Foundations in Finance

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You currently work as a team at a major investment bank and have been tasked by theInvestment Management Division (IMD) to analyse a stock that will be incorporated into aportfolio with other assets from the same market. You will need to prepare a professionalbusiness report that will be submitted to the Investment Management Division (IMD) thatanswers the questions proposed in this investment brief as well as a final recommendation.Analysis [55 marks]
Select a publicly listed company that is a constituent of the S&P/ASX300 index (Australia),S&P500 Index (US) or CSI300 Index (China) that has at least 10 consecutive years ofdividend history from 2010-2019. The selected company cannot be one which is listedon the last page of the Assignment instructions. Describe the company that you havechosen, so that the IMD has a comprehensive understanding of its operations and risks.
Present a table of a current “stock quote” with the following characteristics: (1) CurrentPrice (2) 52 Week Range (3) Market Cap (4) Beta (5) P/E Ratio (6) EPS (7) Earnings Date(8) Forward Dividend and Yield, (9) Ex-Dividend Date, and (10) 1 year Target Estimate foryour chosen company. Define and interpret each characteristic.
Select an appropriate government-issued bond. The choice must be suitably justified tobe used as a risk-free rate proxy. Graph the bond rate over the time period 2010-2019.How have interest rates changed over this period? Why do you think this has occurred?Do you think interest rates will go up or down in the future? Discuss with references toappropriate academic literature.FINC5001 Foundations in Finance Semester 2, 2021
Calculate the required rate of return on equity for your chosen company using the CapitalAsset Pricing Model (CAPM), with the stock’s beta value (from part 2) and the rateidentified as a proxy for the risk-free rate (from part 3). Assume that an appropriatereturn on the market is 8% p.a. over the same period.
Calculate and compare the annual growth rates for dividends from 2010-2019. Calculatethe arithmetic and geometric average annual growth rate of dividends over this period.Identify any year(s) that are anomalous. Discuss why this might have occurred.
Using the Discounted Cash Flow (DCF) models you have learnt in FINC5001, determinethe intrinsic value of your chosen company using an appropriate required rate of return(from part 4) and (a) growth rate(s) (from part 5). Justify your choices and assumptionsyou have made in undertaking this calculation. Discuss the implications of your chosenmodel(s). (If you make deviations from the choices in part (4) and/or part (5), clearlyjustify why you made these changes and why these new values are sensible for thisanalysis).
Draw a timeline of your company’s future dividends to support the discussion above.
Along with the company analysed above, you will also need to select another two publiclylisted companies that belong to the same stock market index. These companies need tobe listed since 1st January 2010 on this market. Describe these two companies that youhave chosen, so that the IMD has a comprehensive understanding of their operations andrisks. Explain why you believe these two companies are good potential candidates tocombine into a portfolio.
Calculate the monthly rate of return for the period from 1st January 2010-31st December
Calculate the expected returns and standard deviations of the monthly rate ofreturn. Annualise the expected returns and standard deviations of returns. Present theexpected returns and standard deviations of the monthly and annualised rates of returnfor your chosen three stocks.
Present the variance-covariance and correlation matrix of these three stocks over thesame analysis period (as in part 9). Interpret and compare the calculated values.FINC5001 Foundations in Finance Semester 2, 2021
Calculate the annual expected rate of return and expected standard deviation for thefollowing portfolio constructs:
Draw a graph of the portfolios (from part 11) as well as Stocks A, B, and C (from part 9)into a risk-return space. Overlay an efficient frontier shape on this graph. Explain whichof the(se) asset(s) amongst the choices available is/are efficient/inefficient.
Calculate the Sharpe ratio for the 20 portfolios (from part 11) using the rate identified asa proxy for the risk-free rate (from part 3). Select the portfolio that has the highest Sharperatio and label this as Portfolio T. Explain what properties Portfolio T should have.Portfolio Stock A Stock B Stock C1 1/3 1/3 1/32 1/4 3/4 03 1/2 1/2 04 3/4 1/4 05 0 1/4 3/46 0 1/2 1/27 0 3/4 1/48 1/4 0 3/49 1/2 0 1/210 3/4 0 1/411 1/3 1/6 1/212 1/3 1/2 1/613 1/6 1/3 1/214 1/2 1/3 1/615 1/2 1/6 1/316 1/6 1/2 1/317 1/8 1/8 3/418 1/8 3/4 1/819 3/4 1/8 1/820 3/4 1/12 1/6FINC5001 Foundations in Finance Semester 2, 2021
Calculate the annual expected rate of return and expected standard deviation for thefollowing portfolio constructs between Portfolio T and the risk-free asset:New Portfolio Portfolio T (%) Risk-free Asset (%)1 100 02 90 103 80 204 70 305 60 406 50 507 40 608 30 709 20 8010 10 9011 0 10012 -10 11013 -20 12014 -30 13015 -40 14016 -50 15017 -60 16018 -70 17019 -80 18020 -90 19021 -100 200
Draw a graph of the portfolios (from part 14) into a risk-return space.
