Demonstrate proficiency in writing Question 1 Differentiate among bond,

TUTOR-MARKED ASSIGNMENT (TMA) This assignment is worth 20% of the final mark for FIN355 Equity Securities and FIN373e Tax and Estate Planning. The cut-off date for this assignment is 4 October 2017, 2355hrs. In this assignment, you are expected to: – Apply economic analysis, industry analysis and company analysis – Value a company’s shares – Formulate reports on equity analysis – Demonstrate proficiency in writing Question 1 Differentiate among bond, common stock and preferred stock from the perspective of risk, relationship of risk to dividend/coupon rates, and possible recurring income features to the investors. Question 2 Given the following: EBIT 80.0 EBIT (1-T) 66.4 Depreciation and Amortization 33.0 Capital Expenditures 11.2 Increase in Net Working Capital 32.7 Interest payment 5.0 Tax rate at 17% (a) Compute FCFF. (b) Compute FCFE. (c) Analyse the likely impact on FCFF and FCFE from an increase of dividend policy. Question 3 Discuss what happens to FCFF and FCFE when: (a) Borrowing is increased (b) Borrowing is paid back (CASE STUDY – Mr& Mrs Anthony Chan Soon Thoong) Anthony is 35 years old. He works as a Compliance Manager with one of the banks here in Singapore. In calendar year of 2016, he took home an annual base compensation of $84,000 (12 months). As a good employee, he received a total of 5 months’ bonus. To enhance his professional skills, he took relevant courses that he paid for by himself at $8,000. In addition to his regular job, Anthony was a prolific author who wrote assessment books. His side income for assessment books sales came to $12,500 (no CPF contribution needed). He had a stock portfolio which started in the year 2016 at $105,000, and ended up the year at $185,000. Total dividend received for 2016 was $4,300. Anthony was a non-commissioned officer in a medical team of 3 head counts. He was called for reservist training last year. Anthony resides at a private condominium. He bought the property at $800,000 two years ago under joint ownership with his wife, and at end of 2016, it was valued at $1,100,000. This year would be considered as the third year of ownership. He is thinking of doing the following: (a) Re-mortgage his existing condominium, and take the money to invest into a second property, budgeting the investment property at $700,000 (b) Sell off his existing property at valuation price, and invest into a bigger property, budgeting the bigger property at $1,400,000 Anthony’s father is staying with him now. Anthony is married to Janet, aged 30 years old, for 3 years now. They have one daughter, delivered on Christmas eve in year 2015, which Anthony claimed all related child reliefthereafter. Anthony last year tax payable amount was $3,250, but the parenthood tax rebate rendered it to zero. Janet is currently working as a freelance yoga teacher. Last year, she earned $34,000 for her teaching. She didn’t contribute any CPF as her friends had advised her as a freelancer, there is no need for her to contribute at all. Both her parents are still living. She claimed both of them as dependants for parent relief. YA 2016 and within the tax jurisdiction of the Republic of Singapore. Question 4 Base on the above case study, determine Anthony’s tax amount. REPORT QUALITY (20 marks) Your report will be assessed for quality, conciseness and appropriate use of reporting aids (graphs, tables and illustrations, etc.) The total marks allocated for this part of the assignment is 20 marks broken down as follows: (a) Layout and formatting – A well-formatted cover page is provided [2 marks] – Format follows a logical reporting flow [1 mark] – Format is consistent throughout report [1 mark] – Layout follows guideline of not more than 10 pages [1 mark] (b) Clarity and standard of language used -The arguments are cogent and consistent [3 marks] – No excessive spelling or grammatical errors [2 marks] – Language is graded [2 marks] – Good use of technical vocabulary [3 marks] (c) Use of presentation aids – Use graphs, tables and/or other visual aids [5 marks, 1 mark per aid] —- END OF ASSIGNMENT —-

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