Summary points for writing the Business Case Study Assignmen Download the updated assessmentdocumentfrom BB.If you have already downloaded the Business Case Studies 1 (Assessment 2) details document,...

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Summary points for writing the Business Case Study Assignmen




  1. Download the updated assessmentdocumentfrom BB.If you have already downloaded the Business Case Studies 1 (Assessment 2) details document, please note a correction is needed to Question 1d. The question said "10 years ofmonthlypayments". This should be "10 years ofquarterlypayments". In other words,all references to periods within question 1d should be quarterly.



  2. The final answer to the questions should be written in a simple numbered list and there is no need to write the questions.


  3. The answer to each TVM and bond valuation question in part 1 will be marked as correct (1 mark) or incorrect (0 marks). Give your final answer to each of the 6 questions on a separate line in the first section of your assignment submission. Give all answers to two decimal places. No workings are required and no part marks will be provided but if you want feedback on any errors, providebriefworkings (e.g. screenshot of completed spreadsheet template section) for each question under the list of 6 answers or in the end.


  4. Parts 2 and 3 can be written in essay form linking theory with the calculations in differentparagraphsfor subparts.


  5. In parts 2 and 3 you can include the background about the company with introduction.The general information about the company can be taken from the S&P Capital IQ database and the company's own website in the investor and news release sections. The letter from the chairman in the last couple of annual reports is always a good way to pick up key recent issues for your company in one place, probably supplemented by any key ASX announcements that the company has made since then.


  6. We are sending S&P the list of all students in the unit so that they can manually register all students who do not yet have an account.This means you don't have to do anything until you receive an email from S&Padvising you of the next steps to take in finalising your account. Please be patient as it may take them a couple of days to do this and should be done by Monday. Send me an email if you are facing issues.


  7. Part 2 requires you to calculate expected risk and return measures for your allocated case company, a hypothetical company and a portfolio of the two. Part 3 requires you to discuss and interpret those measures. So make sure you do discuss and interpret them all using the latest beta value.Findthe yield to maturity of a 10-year Australian Government bond as a proxy for the risk-free ratefor5th April, 2019from the database.However the exercise was done in the class to seebeta valuesbut you need to check thelatest valuesbefore doing the final calculations.


  8. Highlight the key things mentioned in Part 3 and also address the criterion in the marking rubric. Make sure you know what your company does and think about how that might impact their risk and return measures.


  9. Presentation,sources and written expression.(Task 3a: 5 marks) should be carefully addressed forgrammar, syntax, spellings and references

finance-business-case-studies-1-assessment-2-details-rso2gjit.pdf
Answered Same DayApr 18, 2021ACC00716Southern Cross University

Answer To: Summary points for writing the Business Case Study Assignmen Download the updated...

Nakul answered on Apr 20 2021
134 Votes

Assignment Solution
Assessment 2
Mind Your Own Business (MYOB)
Ticker Symbol – MYO
Question 1
    Question 1 Part a
    $ 1094120
    Question 1 part b
    $ 720.26 million
    Question 1 part c
    Loan C (EAR- 5.55%)
    Question 1 part d
    $ 12670.25
    Question 1 part e
    YTM = 5.36%
    Question 1 part f
    Coupon = $ 45
Excel Tables
    Question 1 Part a
     
     
     
    APR
    7%
    Periodic rate
    0.58%
    Time
    48
    payment
    26.2
    NPV
    1094.12
    Question 1 part b
     
     
     
    Revenue (in million)
    445.2
    Time (in years)
    5
    Growth rate
    10.10%
    Expected revenue
    720.26
    Question 1 part c
     
     
     
     
     
     
     
    Loan Type
    APR
    Period
    EAR
    Loan A
    5.45%
    monthly
    5.59%
    Loan B
    5.50%
    semi annual
    5.58%
    Loan C
    5.40%
    daily
    5.55%
    Question 1 part d
     
     
     
    Property Cost
    420000
    APR( quarterly)
    3.80%
    Period Rate
    0.95%
    Time (in years)
    10
    Time (In Quarters)
    40
    Payment
    $12,670.25
    Question 1 part e
     
     
     
    Face Value
    100
    Coupon Rate
    4.10%
    Coupon Payment
    4.1
    Time (In Years)
    8
    Price of Bond
    92
    YTM
    5.36%
Question 2
Part a
Answer –
Mind Your Own Business (MYOB) is an Australian company which helps businesses in taxation and accounting through their software services. The company also provides business management solutions to small and medium enterprises. The company was founded in 1991 in Australia by Christopher Lee. The current CEO of the company is Tim Reed
The company recorded a revenue of $445 million in 2018, which was a 7% increase when compared to 2017 revenue. 82% of the revenue was contributed by partners and clients segment, 15% by enterprise solutions, and 2% by payment solutions. Online subscribers increased by 57% from 2017 to 2018 to 628000 subscribers.
Given data
Risk free rate on April 05, 2019 = 1.90%
Beta = 1.04
Market Risk Premium = 6%
Using CAPM model to determine the expected return
Expected return = Risk free rate + beta*risk premium
Expected return of MYOB = 1.90% + 1.04*6% = 8.14%
    Question 2 part a
     
     
     
    Risk Free Rate
    1.90%
    Beta
    1.04
    Market Premium
    6%
    Expected Return
    8.1400%
Part b
Answer –
Hypothetical company beta = -0.2
Risk free rate = 1.90%
Market risk premium = 6%
Expected Return of hypothetical company = 1.90% -0.2*6% = 0.70%
Considering an investment portfolio made up of MYOB stock and the hypothetical company stock in equal weights:
Portfolio Beta = 0.5*1.04 + 0.5*(-0.2) = 0.42
Portfolio Return = 0.5*8.14% + 0.5*0.7% = 4.42%
    Question 2 part b
     
     
     
    Risk Free Rate
    1.90%
    Beta
    -0.2
    Market Premium
    6%
    Expected Return
    0.70%
     
     
    Portfolio Return
    4.42%
    Portfolio Beta
    0.42
Question 3
Answer –
The portfolio risk consists of two parts- systematic risk and unsystematic risk. These two risks comprises the total portfolio risk. Systematic risk is commonly known as beta. Systematic risk can be reduced through portfolio diversification, i.e. investing in one or more stocks to reduce the concentration risk of investing in a single stock. However the unsystematic risk cannot be reduced through diversification.
As shown in question 2, the portfolio beta was reduced significantly from 1.04 to 0.42 through diversification into two stocks.
Beta determines the volatility of a stock compared to the overall stock market. Beta value greater than 1 signifies that the stock is more volatile than market index and vice versa. A negative beta denotes an inverse relationship between stock and market returns.
The expected return of a stock is determined through the capital asset pricing model.
It is described as
Expected return = Rf +Beta*Market premium
Risk free rate is included in the CAPM equation because it is the rate that the investor can gain through safe investments. Market premium is the rate which an investor expects to gain while investing in the stock market and Beta signifies the level of risk that the investor is willing to take while investing in that particular stock.
As the portfolio risk decreases the expected return also decreases which can be observed from question 2. The MYOB stock return was 8.14% while the portfolio return was 4.42%. The expected return of the portfolio decreased because the portfolio beta decreased due to diversification in two stocks.
The above observation clearly shows the risk and return scenarios and how the risk can be reduced through portfolio diversification.
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