Question 1

Requirement a:

Sandy has to pay $1904.76 for the investment. The calculations are as follows:

 

Requirement b:

 

Requirement c:

 

Requirement i:

 

Requirement ii:

 

The Australian government has planned to make reduction in tax rates of company as the higher taxation rate gas been found to ne major ongoing cost in the budget. Cutting the corporate taxation rate to 25% is the primary policy for lifting investment. Attracting the foreign investment is one of the main reason behind cutting down the rate of taxation moreover, it will also result in reduction of national income for years. The key issue underlying the cutting down of rate of taxation is to improve the Australian living standards. It has been ascertained that the benefits attributable from reduction in taxation rate would be less tangible. Reduction in corporation tax rate in the long run would result in increase in investment at international level. Lending cost of business are extremely low that is regarded as one of the problems associated with encouragement of investment. It has been warned that reduction in corporate taxation rate would start looking uncompetitive and in the wage of revamp of taxation system of US, there have been less investment. Lowering the corporate taxation rate has bene regarded as central to the international competitiveness in Australia and that sought to make it an attractive destination (Scholes, 2015).

Lowering rate of taxation would help in increasing the income of many Australians along with stimulating wages and investments. The dividend imputation system of Australia is a mechanism that provides tax payer or residents with some franking credits. Such system helps in effectively lowering the rate of tax and hence companies operating at local level are provided with franking credits. This would indicate that investors would be making lower payment if the taxation amount paid by company is low. Rate of taxation of company is considered as redundant for the Australian investment from the perspective of making investment. It is foreign investors who would be directly benefitting from lowering of the corporate taxation rate. Higher rate of taxation would have unfavorable impact on investment and causing economic activity dislocation (Baykov & Pavuk, 2017). 

Requirement i:

 

Requirement ii:

 

Requirement iii:

Requirement iv:

Requirement v:

 

Requirement vi:

 

Requirement vii:

 

Requirement viii:

 

Requirement ix:

From the analysis of CAPM and SML computation, the portfolio of assets in which the investors would be making investment is in the shares of BHP Billiton and NAB. It can be seen that average monthly return generated from the shares of BHP stood at 5.24% compared to 2.14% of the return generated by the shares of NAB. The variations in return generated from BHP Billiton stock is 7.54% compared to variations in the stocks of 3.60% generated by stock of NAB. However, the portfolio of assets would help in lowering the total amount of risks and generating average annual return of 1.29%. therefore, it can be said that forming assets portfolio would help in diversifying the risks associated with individual assets.

References

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Balachandran, B., Khan, A., Mather, P., & Theobald, M. (2017). Insider ownership and dividend policy in an imputation tax environment. Journal of Corporate Finance.

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Reducing the corporate tax rate. (2018). Ato.gov.au. Retrieved 2 April 2018, from https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Reducing-the-corporate-tax-rate/

Scholes, M. S. (2015). Taxes and business strategy. Prentice Hall.

Stewart, M. (2017). Australia’s Hybrid International Tax System: Limited Focus on Tax and Development. In Taxation and Development-A Comparative Study (pp. 17-41). Springer, Cham.

Taxpolicy.crawford.anu.edu.au. (2018). Retrieved 2 April 2018, from https://taxpolicy.crawford.anu.edu.au/sites/default/files/events/attachments/2017-07/li_and_tran_day_two_25_july_2017.pdf

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