Accounting & Finance: Corporate Tax, Investment, Portfolio Return

This assignment solution delves into the effects of lowering the Australian corporate tax rate, evaluating its potential benefits and drawbacks on the economy, healthcare, schools, and various companies like Philip Morris International and BHP Billiton. It examines the impact on dividend imputation, employment rates, and foreign direct investment. The solution also includes a detailed analysis of investment returns for NAB and BHP, comparing their risk and return profiles, and assessing the viability of a portfolio approach for investment. The calculations indicate that using a portfolio is a viable option.

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

ACCOUNTING & FINANCE
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Table of Contents
Question 3: Detecting the impact of lowering the Australian corporate tax rate being a good
policy..........................................................................................................................................2
Question 4:.................................................................................................................................4
Question i:..................................................................................................................................4
Question ii:.................................................................................................................................5
Question iii:................................................................................................................................5
Question iv:................................................................................................................................6
Question v:.................................................................................................................................6
Question vi:................................................................................................................................6
Question vii:...............................................................................................................................7
Question viii:..............................................................................................................................7
Question ix:................................................................................................................................8
Reference and Bibliography:......................................................................................................9

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Question 3: Detecting the impact of lowering the Australian corporate tax rate being a
good policy
The argument regarding the impact of lowering Australian corporate tax rate
relatively wide, where adequate impact of the policy needs to be evaluated. the major concern
regarding the corporate tax cut is the loss, which will be incurred by Australian citizens
inform of Healthcare and schools. some of the analyst in Australia relatively believe that the
corporate tax cut would eventually help companies that are profiting from the current market
environment will increase their wealth. On the other hand, the corporate tax cut could directly
impact the overall ability of the Australian government to spend on health care in schools for
the benefits of the Australian citizens. The decline in corporate tax rate from 30% to 25%
wood effect Australian government ability to maintain the level of Healthcare and school
provisions that is needed for the next generation all the country. In this context, Ft.com
(2018) mentioned that government expenditure is relatively adequate for boosting the
economy, as it helps in increasing the overall cash flow and progress in the country.
From relevant research it could be identified that corporate tax cut would eventually
help companies such as Philip Morris International, where the total earnings are given
overseas rather than being used in the Australian market. Moreover, companies such as BHP
Billiton is considered highly profitable Endeavour, while the main problem is from the
lawsuits that is being filed against the company. This has a relatively hampered the actual
profitability of the company due to the negligence on environmental control. Lastly, the
evaluation also indicated that the corporate tax cut would eventually benefit companies such
as big four banks in Australia, whose maximum wealth is being controlled by institutions that
made $30 Billion in profit the last fiscal year. This relatively clears the picture regarding the
current Corporate tax rate cut, which would only benefit rich organizations, while hampering

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this support and benefits that was provided to the normal Australian citizens. Therefore,
understanding the current implications of the corporate tax rate reduction would eventually
help in detecting the benefits and problems that might incur in future (Abc.net.au, 2018).
The corporate tax can directly impact the Australian citizens both adversely and
positively, as it has negative and positive impact on Economy. The current position of
multinational companies in Australia is relatively adequate, as they are making profits from
the operation. However, the main problem occurs when small and medium scale industries,
which is the backbone of the economy are being hampered due to the high tax rate. The
corporate tax rate would eventually impact the dividend Imputation system that is currently
present in Australia. There reduction tax rate would eventually help in increasing the overall
evidence that could be paid to the investors by the companies. therefore, with the help of tax
cut investors and economic condition of Australia can be improved (Static.treasury.gov.au,
2018).
The decline in corporate tax rate would eventually help in improving the employment
rate, employee wage rate, foreign direct investment and boost the Australian economy. the
mentioned attributes of benefits that could be conducted from the decline in corporate tax rate
is achievable as companies with low tax raid would eventually increase their investments in
Australia. In addition, Leigh (2018) mentioned that the high tax rate relatively reduces the
capability of the corporations to increase their exposure in the market due to the low
capability of available cash. Moreover, production incorporated state you would eventually
helping reducing the overall loan and short-term trading that are taken by companies due to
stagnation of adequate cash.
Nevertheless, the evaluation of the above statement indicates that the client in
corporate tax rate needs to be ignored by the Australian government, as it will not benefit the

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common citizens of Australia. The corporate tax cut would eventually boost the economy but
in the long run it would help the overall condition and living standard of Australian citizens.
Corporate tax cut would only benefit multinational companies, whose overall income is
transferred overseas while reducing the actual benefits that could be provided to Australian
citizens (Shaw, 2017). The current conditions of the corporates in Australia is adequate,
where there is no requirement regarding the extra tax cut for the corporations.
Question 4:
Question i:
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
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
-10.21%
8.47%
3.62%
-0.15%
-6.34%
4.36% 3.01% 1.94%
0.47%
3.32% 2.66% 2.12%
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
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
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 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
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
-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
Question ii:

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Question iii:
Question iv:
Question v:
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 of NAB and BHP
NAB BHP

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Question vi:
Question vii:
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 NAB and BHP

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Question viii:
Question ix:
The above calculations mainly indicate that using the portfolio is a much viable
option, as it comprises of Beta 1, while the returns are higher than NAB. This relatively
indicates that with portfolio both the stocks can be used for investment, which might help in
improving the returns generated from investment. The portfolio return is relatively at 6.50%,
which is as the market return. Therefore, investment and Portfolio is a viable approach, which
could help in generating high level of returns from investment.

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Reference and Bibliography:
Abc.net.au. (2018). ABC News. Retrieved 6 April 2018, from
http://www.abc.net.au/news/2018-02-22/more-to-jobs-and-growth-than-a-corporate-
tax-cut/9471856
Au.finance.yahoo.com. (2018). In.finance.yahoo.com. Retrieved 5 April 2018, from
https://au.finance.yahoo.com/quote/BHP.AX/history?
period1=1451586600&period2=1485801000&interval=1mo&filter=history&frequenc
y=1mo
Balachandran, B., Khan, A., Mather, P., & Theobald, M. (2017). Insider ownership and
dividend policy in an imputation tax environment. Journal of Corporate Finance.
Ft.com. (2018). Ft.com. Retrieved 6 April 2018, from https://www.ft.com/content/2583a300-
0c81-11e8-8eb7-42f857ea9f09
Ingles, D., & Stewart, M. (2018). Australia's Company Tax: Options for Fiscally Sustainable
Reform, Updated Post Trump.
Leigh, A. (2018). Do firms that pay less company tax create more jobs?. Economic Analysis
and Policy, 59, 25-28.
McIlroy, J. (2017). The Trump-Turnbull tax trick. Green Left Weekly, (1156), 3.
Shaw, A. (2017). Tax files: Why small really is better: Accessing the lower corporate tax rate
for small business entities. Bulletin (Law Society of South Australia), 39(10), 39.
Static.treasury.gov.au. (2018). Static.treasury.gov.au. Retrieved 6 April 2018, from
https://static.treasury.gov.au/uploads/sites/1/2017/06/03_Incidence_of_company_tax_
in_Australia_v3.pdf

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Wagner, A., Zeckhauser, R. J., & Ziegler, A. (2017). Company stock reactions to the 2016
election shock: Trump, taxes and trade (No. w23152). National Bureau of Economic
Research.