BUACC5936 - Financial Management Final Assessment Revision Memo
BUACC5936 - Financial Management Final Assessment Revision Memo
Hi All,
Please find below information on the semester 1, 2022 final assessment task for Financial Management.
As a student, you will already have completed assessment tasks 1 and 2, and are now looking at final assessment task 3 which is an online timed examination. As your course coordinator and the lecturer, I was delighted to see you all are progressing well with the course and your excellent results for the mid-semester assessments have demonstrated that.
This assessment has a weighting of 60% of the unit and is of 3 hours 40 minutes in duration. This final assessment task will be provided on Moodle on the prescribed date and time. Once you open the final examination your time is running and the clock will continue to count down, so ensure you answer all questions.
The weekly topic guide within the Course Description outlines the following topics covered over the semester:
1 Introduction to Financial Management
2 The Time Value of Money
3 Risk and Return
4 Valuation of Bonds and Shares
5 Investment Decision Criteria
6 Analysing Project Cash Flows
7 Risk Analysis and Project Evaluation
8 The Cost of Capital
9 Capital-Structure Policy
10 Dividend and Share Buyback Policy
11 Working Capital Management
All topics within the semester may be included in the final assessment task. Your financial calculator (or spreadsheet) will be of assistance in this task.
The final assessment will comprise a mixture of theoretical and practical questions. In this instance, there are five questions in total consisting of two 15 marks questions and 3 other 10 marks questions (total of 60 marks). The questions consist of both theory and practical/mathematical questions.
An overview of the final assessment questions is noted below:
Question 1 is worth 15 marks in total and consists of 5 parts of both a theoretical and practical/mathematical nature (financial calculator or spreadsheet required).
Question 3 is worth 15 marks in total and consists of 4 parts of a practical/mathematical nature (financial calculator or spreadsheet required).
Questions 2, 4, and 5 are theoretical and practical/mathematical questions worth 10 marks each and will require a financial calculator (or spreadsheet).
The questions will explore your knowledge of topics within the unit and may include items such as payback, CAPM, Bond and Equity valuation, dividend policy, net present value, cost of capital, and Risk/Return. Of course, all items throughout the unit are assessable in this instance.
This is an open book assessment so be prepared before you open this assessment task. Make sure you are organized and have access to relevant reference material, notes, calculator, or software which you deem appropriate. All questions should be answered and there are no multiple-choice questions within the final assessment task.
Good luck with your preparation and completion of this piece of assessment.
Regards
A/Prof Sisira Colombage
Course Coordinator
center889000
Federation Business School (FBS)
FINAL ASSESSMENT
Semester 1, 2022
BUACC5936 Financial Management-182880300990BUACC5936 Financial Management
Semester 1 2022
Timed Online Assessment
Please read ALL these instructions carefully before you commence:
Answer all questions
Time to complete: 3 hours 40 minutes (220 minutes)
During the assessment:
To add your answers to the assessment word document you will find a box under each question where it asks you to Click or tap here to enter text. Click on this box and begin typing your answers.
You can leave Moodle at any time once you have downloaded your assessment, HOWEVER the clock will continue to count down (closing down your internet browser will save you bandwidth issues if your internet is not always reliable).
If you leave Moodle at any time, you MUST return to the assessment area on Moodle and click on Continue the last attempt before the time runs out to upload your completed assessment document.
To complete & upload your assessment:
Save the document to your desktop using Your Name_StudentID_CourseCode
Return to the Moodle assessment area and click on Continue the last attempt button to return to the assessment.
Scroll down to Question 1 and click on the paper icon to upload your completed assessment.
Click Finish attempt and follow the final prompts to submit your assessment.
If you experience technical issues during your assessment, please dont panic. Email your lecturer explaining the issue. It would be good to provide a screenshot with your email. The lecturer will get in contact with you as soon as possible to discuss how to proceed.
If you are unable to upload your completed assessment document before your time runs out, please email your lecturer with your assessment document attached and a clear explanation as to why you were late. Your lecturer will contact you to discuss.
All Federation University Australia rules apply to the online assessment task: penalties can be applied for late submissions and for breaches of academic integrity inclusive of collusion and/or plagiarism.
00BUACC5936 Financial Management
Semester 1 2022
Timed Online Assessment
Please read ALL these instructions carefully before you commence:
Answer all questions
Time to complete: 3 hours 40 minutes (220 minutes)
During the assessment:
To add your answers to the assessment word document you will find a box under each question where it asks you to Click or tap here to enter text. Click on this box and begin typing your answers.
You can leave Moodle at any time once you have downloaded your assessment, HOWEVER the clock will continue to count down (closing down your internet browser will save you bandwidth issues if your internet is not always reliable).
If you leave Moodle at any time, you MUST return to the assessment area on Moodle and click on Continue the last attempt before the time runs out to upload your completed assessment document.
To complete & upload your assessment:
Save the document to your desktop using Your Name_StudentID_CourseCode
Return to the Moodle assessment area and click on Continue the last attempt button to return to the assessment.
Scroll down to Question 1 and click on the paper icon to upload your completed assessment.
Click Finish attempt and follow the final prompts to submit your assessment.
If you experience technical issues during your assessment, please dont panic. Email your lecturer explaining the issue. It would be good to provide a screenshot with your email. The lecturer will get in contact with you as soon as possible to discuss how to proceed.
If you are unable to upload your completed assessment document before your time runs out, please email your lecturer with your assessment document attached and a clear explanation as to why you were late. Your lecturer will contact you to discuss.
All Federation University Australia rules apply to the online assessment task: penalties can be applied for late submissions and for breaches of academic integrity inclusive of collusion and/or plagiarism.