Combine the diagrams (from parts 12 and 15) onto the same graph. Identify theportfolio(s) that is/are efficient/inefficient among your choices. Explain whether youwould choose any of the individual assets (Stocks A, B, or C) over these portfolios.FINC5001 Foundations in Finance Semester 2, 2021Recommendation [30 marks]
Using the DCF analyses performed in parts 1-7, make a detailed recommendation for yourinitial chosen company as to whether to buy, sell or hold this stock. Along with yourvaluation model, you should use any relevant information about your chosen company,competitors, its industry, and the economic outlook to justify your recommendation.Detail the limitations of your analysis and assumptions as well as provide suggestions onhow to improve the accuracy of your valuation. A well-justified recommendation properlyconnects outside information on how it relates to your valuation model via dividends,cash flows, growth rates, discount rates, and other financial factors.
Using the portfolio construction analyses performed in parts 8-16, discuss how the riskreturn trade-offs change as you combine your chosen stock (from part 1) with the twoother stocks (from part 8) into a portfolio. Explain what would happen if more stocksfrom the same market were added into this portfolio. Choose a portfolio (from part 16)that you would recommend to the IMD. Justify under what conditions and the risk-returncharacteristics that need to be satisfied for your portfolio recommendation to the IMD tobe sensible.
Discuss which portfolio(s) (from part 16) would be preferred if the IMD wanted to marketany of these constructed portfolios to risk-averse investors with these different riskpreferences:(1) conservative (most risk-averse);(2) balanced; and(3) aggressive (least risk-averse);assuming that the balanced investors prefer to hold a portfolio of 50% in Portfolio T and50% in the risk-free asset.
Provide a final, cohesive recommendation that combines stock valuation and portfoliotheory together. Compare and contrast the differences between the financial theoriesincorporated in your analyses (from parts 17-19) which you have learnt in FINC5001.Present a conclusion to the IMD on how they would/would not be able to make excessreturns from your analyses and recommendations above.Presentation and overall style of the report [5 marks]Peer evaluation [10 marks]FINC5001 Foundations in Finance Semester 2, 2021• List and date all your data sources. Depending on the day and time with which you collectthe data, this will be different. For each set of data used in the report, present a screenshotof this data in the Appendix.• Justifications in the report should be made with references to appropriate academicliterature.• The Excel workbook needs to be properly formatted and appropriately labelled such thatthe instructors can read, interpret your calculations, and replicate all results presented inthe report without assistance.Assessment Criteria:
Conforming with instructions (e.g. word length, font, other instructions)
Presentation, communication & style (written)
Clarity of expression (incl. accuracy, spelling, grammar, punctuation)
Referencing
Use of literature/knowledge of theory
Data/information gathering/processing
Conclusions
Analysis
Problem solving
Reflection/evaluationFINC5001 Foundations in Finance Semester 2, 2021Formatting and Presentation:
The maximum number of pages allowed is 20 pages with 1.5 line spacing and size 12 Arialor Calibri Font. It should have normal-sized (2.54cm) margins on all sides. Please numberthe pages of your report. Marks will be reduced by 5% for each page you exceed the pagelimit. Hence, your mark will be reduced to zero if the report exceeds 40 pages. You will bepenalised for inappropriate formatting.
Text presented in tables and graphs do not need to follow this formatting requirement.However, these will still need to be professionally presented in the report.
Ensure you use proper academic referencing in supporting the ideas and discussion withinyour report. All reports must include a list of references in academic form using the APA7th method. Further information on the APA referencing style can be found here:https://libguides.library.usyd.edu.au/citation/apa7. You will be penalised if you forget toreference your sources or use inappropriate referencing.
Pay particular attention to presentation. A component of your mark will be based onpresentation. Avoid overdoing formatting and ensure that the report is very clear, logical,and professional. Pay attention to grammar. Clear and logical presentation is a majorchallenge in report preparation.
Preparing a concise report poses a major challenge. Brevity and conciseness are keyingredients of a highly successful report. Every part of the report should somehow add tothe end result; otherwise, it is superfluous and distracting.
Use headings in the report to separate key ideas. Using paragraphs will also assist withstructuring ideas.
