Finance Assignment: Investment Analysis and Valuation

This finance assignment provides a comprehensive analysis of various financial concepts. It begins with calculating quarterly investments needed to reach a future savings goal, considering compound interest. The assignment then delves into investment appraisal, calculating the Net Present Value (NPV) of a recycling technology investment under different rates of return. Furthermore, the assignment explores personal financial planning, determining the future value of managed funds and superannuation. It includes calculations for portfolio beta and risk assessment, comparing the risk of a portfolio to the market. Finally, the assignment analyzes the performance of Qantas stock, calculating its expected rate of return and standard deviation, and comparing its risk profile to the overall market risk.

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

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ACCOUNTING AND FINANCE
Contents
Answer 1:.........................................................................................................................................2
Part a:...........................................................................................................................................2
Part b:...........................................................................................................................................4
Part c:...........................................................................................................................................6
Answer 2:.......................................................................................................................................12
Answer 3:.......................................................................................................................................13
Part a:.........................................................................................................................................13
Part b:.........................................................................................................................................13
Answer 4:.......................................................................................................................................14
Answer 5:.......................................................................................................................................20
References:....................................................................................................................................24

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ACCOUNTING AND FINANCE
Answer 1:
Part a:
The amount to be invested in the fund quarterly is $2,623.29 and the total amount of principal in
the fund at the end of the 6 year would be $62,958.95 thus, the total amount of interest that the
fund will earn is $27,041.05. The calculation is shown in detail below.
The amount of interest @6% per annum compounded quarterly is calculated on each dollar
below.
Quarters Interest on $1 per quarter
1 0.015
2 0.015225
3 0.015453
4 0.015685
5 0.01592
6 0.016159
7 0.016402
8 0.016648
9 0.016897
10 0.017151

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ACCOUNTING AND FINANCE
11 0.017408
12 0.017669
13 0.017934
14 0.018203
15 0.018476
16 0.018753
17 0.019035
18 0.01932
19 0.01961
20 0.019904
21 0.020203
22 0.020506
23 0.020813
24 0.021126
Total interest earned on $1 over the period of 6 years 0.429503

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ACCOUNTING AND FINANCE
Thus, over a period of 6 years total accumulated balance in the fund should be $90,000, i.e.
principal and interest combined hence, it can be said that ($1+$0.429503) = $1.429503 is equal
to the accumulated expected balance in the fund after 6 years, i.e. $90,000. Hence, total amount
of principal to be invested in the fund is (90,000/ 1.429503) = $62,958.95. Thus, amount to be
invested in the fund quarterly is (62,958.95 / 24) = $2,623.29.
Part b:
Sub part i:
In order to appraise the feasibility of the investment proposal it is imperative to calculate the net
present value of the investment proposal. The table below shows the calculation of net present
value of the investment proposal (Cumming, Helge Haß & Schweizer, 2018).
End of year Cash flow p.a. PV
factor
@12%
pa.
Present value of cash flows
Year 0 (30,000,000.0
0)
1 (30,000,000.00)
Year 1 $6,000,000 0.892857 5,357,142.86
Year 2 $8,500,000 0.797194 6,776,147.96
Year 3 $9,500,000 0.71178 6,761,912.35
Year 4 $12,000,000 0.635518 7,626,216.94

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ACCOUNTING AND FINANCE
Year 5 $15,000,000 0.567427 8,511,402.84
Net present value of the project 5,032,822.95
Since, net present value of the investment proposal is positive at $5,032,822.95 hence, the
technology should be purchase as it is expected to be profitable for the investor.
Sub part ii:
In case the required rate of return is 14% per annum instead of 12% per annum then the net
present value of the investment proposal, i.e. the technology is calculated below.
End of year Cash flow p.a. PV
factor
@14%
pa.
Present value of cash flows
Year 0 (30,000,000.0
0)
1 (30,000,000.00)
Year 1 $6,000,000 0.877193 5,263,157.89
Year 2 $8,500,000 0.769468 6,540,473.99
Year 3 $9,500,000 0.674972 6,412,229.40
Year 4 $12,000,000 0.59208 7,104,963.33

