Work Integrated Learning (WIL) Assessment Task 3
Financial Accounting Theory is designed to enable you to apply financial accounting theories to a contemporary workplace situation. It includes a Work Integrated Learning (WIL) experience in which your knowledge and skills are applied and assessed in a simulated workplace context and where feedback from industry and/or community is integral to your experience.
Background Information
You are currently undertaking a student placement at ‘Water Partners’, a top-tier accounting firm, in their Advisory Services area. The Advisory Services area of Water Partners provides services to a diverse range of clients from all sectors of industry. One of Water Partners’ clients has requested a report on a specific ‘Topic of Investigation’. As part of this task, you are advised to meet with an expert in this topic to discuss your approach and ask for advice (a list of experts will be provided with your topic). You are to write this report and submit to the Advisory Services Manager, who will send it directly to the client. The report should be of an appropriate professional standard to send to the client.
What you need to do
1. Submit a written individual report which addresses the question posed for your team’s selected topic of investigation (Each team member needs to submit their own, individually written report).
Assessment Overview
The assessment for this WIL component of the course comprises the following:
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Financial Accounting Theory WIL Assessment Task 3
Each individual team member is required to undertake research beyond the initial reference to address the question posed for your team’s selected topic of investigation and individually submit a complete and thoroughly investigated report which using your own research. The initial reference can be used, in addition to at least 5 – 10 other academic references.
You should read through the rubric to better understand the expectations of this assessment. There you will see that you are expected to engage with an accounting theory to explain your topic of investigation. Choose only one theory and try to link this theory throughout your whole report. It is advised that one of your sections is dedicated to defining and explaining this theory. Your other sections can be used to explain key aspects of your topic.
Report format: The Individual Report must be in a report format, i.e., the content is split into several logical sections and sub-sections. These sections should include: an executive summary, introduction, main section of the report, conclusion and reference list. A typical report structure is:
Length: Maximum of 2,500 words (excluding references, tables, figures and
appendices). Refer also to the section on penalties for exceeding the word limit on page
4.
Assessment weighting: 45%
Rubric: The key criteria are specified in the rubric on page 3.
Submission: Submit in Canvas via Turnitin. Turnitin settings will allow you to resubmit up to 3 times before the due date. After the due date & time, it will not allow resubmissions (but will allow initial submissions after the due date & time). If you are unable to submit late through Canvas, please email your report to the course coordinator
written individual report which addresses the question posed for your team’s selected topic of investigation
Each individual team member is required to undertake research beyond the initial reference to address the question posed for your team’s selected topic of investigation and individually submit a complete and thoroughly investigated report which using your own research. The initial reference can be used, in addition to at least 5 – 10 other academic references.
Initial reference: The case study in Vietnam
The question posed for my team’s selected: Critically examine factors that influence contemporary accounting practices or standard setting in transition countries
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ACST6003: Principles of Finance ASSIGNMENT – S2, 2020 Due Date and Time: Friday 16 October 2020 at 5pm via iLearn Instructions – Read Carefully Before Attempting the Assignment • Assignment is to be submitted electronically via iLearn • Provide your answers in the worksheets in the acst6003-assignment.xlsx file, which is on iLearn. Each worksheet is named after a question you need to answer, e.g. answer question 1, 2, 3, in worksheet Q1, Q2, Q3. Each question should be answered in one worksheet. Scroll down the worksheet of each question to find any subparts which you need to answer. • When presenting or commenting on your results (final answer), format excel cells to round off numbers to 2 decimal places but use whole numbers (not rounded off) in subsequent or intermediate computations, unless a question state otherwise. • When asked to comment on your results it is sufficient to write 4-5 lines of comment. • Fill out the assignment cover sheet with your details (no need to sign) • Your assignment submission will need to include only two files o Completed (filled out) assignment cover sheet o Completed acst6003-assignment.xlsx file • Total number of 6 questions with subparts • Total number of marks: 30
