Loan Options and Tax System Analysis in Accounting and Finance

This assignment provides a detailed analysis of various financial concepts, including loan payment options and taxation systems. It begins by comparing weekly and fortnightly loan payment schemes, assessing their impact on interest payments and loan duration. The assignment then delves into the differences between classical and imputation taxation systems, highlighting their effects on investor income from dividends, both domestically and internationally. Furthermore, it includes calculations of dividend after-tax under both systems. Finally, the assignment analyzes holding period returns for various investments and evaluates the risk and return profiles of different investment options, including CBA, WBC, and a portfolio, using the Security Market Line to determine optimal investment strategies. Desklib provides access to similar solved assignments and resources for students.

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

ACCOUNTING 2
Table of Contents
Question 1:.................................................................................................................................3
Answer to question a.i):.............................................................................................................3
Answer to question a.ii):............................................................................................................3
Answer to question b.i):.............................................................................................................4
Answer to question b.ii):............................................................................................................4
Answer to question b.iii):...........................................................................................................4
Question 2:.................................................................................................................................5
Answer to question i):................................................................................................................5
Answer to question ii):...............................................................................................................5
Question 3:.................................................................................................................................5
Answer to question i):................................................................................................................5
Answer to question ii):...............................................................................................................6
Answer to question iii):..............................................................................................................7
Question 4:.................................................................................................................................8
Answer to question 1):...............................................................................................................8
Answer to question 2):.............................................................................................................10
Answer to question 3):.............................................................................................................10
Answer to question 4):.............................................................................................................10
Answer to question 5):.............................................................................................................11
Answer to question 6):.............................................................................................................11
Answer to question 7):.............................................................................................................12
Answer to question 8):.............................................................................................................12
Answer to question 9):.............................................................................................................12
Reference and Bibliography:....................................................................................................13

ACCOUNTING 3
Question 1:
Answer to question a.i):
The calculation indicates that the total payment in the weekly payment scheme will be
beneficial for Jayne, as it reduces the level of interest payments. The difference indicates that
choosing weekly measure might eventually help in reducing cost of the house.
Answer to question a.ii):
The number of years taken under Weekly scheme is relevantly lower for a monthly
payment of $1000 in comparison to Fortnight.

ACCOUNTING 4
Answer to question b.i):
Answer to question b.ii):
Answer to question b.iii):

ACCOUNTING 5
Question 2:
Answer to question i):
Year 0 Year 1 Year 2 Year 3 Year 4
Year 0
Year 1
Year 2
Year 3
Year 4
Dividend Cash FLow of Ordinary Shares
Answer to question ii):
Question 3:
Answer to question i):
There is different taxation system, which are used by countries to tax the income of
the investors. The two major taxation system are classical taxation system and imputation
taxation system, which are used for taxation purposes. There is significant difference between
the imputation and classical taxation system, which directly have impact on the income of the
investor receiving dividends from organisations. The classical taxation system mainly

ACCOUNTING 6
increases the level of taxes, which needs to be paid by the investors, as double taxation in
imposed. On the contrary, the imputation taxation system directly reduces the occurrence of
double taxations, which is imposed on the investors receiving the dividends (McClure et al.,
2018).
The second major difference between the imputation and classical taxation system is
the level of alternations, which are imposed by the government conducting the relevant
taxations. The classical taxation system the company was taxed before providing the
dividends, while the investors are charged marginal tax on the income generated from
dividends. This leads to the double taxation problems, which has been seen under the
classical taxation system. On the other hand, the use of imputations system mainly reduces
the chance of double taxation, as only the company is taxed for their income, while investors
are provided with tax credit. This method increases the income of the investors receiving
dividends from companies (Chang, Chen & Chen, 2017).
Answer to question ii):

ACCOUNTING 7
The calculations conducted in the above table directly presents the overall dividend
after tax of the investors under imputation and classical taxations system. This measure
indicates the calculations under the classical method, which allows the investors to receive
the dividends after tax at 2.118 for 45% marginal tax and 3.080 for marginal tax at 20% for a
dividend of 3.850. On the other hand, the imputation taxation system has mainly reduced the
occurrence of double taxation, which raises the dividend to 4.675 for 45% marginal tax and
$4.40 for marginal tax at 20% for a dividend of 3.850. The increment in dividend is due to
the franking credits, which is provided to the investor for reducing the level of tax cash
outflow (Chiu, 2018).
Answer to question iii):
There is adequate impact on both the domestic and international investors for a
country using imputation taxation system. The imputation taxation system directly allows the
investor to increase the level of income from investment, as the taxes on dividends is
reduced. Therefore, investors are keen on investing on markets, where imputation taxation
system is used, as it reduces the occurrence of double taxation. Both domestic and

ACCOUNTING 8
international investors are willing to invest in countries like Australia and New Zealand, as
imputation taxation system is being deployed by the countries. This allows the investors to
increase their exposure in the market and raise the level of income from investment (Faccio
& Xu 2015).
Question 4:
Answer to question 1):
6/1/2017
7/1/2017
8/1/2017
9/1/2017
10/1/2017
11/1/2017
12/1/2017
1/1/2018
2/1/2018
3/1/2018
4/1/2018
5/1/2018
-12.00%
-10.00%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
Holding Period Return
WBC.AX CBA.AX AORD

ACCOUNTING 9

ACCOUNTING 10
Answer to question 2):
Answer to question 3):
Answer to question 4):

ACCOUNTING 11
Answer to question 5):
1.500% 2.000% 2.500% 3.000% 3.500% 4.000% 4.500%
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
8.368%
-8.377%
-5.746%
Risk and Return
WBC.AX CBA.AX AORD
Answer to question 6):

ACCOUNTING 12
Answer to question 7):
0.0000 0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000
0.0000%
1.0000%
2.0000%
3.0000%
4.0000%
5.0000%
6.0000%
7.0000%
Security Market Line
Return Linear (Return) WBC.AX CBA.AX
Answer to question 8):
Answer to question 9):
The calculation directly indicates that investment in CBA, WBC and Portfolio can
eventually help in generating high level of income from investment. The evaluation directly
indicates that investment in either of the options would be beneficial for the investor, as the
risk and return attributes are not different. Hence, in investment in either of the options would
be beneficial for the investors.