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ACCOUNTING AND FINANCE
Year 5 $15,000,000 0.519369 7,790,529.97
Net present value of the project 3,111,354.58
Since the NPV of the investment purchase proposal is positive with an NPV of $3,111,354.58
hence, the investment should be purchased even if the required rate of return is 14% per annum
instead of 12% per annum.
Part c:
Sub part i:
Value of Jane’ financial asset when Jane will be 67 years old is $3,145,309.42. The detailed
calculations of two financial assets, i.e. managed fund and superannuation fund are calculated
below.
Value of managed fund at the age of 67 years will be $487,048.05
Age Balance
managed fund
opening
balance
Interest
@6%
Closing
balance
37 80,00
0.00
4,800.
00
84,80
0.00
38 84,80 5,088. 89,88

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ACCOUNTING AND FINANCE
0.00 00 8.00
39 89,88
8.00
5,393.
28
95,28
1.28
40 95,28
1.28
5,716.
88
100,99
8.16
41 100,99
8.16
6,059.
89
107,05
8.05
42 107,05
8.05
6,423.
48
113,48
1.53
43 113,48
1.53
6,808.
89
120,29
0.42
44 120,29
0.42
7,217.
43
127,50
7.85
45 127,50
7.85
7,650.
47
135,15
8.32
46 135,15
8.32
8,109.
50
143,26
7.82
47 143,26
7.82
8,596.
07
151,86
3.88
48 151,86 9,111. 160,97

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ACCOUNTING AND FINANCE
3.88 83 5.72
49 160,97
5.72
9,658.
54
170,63
4.26
50 170,63
4.26
10,238.
06
180,87
2.32
51 180,87
2.32
10,852.
34
191,72
4.66
52 191,72
4.66
11,503.
48
203,22
8.13
53 203,22
8.13
12,193.
69
215,42
1.82
54 215,42
1.82
12,925.
31
228,34
7.13
55 228,34
7.13
13,700.
83
242,04
7.96
56 242,04
7.96
14,522.
88
256,57
0.84
57 256,57
0.84
15,394.
25
271,96
5.09
58 271,96 16,317. 288,28

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ACCOUNTING AND FINANCE
5.09 91 2.99
59 288,28
2.99
17,296.
98
305,57
9.97
60 305,57
9.97
18,334.
80
323,91
4.77
61 323,91
4.77
19,434.
89
343,34
9.66
62 343,34
9.66
20,600.
98
363,95
0.64
63 363,95
0.64
21,837.
04
385,78
7.68
64 385,78
7.68
23,147.
26
408,93
4.94
65 408,93
4.94
24,536.
10
433,47
1.03
66 433,47
1.03
26,008.
26
459,47
9.29
67 459,47
9.29
27,568.
76
487,04
8.05

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ACCOUNTING AND FINANCE
The value of superannuation fund when Jane will be 67 years old is calculated below:
Age Balance managed fund
opening balance
Annual contribution Interest @7% Closing balance
37 85,000.00 18,000.00 7,210.00 110,210.00
38 110,210.00 18,000.00 8,974.70 137,184.70
39 137,184.70 18,000.00 10,862.93 166,047.63
40 166,047.63 18,000.00 12,883.33 196,930.96
41 196,930.96 18,000.00 15,045.17 229,976.13
42 229,976.13 18,000.00 17,358.33 265,334.46
43 265,334.46 18,000.00 19,833.41 303,167.87
44 303,167.87 18,000.00 22,481.75 343,649.62
45 343,649.62 18,000.00 25,315.47 386,965.10
46 386,965.10 18,000.00 28,347.56 433,312.65
47 433,312.65 18,000.00 31,591.89 482,904.54
48 482,904.54 18,000.00 35,063.32 535,967.86
49 535,967.86 18,000.00 38,777.75 592,745.61
50 592,745.61 18,000.00 42,752.19 653,497.80

