Finance

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Assessment Task – Tutorial Questions Assignment 1
Unit Code: HC2091
Unit Name: Business Finance
Assignment: Tutorial Questions Assessment 1
Due: 11:30pm (22:30) 15th May 2020
Weighting: 25%
Total Marks: 50 Marks
Purpose: This assignment is designed to assess your level of knowledge in the key topics covered in
by unit
Unit Learning Outcomes Assessed:
1. Research and explain the structure of Australian and International financial systems.
Critically analyse the role of finance in business. Explain financial markets and different types of
securities and the processes related to their investment. Interpret the impact of future
developments in the financial markets on business structure and performance.
2. Understand the concept of the time value of money and apply it in investment and portfolio
evaluation and management.
3. Identify the important factors in capital investment decisions, portfolio evaluation and business
financing activities.
4. Critically analyse finance alternatives to manage short and long term debts. Critically understand
and practice valuation of financial instruments, including ordinary shares, preferred shares and
bonds.
5. Describe the effects of interest rates on business finance. Evaluate the firm capital structure
policy and payout policy. Evaluate alternative funding policies and instruments available to
businesses including the banking sector and nonbanking sector.
Description: Each week students are provided with three tutorial questions of varying degrees of
difficulty. The tutorial questions are available on Blackboard in the Tutorial Folder weekly. The
Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer
the provided tutorial questions. Your task is to answer a selection of tutorial questions from weeks 1
to 5 inclusive and submit these answers in a single document.
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The questions to be answered are:
Week 1 Question (10 marks)
a. (i) What does it mean when we say the Australian Securities Exchange (ASX) is an auction
market? Explain your answer (30-40 words).
(ii.) Explain how auction markets differ from dealer markets? (30-40 words)
(4 Marks)
b. Identify three (3) forms of business organisations and list a minimum of two (2) advantages and
disadvantages of each form of business.
(6 Marks)
Week 2 Question (10 marks)
a. Assume you are currently aged twenty (20) and your parents inform you that they are planning to
give you $100,000 on your 30th birthday (10 years from now). If the relevant discount rate is 5%,
how much is your gift worth today? Provide complete calculations in your answer.
(5 Marks)
b. Assume you have $20,000 in your bank account. After five (5) years, you are intending to have
$35,000 in your account. What annual rate of return must you earn on your investment to achieve
your target? Provide complete calculations in your answer. (5 Marks)
Week 3 Question (10 marks)
a. Kristi is considering an investment that will pay $7,500 a year for eight years, starting one year
from today. How much should she pay for this investment if she wishes to earn a 6% rate of
return? Provide complete calculations in your answer
(6 Marks)
b. Kristi was offered three (3) different assets, as listed below:
 Asset 1 pays annual interest rate of 9% compounding annually.
 Asset 2 pays annual interest rate of 8.9% compounding semi-annually.
 Asset 3 pays interest rate 8.95 compounding monthly.
Based on effective annual interest rate calculations, which of the above assets is the best choice
for Kristi. Show your calculations for all three (3) assets.
(4 Marks)
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Week 4 Question (10 marks)
Delta Limited has two possible investment alternatives and seeks your help to select the best option
for them to choose. The table below gives you the initial investment and the expected future cashflows over a 4 year period. The required rate of return is 12%
Year Project A Project B
0 -95,200 -162,000
1 47,800 68,000
2 37,200 65,600
3 41,400 61,000
4 29,200 54,600
a. Calculate the profitability index for each project.
(4 Marks)
b. Calculate the the Net Present Value (NPV) for each project
(4 Marks)
c. Which project should be selected based on your calculations? Explain your answer. (30 – 40 words)
(2 Marks)
Week 5 Question (10 marks)
a. Explain what the relevant incremental cash flows are for a project evaluation. Provide three (3)
examples in your response. (80 -100 words)
(5 Marks)
b. Kite Limited has provided the following forecast for the upcoming year for their business. Based
on the given information, calculate the operating cashflow.
The company projected sales volume is $143,200. Cost of goods sold is 60% of the sales revenue
and administration and other expenses is $10,500. The depreciation expenses will be $8,000 and
the corporate tax rate is 30%. Show all your calculations.
(5 Marks)
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Submission Directions:
The assignment has to be submitted via Blackboard. Each student will be permitted one submission
to Blackboard only. Each student needs to ensure that the document submitted is the correct one.
Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work that
represents their original words or ideas. If any words or ideas used in a class posting or assignment
submission do not represent the student’s original words or ideas, the student must cite all relevant
sources and make clear the extent to which such sources were used. Written assignments that include
material similar to course reading materials or other sources should include a citation including source,
author, and page number.
In addition, written assignments that are similar or identical to those of another student in the class is
also a violation of the Holmes Institute’s Academic Conduct and Integrity Policy. The consequence for
a violation of this policy can incur a range of penalties varying from a 50% penalty through to
suspension of enrolment. The penalty would be dependent on the extent of academic misconduct
and the student’s history of academic misconduct issues. All assessments will be automatically
submitted to Safe-Assign to assess their originality.
Further Information:
For further information and additional learning resources, students should refer to their Discussion
Board for the unit.