FACULTY OF BUSINESS AND LAW Newcastle Business School ACFI2005: Finance PSB Academy - Trimester 1, 2016 Assignment 1 Set B Weighting 15 Marks (worth 15 %) TASK OBJECTIVES In this assignment you will be required to demonstrate your knowledge of the Australian financial system and to utilise financial mathematics to solve financial problems supported by Excel applications. IMPORTANT INFORMATION • If the last digit of your student number is 0, 1, 2, or 3, your assignment questions are from Set A. If the last digit of your student number is 4, 5, or 6, your assignment questions are from Set B. If the last digit of your student number is 7, 8, or 9, your assignment questions are from Set C. • The assignment must be attempted and completed individually. • Any assignment submitted late will be penalised at a rate of 10% per day. • The assignment is to be completed in Microsoft Word with embedded Microsoft Excel worksheets. (Please see Blackboard for details about embedding Excel into Word) • There is no overall word limit for the assignment; however you are encouraged to keep within the prescribed word limits for the written components. • As with all academic submissions, whenever you present information that is not your own you are required to reference your work. SUBMISSION GUIDELINE • Due Date: 11:59pm, 21st March, 2016. • Submission: o Blackboard via Turnitin. GENERAL INSTRUCTIONS This assignment consists of a written component (completed in Microsoft Word) and calculations (which must be done using an Excel spreadsheet embedded in Microsoft Word). This will mean that you complete the assignment in one Microsoft Word file and you will upload this file to Blackboard. The calculations data should be input into cells and then referenced to calculate the answer using appropriate formulae. For example to determine the present value of $1,000 paid in six months at a simple interest rate of 6% p.a.: Do not use Excel functions except to check your work. Type your formulas in Excel and reference the data as shown above. BACKGROUND Northwest Marine Services Pty Ltd is a private Australian company that has existed for 10 years. The principal operations of the company are providing maritime maintenance and support to gas companies operating in offshore locations around Australia. The company employs 75 staff and is 100% owned by the Mitchell family, with four family members each holding a 25% stake. Due to an extremely lucrative business opportunity, the Mitchell family has decided that Northwest Marine Services must expand significantly by hiring an additional 55 staff and bringing in approximately $22million in additional capital. To achieve such an expansion, the company must list on the ASX. Given their relative inexperience, the owners have hired you to provide additional relevant information and calculations to support their decision making ...

1. FACULTY OF BUSINESS AND LAW
Newcastle Business School
ACFI2005: Finance
PSB Academy - Trimester 1, 2016
Assignment 1 Set B
Weighting 15 Marks (worth 15 %)
TASK OBJECTIVES
In this assignment you will be required to demonstrate your
knowledge of the Australian
financial system and to utilise financial mathematics to solve
financial problems supported by
Excel applications.
IMPORTANT INFORMATION
• If the last digit of your student number is 0, 1, 2, or 3, your
assignment questions are
from Set A. If the last digit of your student number is 4, 5, or 6,
your assignment
questions are from Set B. If the last digit of your student
number is 7, 8, or 9, your

2. assignment questions are from Set C.
• The assignment must be attempted and completed individually.
• Any assignment submitted late will be penalised at a rate of
10% per day.
• The assignment is to be completed in Microsoft Word with
embedded Microsoft
Excel worksheets. (Please see Blackboard for details about
embedding Excel into
Word)
• There is no overall word limit for the assignment; however
you are encouraged to
keep within the prescribed word limits for the written
components.
• As with all academic submissions, whenever you present
information that is not your
own you are required to reference your work.
SUBMISSION GUIDELINE
• Due Date: 11:59pm, 21st March, 2016.
• Submission:
o Blackboard via Turnitin.
GENERAL INSTRUCTIONS

3. This assignment consists of a written component (completed in
Microsoft Word) and
calculations (which must be done using an Excel spreadsheet
embedded in Microsoft Word).
This will mean that you complete the assignment in one
Microsoft Word file and you will upload
this file to Blackboard.
The calculations data should be input into cells and then
referenced to calculate the answer using
appropriate formulae. For example to determine the present
value of $1,000 paid in six months at
a simple interest rate of 6% p.a.:
Do not use Excel functions except to check your work. Type
your formulas in Excel and
reference the data as shown above.
BACKGROUND
Northwest Marine Services Pty Ltd is a private Australian
company that has existed for 10 years.
The principal operations of the company are providing maritime
maintenance and support to gas
companies operating in offshore locations around Australia. The
company employs 75 staff and
is 100% owned by the Mitchell family, with four family
members each holding a 25% stake.
Due to an extremely lucrative business opportunity, the Mitchell

4. family has decided that
Northwest Marine Services must expand significantly by hiring
an additional 55 staff and
bringing in approximately $22million in additional capital. To
achieve such an expansion, the
company must list on the ASX. Given their relative
inexperience, the owners have hired you to
provide additional relevant information and calculations to
support their decision making
regarding the listing.
REQUIREMENTS
Question 1 (2 marks)
The regulatory environment for firms listed on the ASX is
significantly different when compared
to private companies that are unlisted. In no more than 500
words contrast the benefits of a
company listing on the stock exchange against the increased
regulatory burden. In your answer
be sure to discuss the sources of additional regulation.