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ACCOUNTING AND FINANCE
51 653,497.80 18,000.00 47,004.85 718,502.64
52 718,502.64 18,000.00 51,555.19 788,057.83
53 788,057.83 18,000.00 56,424.05 862,481.88
54 862,481.88 18,000.00 61,633.73 942,115.61
55 942,115.61 18,000.00 67,208.09 1,027,323.70
56 1,027,323.70 18,000.00 73,172.66 1,118,496.36
57 1,118,496.36 18,000.00 79,554.75 1,216,051.11
58 1,216,051.11 18,000.00 86,383.58 1,320,434.68
59 1,320,434.68 18,000.00 93,690.43 1,432,125.11
60 1,432,125.11 18,000.00 101,508.76 1,551,633.87
61 1,551,633.87 18,000.00 109,874.37 1,679,508.24
62 1,679,508.24 18,000.00 118,825.58 1,816,333.82
63 1,816,333.82 18,000.00 128,403.37 1,962,737.18
64 1,962,737.18 18,000.00 138,651.60 2,119,388.79
65 2,119,388.79 18,000.00 149,617.22 2,287,006.00
66 2,287,006.00 18,000.00 161,350.42 2,466,356.42
67 2,466,356.42 18,000.00 173,904.95 2,658,261.37

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ACCOUNTING AND FINANCE
Sub part ii:
Expected monthly pension amount would be $10,715.
Answer 2:
Sub part a:
No, the focus of Eric on short term profitability is not the best strategy for the Sun Energy in fact
short term profitability cannot be a best strategy for any organization. The focus of Sun Energy
should be to improve the quality of its products in short and long run to maximize revenue and
profitability of the organization in the long term future.
Sub part b:
A corporation pays tax on its profit under classical taxation system whereas in imputed tax credit
the tax resident shareholders receives a higher amount of after tax cash flow as he is allowed to
take credit for the imputation of dividend paid by the company on his investment. For example
ABC Corporation will have to pay 30% flat tax on its income under classical taxation system
thus, the after tax cash flow to the company is significantly lower as compared to under the
imputation credit system.
Answer 3:
Part a:
Sub part (i):

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ACCOUNTING AND FINANCE
Quarterly payment will be $67,226,258 to repay the loan of $100 million over the 10 years
period if loan is taken from GBC.
Annual installment of $257,929,989.70 has to be made to repay the loan in case the loan is taken
from International Financing Group (IFG).
IN each two years’ time a payment of $522,708,607.70 has to be made in case the loan is taken
from WWBS (Johnsen, 2018).
Sub part (ii):
Hence, the loan should be taken from IFG as it will result in lowest amount of total repayment to
repay the loan along with interest.
Part b:
Part 1:
Sub part i:
Sub part ii:
1. Beta of the portfolio is calculated below:
Company Beta Portfolio
weighting
Proportionate
beta
A 0.8 30% 0.24
B 1.05 40% 0.42

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ACCOUNTING AND FINANCE
C 1.3 30% 0.39
Beta of the portfolio 1.05
Part 2:
The risk of the portfolio is slightly higher than the market as the beta of the portfolio is 1.05 as
beta of 1 suggest that the risk of a portfolio is equal with the market risk. Thus, 1.05 indicates
slightly high risk for the portfolio as compared to the market risk.
Part 3:
In terms of risk reward trade off higher risk means that the investor will be compensated with
higher return thus, higher the risk of investment higher would be the amount of return.
Answer 4:
Sub part i:
Date Open Close Monthly
return ($)
Monthly
return
(%)
Jul-18 6.17 6.72
0.55
8.
91
Aug-18 6.72 6.43 (4.3

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ACCOUNTING AND FINANCE
(0.29) 2)
Sep-18 6.45 5.9
(0.55)
(8.5
3)
Oct-18 5.81 5.47
(0.34)
(5.8
5)
Nov-18 5.44 5.96
0.52
9.
56
Dec-18 6.06 5.79
(0.27)
(4.4
6)
Jan-19 5.84 5.44
(0.40)
(6.8
5)
Feb-19 5.44 5.73
0.29
5.
33
Mar-19 5.77 5.66
(0.11)
(1.9
1)
Apr-19 5.66 5.61
(0.05)
(0.8
8)
May-19 5.57 5.55
(0.02)
(0.3
6)
Jun-19 5.47 5.4 (1.2

