代写MAF203 Assignment relationship between risk and return
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代写MAF203 Assignment relationship between risk and return
MAF203 Assignment
Deadline: 5pm Sep 16, 2016
I. Introduction
- The assignment has a weighting of 30% of your overall mark for the unit. The
assignment allocates 50 marks across the two parts A and B. Your group mark will be
converted to a score out of 30. All members of the group will receive the same mark if
they contribute equally.
- The focus of part A is the relationship between risk and return. This part is worth 20
marks allocated across six questions. The questions are designed to enhance your
technical skills in stock picking and investment design. You will need to be familiar
with Excel spreadsheet to do this part.
- The focus of part B is on capital budgeting. This part is worth 30 marks allocated across
three questions. The questions are designed to enhance your analytical skills on
evaluating capital projects and your understanding on how firms make investment
decisions based on incremental cash flows of the project.
- All on-campus students need to enrol in a group of 2 to 4 students to submit the
assignment on CloudDeakin. Off-campus students have an option to do the
assignment individually or to join a group of 2 to 4 students. You can form a group
with any student from any campus, cohort or seminar group. The only requirement is
that all members should be currently enrolled in MAF203 2016 Trimester 2.
- It is up to the group to manage the group dynamics and get equal contribution from all
members. It is a good idea to appoint a leader to direct and coordinate the activities of
the group, including allocating tasks (questions) among the group members. All group
members are expected to discuss the assignment as a whole and contribute to preparing
answers to all questions. Before the final submission of the assignment all group
members are expected to review and edit all questions, as appropriate.
If you are using an Excel spreadsheet for analysis, you need to copy and paste important
parts of the spreadsheet to the body of your Word document. Alternatively, print out the
narrative pages (from Word doc) and the spreadsheets (from Excel file) and scan them
into a single PDF which can be uploaded. Please do not upload Excel spread sheets as
a separate file.
II. Instruction on Group Enrolment
- Both on-campus and off-campus students need to enrol in a group for assignment
submission even if the assignment is done individually.
- The deadline for group enrolment is 5 pm Sep 12 2016.
- Group Number can be found under the headline On-campus Groups ONLY and
Off-campus Groups ONLY.
- Students can enrol themselves into a group or remove themselves out of a group.
Once you are enrolled in a group, you are not able to enrol into another group
before removing yourself out of the group you are currently enrolled.
III. Instruction on Submission
- If working in a group, you need to attach a Statement of Contribution which
indicates the work done (in percentage) by each student. Mark is allocated
according to individual contribution.
- The following declaration relating to academic honesty must be made and submitted along with
any assignment:
"I/We certify that the attached work is entirely my/our own except where material quoted or
paraphrased is acknowledged in the text. I/We also declare that it has not been submitted for assessment
in any other unit or course."代写MAF203 Assignment
An Assignment Attachment Sheet containing this declaration is available online on CloudDeakin.
- Only one file (Word document or PDF) should be uploaded for your group on the
MAF203 CloudDeakin site. List the names and ID numbers of all group members on
the first page of your Word document. Only one member of the group should submit
the assignment on CloudDeakin on behalf of all the group members.
- Assignments sent as e-mail attachments or by mail will not be accepted under
any circumstances.
Assignment Questions
Part A: Risk and Return (20 marks)
Use yahoo finance to find historical prices of the US market index S&P 500 (^GSPC) and the
following three companies traded in the U.S market: Google (GOOG), Walmart (WMT) and
Toyota (TM):
Go to https://au.finance.yahoo.com
Type in the company ticker in the Look Up window
Click on Historical Prices on the left panel of the page
Set date range from 01/01/2011 to 31/12/2015 and choose Daily
Frequency.
Download the data from Download to Spreadsheet button at the end
of the page.
(See Appendix for screenshot of each step)
Note: We assume that the performance of S&P 500 represents the average performance of the
U.S market.
Questions
1. Using daily price from the data, compute 2015 monthly Holding Period Return
(HPR) of the above stocks and index using adjusted Close Price (Adj Close). (4marks)
Hint: ??? ????ℎ ? =
????? ??? ?? ?ℎ? ????ℎ− ????? ????????? ?? ?ℎ? ????ℎ
????? ???????? ?? ?ℎ? ????ℎ
2. Compute the standard deviation of the above stocks and index using monthly HPR in
part (a). (4 marks)
Hint: Use Excel function STDEV.S() to compute standard deviation of a series.
3. Compute the (monthly) return correlation coefficient between any two of the above
stocks. (3 marks)
Hint: Use Excel function CORREL() to compute the correlation coefficient between two
data series.
4. Using the correlation coefficient, comment on the return movement of these stocks in
the specified date range. (2 marks)
5. If you were to form a portfolio of 2 stocks, which ones are your choice to maximise
diversification benefit? Explain the rationale behind your investment choice. (4 marks)
6. If you were to invest in the two stocks in question 5 equally, what is the standard
deviation of your portfolio for 2015. (3 marks)
Part B: Capital Budgeting (30 marks)
Myer Inc. would like to set up a new plant. Currently, Myer has an option to buy an exsiting
building at a cost of $24,000. Necessary equipment for the plant will cost $16,000, including
installation costs. Depreciation of the equipment and of the building is as follows:
Year 1=$3512, Year 2= $5744, Year 3=$3664, and Year 4= $2544.
The project would require an initial investment of $12,000 of net working capital and will be
made at the time of the purchase of the building and equipment. The working capital will be
fully recovered at end of year 4.
The project’s estimated economic life is four years. At the end of that time, the building is
expected to have a market value of $15,000 and a book value of $21,816, whereas the
equipment is expected to have a market value of $4000 and a book value of $2720.
Annual sales will be $80,000. The production department has estimated that variable
manufacturing costs will be 60% of sales and that fixed overhead costs, excluding depreciation,
will be $10,000 a year ( hint: total costs = 0.6*80,000+10,000=58,000).
Myer’s marginal tax is 40%; its cost of capital is 12% and for capital budgeting purposes, the
company’s policy is to assume that operating cashflows occur at the end of each year. The plant
will begin operations immediately after the investment is made, and the first operating cash
flows will occur exactly one year later.
Questions:
1. Compute:
the initial investment outlay. (3 marks)
operating cashflows over the project’s life. (8 marks)
the terminal-year cashflows for Myer’s expansion project. (3 marks)
2. Determine whether the project should be accepted using NPV analysis. (6 marks)
3. Perform a sensitivity analysis on NPV of the project on the following scenarios:
a. Sales increases/decreases by 10%. (3 marks)
b. Cost of capital increases/decreases by 10%. (3 marks)
c. Both (a) and (b). (4 marks)
Appendix
Step 1: Go to https://au.finance.yahoo.com
Step 2: Type in the company ticker in the Look Up window
Step 3: Click on Historical Prices on the left panel of the page
Step 4: Set date range from 01/01/2011 to 31/12/2015 and choose Daily Frequency.
Step 5: Download the data from Download to Spreadsheet button at the end of the page.
代写MAF203 Assignment relationship between risk and return
