Report Writing
Value: 20%
Submission method options
Alternative submission method
Task
This assessment task covers topics covered in week 1 to 6 and has been designed to ensure that you are engaging with the subject content on a regular basis.
Task
An overseas institutional investor has approached your investment advisory firm seeking to invest AUD280 million in one of the big local bank’s ordinary shares. Your Chief Investment Officer has done some preliminary research on the seven banks financial returns and current financial position that has helped her to narrow the choices down to two banks. You have been given the assignment to analyse and prepare a report as to which of the two banks' ordinary shares is better value for investment.
Based on your market research (qualitative and quantitative) on BENDIGO AND ADELAIDE BANK and SUNCORP GROUP LIMITED, you are required to prepare a report with your recommendation to the Chief Investment Officer, as to which of the companies’ ordinary shares is better value for investment. The overseas investor desires high returns and growth and is looking to park the funds for long term i.e. 10 years. In your report, include all the calculations and market information on which your recommendation is based.
Show all your calculations on the annexure. Limit your report between 1,500 to 2,000 words using financial theory and concepts.
For this question you may use information provided in the below websites and any other sources you feel will assist you to come up with your recommendation.
Yahoo! Finance http://au.finance.yahoo.com/
Australian Stock Exchange http://www.asx.com.au/
Reuters http://www.reuters.com/finance/markets
Bendigo and Adelaide Bank http://www.asx.com.au/asx/research/company.do#!/BEN
Suncorp Group Limited http://www.suncorpgroup.com.au/investors/results-presentations?term=financial-results&year=2015
As a minimum calculate the following to help you come up with a recommendation:
• The required rate of return on ordinary shares of the above two banks using Capital Asset Pricing Model.
• Ordinary share valuation – Constant dividend growth model.
• Find the monthly holding period returns (%) for the period 01 July 2014 to 30 June 2015. The monthly holding period return is the percentage return you would receive if you bought an asset on the first day of the month (opening price) and sold it on the last day of the month (closing price). Graph your results on one graph with returns on the y axis and time on the x axis. (Use ‘Close’ rather than ‘Adjusted Close’ for the selling price and ignore any dividends.
Guidelines:
• Base your calculations on the most recent financial results ending 30 June 2015.
Rationale
This report writing will provide an opportunity to apply the concepts in an authentic scenario that you may encounter in the workplace and also:
• be able to demonstrate appropriate communication skills in the context of corporate finance.
• be able to demonstrate specific technical competencies and skills in utilizing quantitative techniques in financial analysis.
• be able to critically evaluate mainstream financial theory and concepts.
Marking criteria
Where necessary, state any assumptions you have made. Assignments should show all workings and students will be penalized for failing to do this.
Use the following table as guidance:
High Distinction Distinction Credit Pass Fail
Problem types/criteria (HD) (DI) (CR) (PS) (FL)
85% to 100% 75% to 84% 65% to 74% 50% to 64% 0% to 49%
Quantitative problems HD DI CR PS FL
Recommendation report applies principles of finance correctly to quantitative analysis. Types of quantitative analysis required are valuation of shares, expected rate of return & price-earnings ratio etc. Applies all correct principles and calculations, substantiated with workings or diagrams in order to arrive at the right answer. There are negligible errors in calculations. Applies correct principles and calculations, substantiated with workings or diagrams in order to arrive at the right answer, shows workings but contains minor errors in calculations. Applies most of the correct principles and calculations, substantiated with workings or diagrams in order to arrive at the right answer, shows workings but contains some minor errors. Applies understanding of most relevant principles, shows workings but contains some major errors. Frequent errors or unacceptable mistakes indicative of a lack of understanding of core principle(s).
Conceptual problems HD DI CR PS FL
Recommendation report use applies principles of finance correctly in discussing recommendation. Principles are applied in the appropriate manner to arrive at the correct answer. The use of relevant principles shows creativity and imagination. Discussion reflects excellent understanding of relevant principles, as evidenced by explicit use of financial theories and concepts. Discussion reflects on all relevant principles with some level of detail, minor errors in the application. Discussion reflects basic understanding, but not deep understanding of relevant principles. Minor errors in the application. Discussion reflects lack of basic understanding of relevant principles.
Financial technology HD DI CR PS FL
Recommendation report uses appropriate financial technology to gather information and conduct financial analysis. Spreadsheet, data sources, and/or financial software used masterfully. The correct answers are derived using relevant technology, and the results are presented in a clear and professional manner. Spreadsheet, data sources, and/or financial software used competently. Mostly correct results are derived using relevant technology. Spreadsheet, data sources, and/or financial software used competently. Mostly correct results are derived using relevant technology, but there may be some minor errors. Spreadsheet, data sources, and/or financial software used competently. Mostly correct results are derived using relevant technology, but there may be some major errors. Spreadsheet, data sources, and/or financial software is misused or used inappropriately.
Analyze business situations HD DI CR PS FL
Analysis is sufficient to reach reasonable conclusions and recommendations as to which stock is better value. Quantitative and qualitative analysis persuasively supports the recommendations and conclusions. Quantitative and qualitative analysis is clearly used to make specific and relevant conclusions and/or recommendations Quantitative and qualitative analysis is used to make reasonable conclusions and/or recommendations Quantitative and qualitative analysis is adequate to make reasonable conclusions and/or recommendations Quantitative and qualitative analysis too simplistic or convoluted.
Financial research HD DI CR PS FL
Use of literature/market research /evidence of reading. Has developed and justified own ideas based on a wide range of sources which have been thoroughly analysed, applied and discussed. Literature is presented with soundly based criticisms, in a descriptive way and indicates a good understanding of the literature. Literature is presented with some criticisms, in a descriptive way and indicates a few limitations of understanding. Literature is presented uncritically, in a descriptive way and indicates some limitations of understanding. No evidence of literature or irrelevant to the research question
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