5. Question 2 (3 marks)
Part A (1 mark):
Northwest Marine Services has issued a dividend of $0.38 per
share for the past five years. As
part of your advice to the Mitchell family, you have been asked
to determine what a ‘fair’ price
for company shares would be before listing on the ASX. You
are told that in total the Mitchell
family holds 3 million shares, and required rates of return for
companies in the same industry are
approximately 7% per annum. Despite the possibility of listing,
you are told to assume that the
dividend will remain constant in the future.
Required: Calculate a ‘fair’ share price based on the
information above.
Part B (2 marks):
Northwest Marine Services successfully lists on the ASX, and in
approximately one year trade at
$5.16 per share, with a recent dividend of $0.38. A member of
the Mitchell family contacts you
and explains that they would like to repurchase some shares in
the now-listed company. They ask
you if $5.16 per share is a ‘fair’ price, or if the company is

6. potentially overvalued. You check the
financial press and note that required rates of return on similar
companies are 12% per annum,
with a market-consensus dividend growth rate of around 4% per
annum.
Required: Calculate a ‘fair’ share price based on the
information above. Explain why shares in
Northwest Marine Services are either under or over-valued
based on your calculations.
Question 3 (5 marks)
Part A (3 marks):
During the listing process, most of the cash flow of Northwest
Marine Services will be devoted
to administrative and legal costs, leaving a shortfall for day-to-
day operations. The finance
manager informs you that she expects the company to owe their
largest supplier $3million by the
beginning of April. You are asked to find an appropriate
commercial bill to finance the payment
to this creditor. You are told that the company plans to repay
the bill at the end of August.

7. You contact some finance brokers who provide you with the
following BAB quotes:
Discounter Face Value Yield Term
Aussie Investments $3,000,000 0.0450 120 days
National Kiwi Bank $3,000,000 0.0460 150 days
Bank of Tasmania $3,100,000 0.0510 150 days
PRJ Pty Ltd $3,100,000 0.0515 150 days
Real Life Super Fund $3,400,000 0.0520 210 days
Required (2 marks): For each of the quoted BAB’s, calculate the
price (amount lent) on issue.
Required (1 mark): Are the quoted bills useful for the stated
purpose of repaying the creditor?
In your answer explain why each bill does or does not achieve
the required outcome.
Part B (2 marks):
Exactly five years ago Northwest Marine Services invested
excess cash holdings in a debenture
issued by National Consumables Ltd. At the time of issue, the
face value of the debenture
purchased was $8million, it had a term of 15 years, and it paid a
semi-annual coupon at a rate of

8. 8% per annum. The required market yield on similar debentures
at that time was 6% per annum.
Today, just after the 10th coupon payment, Northwest Marine
Services decides to sell the
debenture. At this time the required market yield on similar
debentures has risen to 7% per
annum.
Required: Calculate the amount paid for the debenture on issue,
the amount the debenture was
sold for, and demonstrate whether the company has made a gain
or loss on the sale.
Question 4 (3 marks)
As part of the listing prospectus, you are required to make an
assessment on Northwest Marine
Service’s performance. To assist you with this task, the finance
manager has given you the
following Balance Sheet and Income Statement extracts.
Northwest Marine Services Financial Data – 31/12/2015
Profit and Loss Summary Balance Sheet Summary
Revenue 11,314,326 Current Assets

9. Expenses 3,550,495 Cash 2,035,956
EBIT 7,763,831 A/R 1,245,986
Net Interest Expense 760,000 Inventory 5,213,698
Pre-tax Profit 7,003,831 NC-Assets
Tax Expense 2,101,149 Equipment 19,542,635
NPAT 4,902,682 Investments 6,512,879
Current Liabilities
Shareholders’ Equity Accounts Payable 3,467,592
Share Capital 14,203,323 Short-term Debt 2,645,798
Reserves 4,734,441 NC-Liabilities
Long-term Debt 9,500,000
Required (2 marks): In approximately 200 words, using only the
information contained in the
extracts and the ratios that you have learnt in class provide a
brief statement outlining the
financial position of Northwest Marine Services. Include

10. calculations to support your
conclusions.
Required (1 mark): In no more than 100 words, identify other
information that would be useful
in providing a complete assessment of financial performance,
and explain why that information
is relevant.
Question 5 (2 marks)
In addition to your consultation on the listing process, the
youngest and eldest members of the
Mitchell family have asked you to assist them with their
superannuation planning. The eldest
member of the family, Geoff Mitchell, turned 61 years old this
January, and is hoping to retire in
early 2020. The youngest member of the family, Matthew
Mitchell, is 21 years old, and expects
to work at Northwest Marine Services for his whole working
life.
Geoff and Matthew are considering the following choices of
funds:
Fund Risk Profile Expected Annual Returns
Capital guaranteed 4% per annum

11. Capital stable 5% per annum
Balanced 6.5% per annum
Managed Growth 8% per annum
Required: In no more than 200 words explain the role of
superannuation funds in the Australian
financial system. Based on the individual circumstances of
Geoff and Matthew, and using your
knowledge on asset allocation decisions, justify which risk
profile each should invest their
superannuation.