Assessment Three: Individual assignment
Word limit : 3,000±10% words
Aim of this assessment
This individual assessment consists of four questions and aims to test students’
understanding and competency in learning outcomes 3,4,5 and 6.
For the integrity of this assessment, the lecturer-in-charge or National
Lecturer-in-charge (NLIC) may contact students to explain their work and
answer questions pertinent to the work submitted before student’s mark is
finalised.
Please attach any expected questions.
To answer Questions 1 and 2 please select one of the following companies:
Company choice is your freedom.
1. Seek Limited (ASX Code: SEK)
2. A2B Australia (ASX Code; A2B)
3. Flight Centre Travel Group Limited (FLT)
QUESTION 1 ( LO3)
(i) Determine the (a) weighted average cost of capital, (b) debt ratio, (c) debt-toequity,
(d) return on assets and (e) return on equity for financial year (FY) 2019.
(ii) What is the mix of debt and equity for the firm in FY 2019? Do you think the
company’s capital structure for FY2019 optimal? Discuss.
(iii) What role does the cost of capital play in the overall financial decision making
of the firm’s top managers?
QUESTION 2 (LO6)
A: Dividend Policy
(i) Calculate the dividend payout ratio and dividend yield for each year from
2015 to 2019. How can you describe the dividend policy of the company
the 2015-2019 period?
(II) What factors would you take into consideration when deciding on the appropriate
dividend policy for the company? Is the current dividend policy justified?
B. Working Capital Management
(i) Calculate the cash conversion cycle and net working capital for each year
(2015-2019). What considerations determine the optimal size of the
company’s investment in current assets?
(ii) Critically evaluate the working capital management policy of the company
during the period 2015-2019
QUESTION 3 (LO 4)
This task is similar to your Assessment One question. Consequently, it is an
opportunity for you to apply what you have learned in Assessment Two and thus
improve the quality of your response.
XYZ Limited is considering to introduce a new fad product which is envisaged to stay
in the market for five years from today. The company requires a return of 15% from
the project. The following information is available for this new project:
• Cost of new equipment to be acquired: $15,800,000
• Installation and commissioning of new equipment: $200,000
• Depreciation: The new equipment will be depreciated using straight-line
depreciation over five years with no salvage value.
• The company is subject to 30% income tax for both income and capital gains.
Sales in units for the next five years are projected as follows:
| Year | Units | Projected selling price per unit |
| 1 | 140,000 | $600 |
| 2 | 240,000 | $600 |
| 3 | 280,000 | $600 |
| 4 | 160,000 | $600 |
| 5 | 160,000 | $520 |
• Variable expenses per unit: $360
• Fixed expenses per year: $400,000
• Working capital: Required initial working capital to get production started:$200,000.
Annual net working capital requirement amounts to ten per cent (10%) of the sales
revenue of each year. All working capital is to be liquidated at the termination of
the project at the end of year 5. Anticipated inflation rate over the next five years is
2% per annum.
Required: (show your workings)
You have been asked to provide recommendation on the feasibility of the project.
(i) Using Excel, calculate initial cash flow, operational cash flows, terminal cash flow
and the free cash flow.
(ii) Calculate the real rate of interest, and sing Excel, calculate the project’s net present
value (NPV). Show all your workings.
(iii) Using Excel, calculate the internal rate of return for the project?
(iv) In consideration of NPV and IRR calculated in b and c above, do you recommend
the project to go ahead? Consider both quantitative and qualitative factors and
justify your decision.
PS: You may copy your Excel work into Word document or alternatively submit
the Excel file separately.
QUESTION 4 (LO 5)
Suppose you are the chief financial officer of a medium-sized computer software
development firm. Your firm needs $10 million to exploit investment opportunities
that will allow it to retain its position in the software market. Identify the financing
alternatives (securities) that might be most appropriate for your firm? (Assume your
firm is in the early stages of its life cycle). Discuss the plausibility, advantages and
disadvantages of each alternative.
The assignment must be submitted in a report format which contains table of contents,
introduction, body of the report with each question answered separately and
conclusion.
MARKING GUIDE
| # | Question | Max marks |
| 1 | (i)WACC 4, debt ratio 1, debt-to-equity 1, ROA 1 and ROE 1 (ii)Capital structure 2 (iii)Cost of capital 2 | 12 |
| 2A | (i)Calculation of dividend payout 2 and dividend yield ratio 2 and dividend policy 3 (ii)Analysis of dividend policy 3 | 10 |
| 2B | (i) Calculation of cash conversion cycle and net working capital and interpretation. 4 (ii)Evaluation of working capital management 4 | 8 |
| 3 | Cash flows (initial investment 1, operational 2, terminal 1, free cash flows 2, NPV 2 and IRR 2) Recommendation 2 | 12 |
| 4 | Finance of small IT firm | 8 |
| TOTAL | 50 |
Lodgement of assignment
Students should submit their assessment via Turnitin no later than 23.59 AEST on
15 June 2020. Submission deadline is strictly enforced.
Assignment should:
be typed using one-and-a half (1.5) spacing left justified.
use Ariel or Times New Roman font size 12.
display a one-inch margin on all sides.
Cover page is attached at the front of the assignment. The cover page can be
downloaded from the following link:
assignment_forms
appropriately cite original work, author(s) etc. Citation and referencing must
conform to Harvard referencing format both in the body of the paper and its
attached reference section. Harvard referencing guide can be found in the
Assessments section on the BAFN200 LEO page.
Assignments must be submitted with an ACU cover sheet which can be downloaded
from the following link. It is imperative that the cover sheet is signed off by the student
who submitted the work.
ssignment forms
Students must submit assignments electronically via Turnitin. The software used for
checking originality compares works submitted by students with published material
from a variety of sources including the Internet. A Turnitin score of 10% or greater will
be considered cause for concern.
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