The report must be submitted as a PDF document. You must submit the reportelectronically via the Turnitin link on Canvas. Excel spreadsheets with all your calculationsmust be submitted as a .xlsx workbook. You must submit two files electronically via thelink on Canvas.The page limit for the report is 20 pages.What is included in the 20 page limit?• Report body• Tables• DiagramsWhat is excluded from the 20 page limit?• Title page• Table of contents• Executive summary• Reference list• Appendices (For each set of data used in the report, present a screenshot of this data inthe Appendix)FINC5001 Foundations in Finance Semester 2, 2021Marking Guide:Company A selection, description, and financial data /5 marksRisk-free rate /5 marksCAPM calculation /2 marksGrowth rates /3 marksStock valuation /6 marksCompany B and C selection and description /4 marksRates of return calculations (expected returns, standard deviations, covariances, correlations) /10 marks3-stock portfolio construction /10 marksCombined portfolio construction /10 marksFinal recommendation /30 marksPresentation and style of report /5 marksPeer evaluation /10 marksPenaltiesIncorrect dating of data sources up to -10 marksIncomplete screenshots of data sets in Appendix up to -10 marksInappropriate use of literature up to -10 marksIncorrect referencing up to -10 marksFailure to comply with formatting requirements up to -10 marksPoorly presented report, tables, graphs up to -10 marksIncorrect selection of companies -50 marksFailure to submit Excel file with calculations -50 marksFailure to complete peer evaluation (individual deduction) -50 marksEach page over the 20 page limit -5 marks per pageTOTAL MARKS /100 marksFINC5001 Foundations in Finance Semester 2, 2021List of Prohibited US-listed Stocks (for part 1):
3M (MMM)
American Express (AXP)
Amgen (AMGN)
Apple Inc. (AAPL)
AT&T Inc (T)
Bank of America (BAC)
Boeing (BA)
Caterpillar Inc. (CAT)
Chevron Corporation (CVX)
Cisco Systems (CSCO)
The Coca-Cola Company (KO)
Colgate-Palmolive (CL)
Costco (COST)
Dow Inc. (DOW)
Estee Lauder (EL)
Exxon Mobil Corp (XOM)
Goldman Sachs (GS)
The Home Depot (HD)
Honeywell (HON)
IBM (IBM)
Intel (INTC)
Johnson & Johnson (JNJ)
JPMorgan Chase (JPM)
McDonald’s (MCD)
Merck & Co. (MRK)
Microsoft (MSFT)
Nike, Inc. (NKE)
PepsiCo (PEP)
PPG Industries (PPG)
Procter & Gamble (PG)
Salesforce (CRM)
Starbucks (SBUX)
Target Corp (TGT)
The Travelers Companies (TRV)
UnitedHealth Group (UNH)
Verizon Communications (VZ)
Visa Inc. (V)
Walgreens Boots Alliance (WBA)
Walmart (WMT)
The Walt Disney Company (DIS)List of Prohibited Australian-listed Stocks (for part 1):
Commonwealth Bank of Australia (CBA)
Domino’s Pizza Enterprises Ltd (DMP)
Telstra Corporation Ltd (TLS)
Wesfarmers Ltd (WES)
Woolworths Group Ltd (WOW)
Other Article:

Longfellow’s Unique American Hero in Evangeline A one of a kind American saint unique in long individual in Evangeline: The clarification of Adam’s long individual in the United States is something else. Through the portrayal of the story sonnet Evangelin, the idea of American Adam can be seen in different manners. R. W. B. Lewis investigated the journey for American Renaissance journalists and made a one of a kind American writing in the 1955 content “American Adam in the Nineteenth Century: Innocence, Tragedy and Tradition”. In 1847, the American writer Henry Wadsworth Long Fellow distributed a long story sonnet about the ejection of the Acadians called Evangeline, delineating an imaginary individual Ivagne. Phosphorus’ quandary. This sonnet got in vogue and got acclaimed. Evangeline oak is a vacation destination in Louisiana. The melody “Acadian Driftwood” recorded by The Band in 1975 speaks to the development and Acadian development. Antonine Maillet composed a novel called Pélagie-la-Charrette because of huge wreck. It was granted to Prix Goncourt in 1979. Fantastic PréPark is Canadian National Historic Site of Grand-Pére, Nova Scotia State and is protected as a landmark to the outcast. It incorporates the commemoration church and the sculpture of Evangeline, the subject of long individual verse. In 2018, Canadian history specialist and writer A.J.B. Johnston distributed YA’s epic called The Hat, propelled by the occasion in the Grand Prix of 1755. On the off chance that the understudies meet a long individual before attending a university, at that point the writer they know isn’t in this assortment: Evangeline, “Ha Faasha’s melody”, “Million’s romance”. This long individual’s assortment is our “revisionist” long individual in the second 50% of the twentieth century and nearly perceives renowned journalists who may have thought of them, aside from sonnets like “Hymns of life” can not. On the off chance that verse understudies don’t really peruse Long Fellows, he just tuned in to him (in an ordinary case) and they need to know why he is so celebrated. These are a ton of extraordinary writers. Long Fellow is one of only a handful barely any writers who joined new works. He made a few best sonnets ever. Sonnets of the Evangeline, Haihuasha tunes, and long individual stories, for example, Miles Stendish’s tribute give a sentimental perspective on the early American history and vote based goals. Evangelin is perhaps the longest sonnet at any point composed by an essayist. It is mainstream through the differentiation everything being equal. It is perused, cherished and thought in an unassuming bungalow (Wagonknecht P.85). Evangelin is difficult to misrepresent his style at home and abroad, which is the principal long verse that rose above his own time in American writing (Wagonknecht P.85)>

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