Total Marks: 60
Question 1 (15 Marks)
Explain the two rates below and indicate which one is the most appropriate one to calculate the pre-tax cost of debt for a company.
Coupon rate
Yield to Maturity (YTM)
(4 Marks)
Click or tap here to enter text.
IRR and NPV are two different discounted cash flow methods used for evaluating capital projects. If the company will reinvest its interim cash inflows for the lifetime of the project, which method is preferred?
(2 Marks)
Click or tap here to enter text.
You must make a payment of $143,202 ten years from today. In order to prepare for this payment you will make 5 equal deposits, beginning today and for the next 4 quarters in a bank that pays a nominal interest rate of 12 percent per year compounded quarterly. The accumulated amount at the end of the fifth quarter will be left in the account until the payment date at the end of ten years from now when the balance in the account should have grown to $143,202. How large must each of the 5 equal deposits be rounded to the nearest dollar?
(2 Marks)
Click or tap here to enter text.
Assume that it is presently July 1, 2022, and you need to raise $10,000 by July 1, 2027. You have $4,000 on July 1, 2022, and you earn sufficient to make equal half-yearly deposits. If your bank agrees to compound its 8% rate of interest semi-annually.
Calculate the value of each deposit you must earn.
Click or tap here to enter text.
Calculate the annual effective rate of the banks offer.
Click or tap here to enter text.
(c) Is there any reinvestment rate risk involved in the preceding analysis? If so, how might this risk be eliminated?
(3 Marks)
Click or tap here to enter text.
It is commonly accepted that there are gains from adding securities to an investment portfolio. Discuss this statement using the important concepts of modern portfolio theory and practice.
(4 Marks)
Click or tap here to enter text.
Question 2 (10 Marks)
Michael owns 100,000 shares of common stock in the Pro Logic company. The market value of Pro Logic shares is currently $5 per share. Pro Logic company is currently financed as follows:
Common stock: (20 million shares) $40,000,000 (book value)
Short term debt: $60,000,000
Pro Logic announces today that $10,000,000 (10 million) of its short-term debt will be replaced with common stock. Michael is worried that he will now receive less profits. What action can he take to ensure that he receives the same proportion of profits as before?
(4 Marks)
Click or tap here to enter text.
Miller and Modigliani ignore the consequences of large amounts of debt. With more
borrowings, there might be a higher rate of interest required. State whether you agree with
this statement and explain why/why not.
(4 Marks)
Click or tap here to enter text.
Define operating leverage and why it is potentially risky.?
(2 Marks)
Click or tap here to enter text.
Question 3 (15 Marks)
Tirana Plc is an equity-only health care company with a few branches in the country. The firm has three divisions aged care, cosmetic manufacturing, and allied health services. The risk-free rate is 4%, the market risk premium is 10% and the firms beta is 1.3. The company is planning to invest $20 million in each of its three divisions.
The CFO has estimated the equity beta for each of its divisions by identifying similar businesses in the market. The equity beta and IRR for the proposed new investments in each division are provided below.
DivisionEquity Beta IRR
Aged Care 2.021%
Cosmetic Manufacturing1.318%
Allied Health Services0.613%
Calculate the cost of capital for Tirana Plc using the CAPM.
(2 Marks)
Click or tap here to enter text.Calculate the cost of capital for each division of Tirana using the CAPM
(6 Marks)
Click or tap here to enter text.
Identify the projects that will be accepted using the divisional cost of capital..(3 Marks)
Click or tap here to enter text.
Which projects will be incorrectly accepted or rejected if the firms overall cost of capital is used as a hurdle rate?
(4 Marks)
Click or tap here to enter text.
Question 4 (10 Marks)
Unexpected increases in dividends usually result in a rise in stock price. Similarly, an unexpected cut in dividends results in a decline. Explain, drawing upon theory, why this
might occur.
(2 marks)
Click or tap here to enter text.Explain the differences between the classical dividend tax system and the imputation tax system. Clearly state how each taxes dividends and explain which of the two systems
encourages larger dividend payouts.
(2 marks)
Click or tap here to enter text.On 30 June 2022, the board of directors of Sakura Plc declared a dividend of $2 per share. This dividend is payable on 30 July to all shareholders on record on 15 July.
Identify the ex-dividend and cum dividend date. (2 marks)
Click or tap here to enter text.Ignoring any tax effects and assuming no other new information:
(ii)On which date would you expect to see a change in share price. (1 mark)
Click or tap here to enter text.
(iii) In what direction would the change occur? (1 mark)
Click or tap here to enter text.(iv)By how much do you expect the price to change? (2 marks)
Click or tap here to enter text.Question 5 (10 Marks)
Explain the meaning of the term cash conversion cycle and briefly discuss the relationship between the cash conversion cycle and the level of investment in working capital.?
(2 marks)
Click or tap here to enter text.Total risk can be decomposed into systematic risk and unsystematic risk. Explain each of these components of risk and how they are affected by increasing the number of securities in the portfolio.? Briefly explain how the systematic risk of an individual asset is measured.
(4 marks)
Click or tap here to enter text.Define the payback period and briefly explain the accept/reject decision criteria for this capital budgeting technique. List the disadvantages of the payback period method
(4 marks)
Click or tap here to enter text.right427482000000
right00
right434848000
right40081200right-10668000
right54178200-57150076200
right46329600right-1143000
-3733804480560-457200-685800
-647700468630000right00right46939200-434340000
right416052000-61722076200
right379476000-51054076200
leftbottom00
137160bottom00
-22860bottom0
22860-105918000
left-141732000
-1584960-23622000
45720-19050000
left762000
END OF ASSESSMENT