Data Description Excel file acst6003-assignment.xlsx contains the following data: • A 15 years loan on $550,000 (Amortization worksheet) • A 18.5 years bond (Bond worksheet) • Annual yields on 30 day bank accepted bills (prices worksheet) • All Ordinaries Share price index (prices worksheet) • Share prices of Australian and New Zealand Banking Group Limited (ANZ) and Woolworths Group Limited (WOW) (prices worksheet) • Dividends for ANZ (dividends worksheet) • Dividends for WOW (dividends worksheet) Questions Q1a. Assume you take a loan of $550,000. The loan is for 15 years and the annual interest rate offered by bank is 5.35%. If the cash repayment frequency is on monthly basis, using the worksheet “Amortization” calculate the number of repayments, effective period rate and size of repayment on the loan amount. (2 marks) Q1b. Complete the loan amortization table using worksheet Q1. At the end of the table calculate the principle repayment amount for period 160? Explain how the amortization table works in loan repayment schedule. (4 marks) Q2a. Company Lockland Ltd has issued 18.5 years bond to raise capital. If the bond face value is 1000, the interest rate is 3.5% p.a. compounded semi-annually and the coupon rate is 4.5% p.a. Find the price of the bond using both PRICE and PV function. Comment on your results of the two functions. (2 marks) Q2b. Assume new information is given about yield and coupon rate. If yield reduces by 2% and all other information stay same as in part 2a, recalculate the price of the bond either using the PV or PRICE function. Instead of yield change suppose coupon rate reduces by 2% and all other information stay constant as in part 2a. Recalculate the price of the bond either using the PV or PRICE function. Comment on the results. (3 marks)
Q3a. Compute the monthly returns for the All Ordinaries (𝑅𝑅𝑚𝑚), Woolworth Limited (𝑅𝑅𝑊𝑊𝑊𝑊𝑊𝑊) and ANZ (𝑅𝑅𝐴𝐴𝐴𝐴𝐴𝐴) using the following formula 𝑅𝑅𝑡𝑡 = 100 × � 𝑃𝑃𝑡𝑡 𝑃𝑃𝑡𝑡−1 − 1�. Compute a monthly 30-day bank accepted bill rate as follows: 𝑅𝑅𝑟𝑟𝑟𝑟 = 𝑅𝑅𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 12 (1 mark). Q3b. Compute 𝐸𝐸(𝑅𝑅), 𝜎𝜎 and CV for all four-return series over the 01/10/2010 - 01/09/2020 time period. Comment on all computed quantities in regards to the risk return trade-off. (2 marks) Q4a. Compute excess returns for the market, i.e. market risk premium as 𝑅𝑅𝑚𝑚 𝑒𝑒 = 𝑅𝑅𝑚𝑚 − 𝑅𝑅𝑟𝑟𝑟𝑟, where 𝑅𝑅𝑚𝑚 is the return on the All Ord’s computed in question 3, and 𝑅𝑅𝑟𝑟𝑟𝑟 represents the monthly return on the 30-day bank accepted bill rate. Also compute excess return for each WOW and ANZ as follows 𝑅𝑅𝑊𝑊𝑊𝑊𝑊𝑊 𝑒𝑒 = 𝑅𝑅𝑊𝑊𝑊𝑊𝑊𝑊 − 𝑅𝑅𝑟𝑟𝑟𝑟 and 𝑅𝑅𝐴𝐴𝐴𝐴𝐴𝐴 𝑒𝑒 = 𝑅𝑅𝐴𝐴𝐴𝐴𝐴𝐴 − 𝑅𝑅𝑟𝑟𝑟𝑟. Use the 01/11/2010 – 01/09/2020 time period. (1.5 marks) Q4b. Obtain CAPM betas for both WOW and ANZ using excess returns by estimating the following regressions (1.5 marks) 𝑅𝑅𝑊𝑊𝑊𝑊𝑊𝑊 𝑒𝑒 = 𝛼𝛼𝑊𝑊𝑊𝑊𝑊𝑊 + 𝛽𝛽𝑊𝑊𝑊𝑊𝑊𝑊𝑅𝑅𝑚𝑚 𝑒𝑒 + 𝑢𝑢𝑊𝑊𝑊𝑊𝑊𝑊 𝑅𝑅𝐴𝐴𝐴𝐴𝐴𝐴 𝑒𝑒 = 𝛼𝛼𝐴𝐴𝐴𝐴𝐴𝐴 + 𝛽𝛽𝐴𝐴𝐴𝐴𝐴𝐴𝑅𝑅𝑚𝑚 𝑒𝑒 + 𝑢𝑢𝐴𝐴𝐴𝐴𝐴𝐴 where 𝑢𝑢𝑊𝑊𝑊𝑊𝑊𝑊 and 𝑢𝑢𝐴𝐴𝐴𝐴𝐴𝐴 are the random error terms of the regression models. Q4c. Present and comment on the two beta coefficients estimated in question 4b. What do they imply about the amounts of systematic risk? Note: provide final answer in 4 decimal places (2 marks) Q4d. Compute the expected returns for WOW and ANZ using the CAPM, i.e. 𝐸𝐸(𝑅𝑅𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼) = 𝑅𝑅𝑟𝑟𝑟𝑟 + 𝛽𝛽𝑊𝑊𝑊𝑊𝑊𝑊�𝐸𝐸(𝑅𝑅𝑚𝑚) − 𝑅𝑅𝑟𝑟𝑟𝑟� 𝐸𝐸(𝑅𝑅𝐴𝐴𝐴𝐴𝐴𝐴) = 𝑅𝑅𝑟𝑟𝑟𝑟 + 𝛽𝛽𝐴𝐴𝐴𝐴𝐴𝐴�𝐸𝐸(𝑅𝑅𝑚𝑚) − 𝑅𝑅𝑟𝑟𝑟𝑟� Where: • 𝑅𝑅𝑟𝑟𝑟𝑟 is the average of the monthly risk free rate computed in question 3 • 𝐸𝐸(𝑅𝑅𝑚𝑚) is the average of the market return computed in question 3 Note: provide final answer in 4 decimal places (1 mark)
Q4e. Assume you buy one share of WOW and one share of ANZ on 1/01/2019 and sell the shares on 1/12/2019. Calculate your holding period return for the two shares. State the formula you use in your calculation. Comment and compare your results with part 4d above and state which share is over-valued and under-valued. Note: provide final answer in 4 decimal places (3 marks) Q5a. Calculate annual growth rates of dividends for ANZ (𝑔𝑔𝐴𝐴𝐴𝐴𝐴𝐴) and for WOW (𝑔𝑔𝑊𝑊𝑊𝑊𝑊𝑊) using the formula � 𝑔𝑔𝑡𝑡 = 𝐷𝐷𝑡𝑡 𝐷𝐷𝑡𝑡−1 − 1� and the average annual growth rate for ANZ and WOW. Note: provide final answer in 4 decimal places (2 marks) Q5b. Assume constant growth model holds. The effective annualized return of ANZ and WOW are 11.70% and 3.89% respectively. Find the share price of ANZ and WOW at time 2020 if the average growth rate is expected to decline for ANZ but increase for WOW from time 2020 onwards infinitely. Note: provide final answer in 4 decimal places (3 marks) Q6. Consider an investment cost $5000 today which pays fixed amount of $250 at the beginning of every month for 10 years and the annual percentage rate is 6.3% p.a. compounded quarterly. Explain how the conversion rate works which can be used to calculate either the present value or future value of this investment. Show the conversion formula only using the appropriate inputs in the formula? (2 marks)