BFC5925 Semester 1, 2022
Assignment
Assignment Weight: 10% of unit assessment
Due Date: Friday 11:55PM Teaching Week 10
General instructions:
1. This is an individual assignment. Each student is expected to complete the assignment by yourself and to submit the file on Moodle by 11:55pm Friday 13th May in Week 10. All assignments will be sent through to Turnitin to check the similarities.
2. You will need to download an Excel file with a list of companies which is available on the Moodle website for BFC5925 (in the ‘Assignment’ folder). You are required to choose TWO companies from the Excel file list provided on Moodle. The company selection process must be as follows: 1) find companies in the same row of your student ID number, 2) out of the available companies assigned to you, please choose two companies. You must ensure that the companies selected were traded on the Australian Securities Exchange in the period of at least four years, i.e., between January 2017 and March 2022 (to verify this, simply download share prices for your selected companies from Yahoo finance or from DatAnalysis Monash Library electronic database – you will need your student authcate and password to log into the DatAnalysis database). Note that it is your responsibility to select one company assigned to your student ID from the list provided in the Excel file on Moodle.
3. You are required to conduct extensive research from reliable source of Internet (the major business and finance newspaper) and library databases (e.g. Wall Street Journal; Yahoo finance or DatAnalysis) and answer the set of questions that follow on the next page.
4. You will need to provide calculations (in an Excel file) and discussion (in a PDF file) which will need to be submitted through an electronic assignment submission link in “Assignment” folder on Moodle.
5. This assessment is designed to test your achievement of unit objectives 1, 2, and 4.
6. No hardcopy submission is accepted. Submission details are on Page 3.
7. This assignment carries 10% of the total marks for this unit (the assignment will be marked out of 50 marks as outlined on the next page, and then adjusted as proportion of 10% of the total marks for the unit).
8. All assignments will be sent through to Turnitin to check the similarities. The total marks will be adjusted based on the assignment’s originality report in Turnitin.
9. Some relevant websites that can be used for this assignment (but not limited to) are:
Yahoo finance http://au.finance.yahoo.com/ (source of share price data and company information);
DatAnalysis - University Library Databases (alternative source of share price data and company information)
http://datanalysis.morningstar.com.au.ezproxy.lib.monash.edu.au/af/dathome?xtmlicensee=datpremium
ASX website: https://www.asx.com.au/asx/research/listedCompanies.do
Assignment Questions:
1. Select company
Select two companies according to steps explained on the previous page (the company list is provided on Moodle in the Excel file in the “Assignment” folder). Verify that both two companies have been trading on the Australian Securities Exchange between January 2017 and March 2022.
2. Stock analysis (20 Marks – 4 marks per question) – complete in an Excel file
a. Collect monthly share price data for the selected two companies between January 2017 and March 2022. Calculate realized monthly return each period for each company using share prices between January 2017 and March 2022 (note that you are permitted to use a longer investment period if data is available for your selected companies). Calculate average monthly return, variance, and standard deviation of returns for each stock.
b. Assume you use the estimated ASX 200 index returns as proxy for the market return. Collect monthly market index data for ASX 200 between January 2017 and March 2022. (The historical price data for ASX200 is also available in the -Assignment- folder of the BFC5925 Moodle site. You can directly use that data.) Calculate realized monthly ASX 200 index return each period between January 2017 and March 2022 (note that the sample period should be consistent with question 2.a). Calculate average monthly return, variance, and standard deviation of returns for ASX 200.
c. Calculate the Beta for the two companies (hint: use the ASX 200 index returns as the market proxy).
d. Use the Capital Asset Pricing Model (CAPM) to estimate the stock return for each company, assume the average monthly risk-free rate is 0.15% (hint: use the ASX 200 index returns as the market proxy).
e. Suppose you are considering two possible portfolios which combine the two stocks you have selected. Portfolio 1 is an equal-weighted portfolio (i.e., 50% in each stock). Portfolio 2 is a value-weighted portfolio in which each sstock is held in proportion to its market capitalization. Use the expected stock returns you calculated in Question 2d and calculate the expected return of each portfolio.
3. Discussion (30 Marks – 10 marks per question) – report in a PDF file
a. Check the cash flow annual statement of each firm from 2017 to 2020. Which company’s net cash flows were more affected by Covid-19. Discuss why. Your discussion should be up to maximum of 300 words.
b. Check the balance sheet of each firm from 2017 to 2021. Does the firm change its leverage during Covid-19? Discuss the potential risk and/or benefits of the firm’s change of leverage (or maintaining the same leverage). Your discussion should be up to maximum of 300 words.
c. Based on your analyses in Section 2 and Section 3 (3a and 3b), please make a recommendation as to whether or not to invest in these two companies’ shares (your recommendation could be to invest in both stocks, one of the stocks, or neither of them).
Please provide your reasons. Your discussion should be up to maximum of 300 words.
Submission due date
You need to submit one Excel file (for the stock analysis) and one report in PDF format (for the discussion part) to BFC5925 Moodle assignment submission link by 11:55PM Friday 13th May, 2022 in teaching Week 10.
Please use the following format in naming both files:
Tutor's first name_Tutorial day time_Your Full Name_Student ID e.g., Tony_Wed1pm_John_Lee_01234567