Analyzing the Impact of Corporate Tax Cuts and Portfolio Returns

This report evaluates the Australian government's decision to reduce corporate tax rates, examining the potential advantages and disadvantages for taxpayers, corporations, and the overall economy. It analyzes how tax cuts could stimulate investment, employment, and wage growth, while als...Read More

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Question 3: Observing the decision regarding corporate tax cut conducted by the Australian
government.................................................................................................................................2
Question 4:.................................................................................................................................4
i: Return......................................................................................................................................4
ii: Holding period.......................................................................................................................5
iii: Annual holding period..........................................................................................................5
iv: Standard deviation................................................................................................................5
v: Risk and return graph.............................................................................................................6
vi: Expected return.....................................................................................................................6
vii: SML.....................................................................................................................................6
viii: Portfolio beta and return.....................................................................................................7
ix: Explaining the selection of stock or portfolio.......................................................................7
Reference and Bibliography:......................................................................................................8

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Question 3: Observing the decision regarding corporate tax cut conducted by the
Australian government
This statement portrayed by Australian government regarding the reduction in
corporate tax rate is being evaluated on the basis of the advantages that will be provided to
the taxpayers. Taxpayers are relatively identified, as the citizens of Australia who receive
relevant benefits from the government. The decision regarding corporate tax cut would
eventually allow corporations to reduce their overall cash outflow, while increasing their
income retention capacity. The decision directly increases the overall capacity of the
organization to increase their investment in Australia due to low cash outflow. Moreover, the
dividend imputation credits that is transferred to the investors will also reduce taxes of the
investors, while increasing their returns from investment (Theaustralian.com.au, 2018).
Furthermore, the benefits of the reduction in corporate tax would eventually help the
Australian government to increase the number of employment with any country, as more and
more companies will be willing to invest in Australia. Moreover, the increment in foreign
direct investment could also be conducted due to the reduction in corporate tax, as companies
all over the world needs no taxation rate for surviving the competitive market. This would
also help in raising the level of wage rate in Australia, which could boost the living standards
of the citizens. With the minimum unemployment rate and the living standard the overall
expenses on care that is conducted by the Australian government will reduce, while
increasing the tax collection from citizens. this would eventually support the government in
making adequate capital expenditure decisions to improve infrastructure and services to the
Australian citizen (Theguardian.com, 2018). The decision regarding the corporate tax cut
would eventually support medium-scale and small-scale industries, which of burden to with
excessive cash outflow. This would eventually help in supporting the companies that are

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operating in Australia to improve the cash retention capability for increasing investments and
conducting more business within the country.
However, the analysis of different analyst relative relief would raise a different
picture of Corporate tax cut, which would only help multinational companies and large
organizations operating in Australia. The overall corporate tax cut from 30% to 25% which
support companies such as BHP Billiton and big four banks who are making billions of
dollars in profit every fiscal year. Nevertheless, the losses made by BHP Billiton is due to the
lawsuit and negligence that they are conducting overseas. hence, the corporate tax cut would
hamper the capability of Australian government to acquire adequate funds for supporting the
citizens by helping them with medical and school facilities (Abc.net.au, 2018).
Therefore, the decline in overall corporate tax rate would directly hamper the living
standard and facilities that is provided by the Australian government to the taxpayers.
Moreover, corporate tax deduction would eventually allow multinational companies to
become richer from the current situation. Furthermore, there are multinational company
whose overall Net profit is shipped Offshore to their actual country of origin, which does not
help the Australian citizens and the economy. Consequently, ignoring the increment in
corporate tax rate could be beneficial for the Australian government, as it might help in
maintaining the level of support and facilities that are provided to the Australian citizens
(Aph.gov.au, 2018).
Nevertheless, adequate support to the small and medium scale industries needs to be
conducted by the Australian government, as it might help in improving the economy.
Moreover, the corporate tax rate that will help big corporations should be ignored and
discontinued by the Australian government. The focus on small and medium scale industries
would eventually help in boosting the current economic condition of the country, while
generating revenues for the Australian government.

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Question 4:
i: 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
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
AORD 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
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
NAB Return

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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
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
BHP Return
ii: Holding period
iii: Annual holding period
iv: Standard deviation

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v: Risk and return graph
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%
NAB and BHP (Risk & return)
NAB BHP
vi: Expected return
vii: SML
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
Security Market Line

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viii: Portfolio beta and return
ix: Explaining the selection of stock or portfolio
After evaluating the calculations, it could be identified that investment in portfolio is
much viable option for investors, as it helps in improving the returns from investment while
reducing the risk. the portfolio mainly has a beta of 0.99900, with a return of 6.50100%.
Therefore, investment in the portfolio is much better option as higher returns are generated
with low risk.

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Reference and Bibliography:
Abc.net.au. (2018). ABC News. Retrieved 8 April 2018, from
http://www.abc.net.au/news/2018-02-19/corporate-tax-rate-tax-reform/9451592
Aph.gov.au. (2018). Aph.gov.au. Retrieved 8 April 2018, from
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/rp/BudgetReview201617/Corporate
Au.finance.yahoo.com. (2018). Au.finance.yahoo.com. Retrieved 7 April 2018, from
https://au.finance.yahoo.com/quote/BHP.AX/history?
period1=1451586600&period2=1485801000&interval=1mo&filter=history&frequenc
y=1mo
Lowyinstitute.org. (2018). Lowyinstitute.org. Retrieved 8 April 2018, from
https://www.lowyinstitute.org/the-interpreter/no-urgency-cutting-australian-corporate-
tax
Theaustralian.com.au. (2018). Theaustralian.com.au. Retrieved 8 April 2018, from
https://www.theaustralian.com.au/national-affairs/income-tax-cuts-in-next-budget/
news-story/56c50d3074f8f4f91ebe5535716baafc
Theguardian.com. (2018). Company tax cuts would boost wages by just $750 over time –
Treasury secretary. the Guardian. Retrieved 8 April 2018, from
https://www.theguardian.com/australia-news/2018/feb/28/company-tax-cuts-would-
boost-wages-by-just-750-over-time-treasury-secretary