25
Interest rate 5%
Pension amt $225,369.87
Question 2:
Part a:
% 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
Part b:
% Year 1 to 4 = 4.5% Year 5-6=
6%
Year 7-10 = 7%
CFi 2500 2500 2700 -1500 7000 10000
Year

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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
Accumulate
d value
$ 4583.09 $ 960.15 $ 8891.03
Total value $ 14,434.27
Question 3:
Taxation amount is the mandatory financial charge which is levied by the government
upon the individuals and the corporate in order to fund various expenditures and manage the
economical performance of the business. The conversation (2018) explains that Australian
government charges 30% from the corporate against their profit. It has been argued by AFR
(2018) that the Australian government charges higher taxation than various other countries.
In the list of corporate tax rates, it has been measured that the Australian taxation rate is on 5th
number. It explains that the Australian government’s taxation rate is higher and it must be
reduced by the Australian government in order to improve the economical performance of the
business.
However, the News (2018) has argued that the Australian government offer the
franking dividend to the shareholders of the company which basically manages the taxation
rate of the country. The overall tax charges of the business reduce due to it. thus, it has
concluded by them that the taxation rate of Australia is quite perfect and Australian
government does not require to make any change into it (Saad, 2014). The changes into the
Australian corporate taxation rate would lead to the business towards loss.
It has been stated by The Australian (2018) into his report that the taxation rate of the
Australian government is competitive in terms of economical performance as the company
needs huge fund to manage the position as well as franking dividend policy offers a good
market to FDIs. On the basis of the “The Conversation (2018)” article and the argument of
various economist, it has been concluded that the Australian taxation rate is quite better and

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the country is not required to make any change into the policy. The changes into the
Australian taxation rate would lead to the business towards less revenue which would impact
on the economical position of the business.
The Australian corporate taxation policy has been set in such a way that the
shareholders of the country don’t have to bear the burden of higher taxation. The total
deducted tax amount is given back to the shareholders which makes the corporate system
more impressive and due to which the FDIs feel attracted. However, there are various other
factors as well which is considered by the FDIs before entering into the market to measure
the overall position of the business (Henry, Harmer, Piggott, Ridout & Smith, 2009).
The Australian dividend imputation system explains that all the tax payers of the
Australia which are either imputed or attributed, to the shareholder by a path of tax credit to
make the reduction in the total distribution of income tax payable. The imputation system of
the Australian government effectively charges the tax amount on the company’s profit at the
average tax rates of the shareholders.
On the basis of the “The Conversation (2018)” article and the argument of various
economist, it has been concluded that the Australian taxation rate is enough competitive in
order to manage the economic performance of the business. Further, it is recommended that
the Australian government is not required to make any change into the policy. The changes
into the Australian taxation rate would lead to the business towards less revenue which would
impact on the economical position of the business. Lastly, it has been measured that the
corporate taxation structure of the Australian government is efficient which manages the tax
payment and income tax payable of the business.
Question 4:
Part a:
Calculation of monthly return
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%

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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%
25/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Figure 1: Monthly Return Graph
Part b:
Calculation of average monthly return
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%

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31/07/2018 28.8 51.49 6357.9 -4.29% 4.10% -0.13%
25/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Average monthly return 1.18% 1.91% 0.87%
Part c:
Calculation of annual holding return
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%
25/08/2018 28.8 51.49 6357.9 0.00% 0.00% 0.00%
Average monthly return 1.18% 1.91% 0.87%
Annualized holding return (1+Monthly
return)^12-1 15.09% 25.49% 10.95%
Part d:
Calculation of Standard deviation
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%

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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%
25/08/2018 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
Part e:
WOW WES MKT
Annualized holding return 15.09% 25.49% 10.95%
Standard deviation 2.97% 3.00% 2.10%
Part f:
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%
Part g:

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WOW WES
Beta 0.770 0.810
Return 0.049 0.050
Part h:
Particulars WOW WES
Weightage 30% 70%
Beta 0.77 0.81
Portfolio Beta
Portfolio Beta 0.80
Market Risk
Premium 5.75%
Risk Free Rate 2.00%
Portfolio Expected
Return 6.59%
Part i:
Through the evaluation on Woolworths and Wesfarmers stock price, it has been
concluded that the return from both the stocks are positive and depicting about a great
performance of both the stocks. The CAPM calculations brief that the return from WES
stocks are higher along with the higher risk. In context with the portfolio, it has been found
that the risk of the portfolio is average as well as the return from the portfolio is higher than

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the individual stocks. So, investors are recommended to invest in the portfolio rather than the
individual securities.
References:
AFR. (2018). Current Australian tax cut debate a tale of two populisms. [online]. Retrieved
from: https://www.afr.com/opinion/columnists/current-australian-tax-cut-debate-a-tale-
of-two-populisms-20180702-h124oh
Henry, K., Harmer, J., Piggott, J., Ridout, H., & Smith, G. (2009). Australia’s future tax
system. Canberra, Commonwealth Treasury.
News. (2018). Fact check: Will Australia be uncompetitive on company tax if the
Government's reforms fail?. [online]. Retrieved from:
http://www.abc.net.au/news/2017-10-13/fact-check-wii-australia-be-uncompetitive-on-
company-tax/9033940
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 3 (ii), 109, 1069-1075.
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