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ACCOUNTING AND FINANCE
(0.07) 8)
Sub part ii:
Average monthly holding return is (0.89%).
Average holding return is calculated as following:
Date Monthly
return
(%)
Jul-18
8.91
Aug-18 (4
.32)
Sep-18 (8
.53)
Oct-18 (5
.85)
Nov-18
9.56
Dec-18 (4

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ACCOUNTING AND FINANCE
.46)
Jan-19 (6
.85)
Feb-19
5.33
Mar-19 (1
.91)
Apr-19 (0
.88)
May-19 (0
.36)
Jun-19 (1
.28)
The accumulated return in 12 months above is negative with -10.62. Hence, the average holding
return is (0.89), i.e. (10.62/12).
Sub part iii:
Particulars Average monthly
return in %

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ACCOUNTING AND FINANCE
Return (1.0400)
Sub part iv:
Line graph showing HPR:
Sub part v:
Standard deviation of monthly return is calculated below:
Date Open Close Monthly
return ($)
Monthly
return
(%)
Jul-18 6.17 6.72
0.55
8.
91
Aug-18 6.72 6.43 (4.3

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ACCOUNTING AND FINANCE
(0.29) 2)
Sep-18 6.45 5.9
(0.55)
(8.5
3)
Oct-18 5.81 5.47
(0.34)
(5.8
5)
Nov-18 5.44 5.96
0.52
9.
56
Dec-18 6.06 5.79
(0.27)
(4.4
6)
Jan-19 5.84 5.44
(0.40)
(6.8
5)
Feb-19 5.44 5.73
0.29
5.
33
Mar-19 5.77 5.66
(0.11)
(1.9
1)
Apr-19 5.66 5.61
(0.05)
(0.8
8)
May-19 5.57 5.55
(0.02)
(0.3
6)
Jun-19 5.47 5.4 (1.2

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ACCOUNTING AND FINANCE
(0.07) 8)
Standard deviation 0.337437237 5.
69
Thus, standard deviation is 5.69%.
Sub part vi:
The standard deviation of Qantas is much less at 5.69% as compared 10.67% of market standard
deviation. It is clear that the risk of holding investment in shares of Qantas is much less than the
average risk of investment in the market (Levitas & Ann McFadyen, 2019).
Answer 5:
a. Beta of a stock represents the risk of investment in the stock.
b. 0.59 beta means that the risk of investment in Qantas is less the than the market risk. As
the market risk is denominated at 1 with anything less than 1 for any stock indicative of
lower risk than the risk of market and higher beta indicates higher risk than the market
risk.
c. The riskiness of investing in the shares of beta at 0.59 is clearly lower than the risk of
investment in Qantas.
d. Calculation of expected rate of return for Qantas.
CAPM
Rf 2.75%
Rm 9.25%

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ACCOUNTING AND FINANCE
Beta 0.59
Expected rate
of return
Rf + beta X (rm - rf)
6.585%
e. (i):
(ii):
Calculation of return and beta are provided in the table below:
Securities Beta Return weightage Proportionate
beta
Proportionate
return

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ACCOUNTING AND FINANCE
Qantas 0.59 6.59% 45% 2.96% 0.2655
Market 1 9.25% 55% 5.09% 0.55
8.05% 0.8155
Thus, return is 8.05% and beta is 0.8155.

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ACCOUNTING AND FINANCE
References:
Cumming, D., Helge Haß, L., & Schweizer, D. (2018). Strategic Asset Allocation and the Role
of Alternative Investments. European Financial Management, 21(4), 521-547. doi:
10.1111/j.1468-036x.2012.00642.x
Johnsen, Å. (2018). Strategic Management Thinking and Practice. Financial Accountability &
Management, 33(5), 243-268. doi: 10.1111/faam.12056
Levitas, E., & Ann McFadyen, M. (2019). Multicomponent signals and financial
constraints. Technology Analysis & Strategic Management, 1(1), 1-16. doi:
10.1080/09537325.2019.1664735