Reference no: EM132644647 , Length: word count:3000

HI5002 Finance for Business - Holmes Institute

Research on Financial market and Capital Budgeting Analysis

Assignment Tasks

Introduction
Briefly introduction of your group's work: the purpose of assignment, key findings and structure of the assignment (not more than 300 words)

Part 1. Research and fact finding of Australian financial market

1.1 Comparison of three essential types of businesses in Australia: use the following criteria and organize your comparison in a relevant table:
1) Owner/s of businesses
2) Level of difficulty in setting up the business
3) Life the business (limited or unlimited)
4) Liabilities of owners over the business's debts
5) Legal status of business
6) Level of difficulty in mobilizing funds
7) Level of difficulty in business transfer.
1.2 Analysis of five basic principles of finance: Define the five basic principles finance and justify your analysis by illustrating examples: Choose one or more events described by media (CNN Business, Financial Times, Dow Jones financial news etc.) about companies and financial market. Analyse that event (s) applying the five basis principles of finance. Note: Each principle is to be illustrated by at least one event. The events should be in 2020.

Example of an event in media that reflect one of five basic principle of finance:
"The biotechnology company Moderna said Tuesday that its vaccine, developed in partnership with the National Institutes of Health, has been found to induce immune responses in all of the volunteers who received it in a Phase 1 study. Moderna coronavirus vaccine shows 'promising' safety and immune response results in published Phase 1 study, but more research is needed The early results are the first for a US vaccine candidate to be published in a peer-reviewed medical journal, in this case the New England Journal of Medicine. The news sent shares of Moderna skyrocketing nearly 18% in premarket trading. Later this month, the company is expected to begin a large Phase 3 trial, the final stage before regulators decide whether to approve the vaccine."

Source: Julia H. 2020, The world loves the US dollar. Trump and the pandemic could change that, published July 15, 2020 at CNN Business.

This article paragraph clearly shows the principle: Market price reflects information. Please note that this is just an example of relevant event on media for your analysis. To meet the requirement of this assignment question, you will need to analyse your selected event and justify why and how a basis principle of finance apply to that event.

Part 2. Fact Finding of Australian financial market trading practices and regulations

2.1 Fact finding of the trading on ASX
Assuming your group is working for an institutional investor that is considering to trade actively on ASX in the near future. Go to the website of Australian Stock Exchange (ASX), do a fact finding to answer the following questions:
(1) Identify at least 5 types of information the public companies provide on the area of Previous Trading Day Announcement.
(2) How are the dividend released by the public companies listed on ASX. Briefly explain the concepts of ex-dividend date, record date, date payable, dividend franking and type of dividends by the companies listed on ASX.
(3) Name 7 types of trading reports listed in ASX 24 Reports. Briefly describe the content of each report.
(4) How many types of calculators available on ASX website for the usage of investors and practitioners? Name them and explain the usage of each calculator.
(5) What are the questions you should ask your broker before you start trading?
2.2 Fact Finding of financial market regulator in Australia
Assuming after graduation you would like to apply for a position at ASIC. Go to the website of Australian Securities and Investment Commission, do a fact finding and answer the following questions:
(1) What are the ASIC roles?
(2) Who and what ASIC regulate?
(3) What are the powers of ASIC?
(4) If a business approaches you to ask about procedures for providing credit activities, what kind of license you would advise them to apply for and what are the steps they should consider to decide whether they should apply for that license?
(5) What is book up practice in Australia, briefly explain.

Part 3: Risk analysis and project evaluation
3.1 Perform a scenario analysis on the data provided
Case Study: Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 650 000 unit per year at this price for a period of 4 years. Launching this project will require purchase of a $3 500 000 equipment that has residual value in four years of $500 000 and adding $ 850 000 in working capital which is expected to be fully retrieved at the end of the project. Other information is available below:

Depreciation method: straight line
Variable cost per unit: $17
Cash fixed costs per year: $450 000
Discount rate: 10%
Tax Rate: 30%

Do a scenario analysis with cash flows of the assumed project to determine the sensitivity of the project's NPV to different scenarios that are defined in terms of the estimated values for each of the project's value drivers. Please work on two scenarios corresponding to the worst- and best-case outcomes for the project. You need to provide your results in (a) relevant tables:

Worst case: Unit sales decrease by 20%; price per unit decreases by 20%; variable cost per unit increases by 20 %; cash fixed cost per year increases by $100 000

Best case: Unit sales increase by 20%; price per unit increases by 20%; variable cost per unit decreases by 20%; cash fixed cost per year decreases by $100 000

Based on the scenario analysis outcome, draw relevant conclusion about project NPV's sensitivity.

3.2 Perform an NPV break-even analysis
Perform an NPV break even analysis for the case where price per unit decreases by 20 % to identify the number of unit sales that is needed for the project to get break-even.
Trial and error method or What - If Analysis with excel spread sheet is to be used.

Conclusion
Summarize the outcomes of your group's works (not more than 300 words)

Attachment:- finance assignment.rar