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TFIN 603 Corporate Finance

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TFIN 603 Corporate Finance

 

TFIN 603 Corporate Finance

Date Due: 25/5/2020 in Turnitin and before class

Total Marks: 20 marks of the Unit

 

Instructions:

 ⦁State and justify all your assumptions

 ⦁This Group Assignment contains two parts:

 ⦁Part 1 (50%) is the work contained in the instructions below.

 ⦁Part 2 (50%) is the final report, follow the “Example Business Report Structure” found in Moodle. It should contain a report of the main points found in Part 1, and not the details already reported in Part 1.

 ⦁Part 1 work should be separated from Part 2 and include no more than 12 A4 pages.

 ⦁Part 2 should be no more than 4 A4 pages, or maximum of 1,200 words.

 ⦁Both Part 1 and 2 should be typed in Times New Roman, font 12, 1.5 spacing.

 ⦁Part 1 should only contain the table from Step 7, the regression summary (no data please), the graphs and the correlation matrix from step 8 to 12.

 ⦁A copy of Part 1 (DO NOT INCLUDE EXCEL) and 2 should be submitted in Turnitin before 9am on 25 May 2020.

 ⦁A soft copy (one copy per Group) of all WORD and EXCEL files should be emailed to ⦁siang.chang@top.edu.au⦁ before the beginning of the class, complete with cover sheet found in Moodle. Failure to submit on time will receive a 10% deduction in marks

 ⦁Email your “Group Assignment Peer and Self-Assessment” with the document stated in point 4. You can find this form in Moodle.

 ⦁Any form of cheating will attract a mark of ZERO.

 

OBJECTIVE:-

 Relationship between Beta and Financial Ratio of a company assigned to your group

 Part 1 Instructions

 Step 1 Collect 10 years of closing price data from https://au.finance.yahoo.com

 Step 2 Collect 10 years of All Ordinaries Index (^AORD) from the same site.

 Step 3 For a one-year data series for year 2010:

 3a) Calculate weekly security return Ri. Ri  = ln Price at t + 1/ ln Price at t

 3b) Calculate weekly market return Rm. Rm = ln AORD at t + 1/ ln AORD at t

 3c) Use Regression Analysis in Excel, regress Ri vs Rm (Refer to example in Moodle)

 3d) Record the value of 1-year beta from the regression

 Step 4 Repeat Step 3 for each year from 2010 to 2019, a total of 10 regressions, including 2010 (if your company data does not go as far back as 2010, start from the earliest year where you can find the data)

 Step 5 Go to the website of your assigned company, and find the balance sheet and profit and loss statements from 2010 to 2019.

 Step 6 Calculate the following ratios for each of the years from 2010 to 2019:

 (Source: Chapter 3 Essentials of Corporate Finance 5e by Ross, Trayler, Koh, Hambusch, Westerfield and Jordan, 2019)

 Step 7 Present your results in a table as follows:

 

Step 8 Regress Beta against P/E, where Beta is the y variable, and P/E the x variable.

 Step 9 Draw a time series graph, where Beta and P/E are the y values, and year the x values.

 Step 10 Repeat Step 8 and 9 for D/E, Times Interest Earned and MV/BV, one ratio at a time.

 Step 11 a) Repeat Step 8 and 9, but with Beta against all the four ratios.

 This multiple linear regression is expressed as:

y = a + b1 x1 + b2 x2 + b3 x3 + b4 x4

 where y = Beta, x1 = P/E, x2 = D/E, x3 = Times interest earned, x4 = MV/BV

 a = y intercept, bi = slope for each of the ratios (where i = 1, 2, 3 4)

 b)You should plot a time series graph containing all five variables, where y-axis represents the five variables, and x-axis the “year”.

 (5% per regression and graph, a total of 25%)

 Step 12 Find “Correlation” under Data/Data Analysis in Excel, and compute the correlation matrix of beta and the four ratios.

 Part 2 (50%)

 n a Business Report format, include the summary results (do not include data-series) from Part 1 and answer the following questions

 1.What is the meaning of beta? (5%)

 1.What type of beta have you found in Part 1-asset beta, equity beta or debt beta? Explain. (5%)

 1. Explain briefly the meaning of the financial ratios you are studying in this assignment. (5%)

 1.Explain the meaning of R-Square of the regression. Refer to the Excel example in Moodle. (5%)

 1.From each of the regressions in step 8 and 10, comment on the R-Square and the p-value for the slope. Similarly for step 11, comment on R-Square and p-values of the 4 slopes. (10%)

 Show your results as follows:

TFIN 603 Corporate Finance

 RegressionR-Squarep-value

Beta vs P/E

Beta vs D/E

Beta vs TIE

Beta vs MV/BV

Beta vs all 4 ratiosshow all 4 p-values

 Note that p-value is compared to the level of significance α.

 e.g.

 a)if α > p, the regression model in step 8 and 10 are significant and can be used at a confidence level of (1-α). Test at α = 5%

 ⦁if α < p, the regression model in step 8 and 10 are insignificant and cannot be used at a confidence level of (1-α). Test at α = 5%

 ⦁For step 11, some or all of the slopes may be significant. The model is significant when only the significant x-variables are included. Test at α = 5%.

 ⦁Comment on the correlations in the correlation matrix found in step 12, include the correlation matrix here. (10%)

Turnitin and before class,Relationship between Beta and Financial Ratio of a company assigned to your group, Finance Assignment Help, Finance Planning Assignment Help, Behavioral Finance Assignment Help,Management assignment help, Finance assignment help review

 

 



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