...y2. The Superannuation System in Australia Superannuation has been used in Australia as a policy instrument to increase retirement incomes and reduce reliance on the age pension (which is provided by the government). Tax concessions have existed for superannuation since 1914.1 Until the 1980s, interest and capital gains on superannuation funds were not taxed. However, the extent of tax concessions has since been reduced. In 1986 compulsory superannuation was introduced in Australia. The system initially applied to employees on Federal awards, with 3 per cent of their earnings saved in superannuation funds in lieu of wage rises.2 The system was extended to apply to most employees in 1992 under the Superannuation Guarantee Charge (SGC), with the contribution rate gradually raised to its current level of 9 per cent of earnings and coverage increased to 90 per cent of employees. Perhaps not surprisingly, households’ superannuation assets as a proportion of GDP almost quadrupled in Australia over the last 20 years (Figure 1), and are now the second largest component of household wealth after non-financial assets, which comprise mostly housing.3 However, the growth in superannuation funds (or their equivalent) was an experience shared by the US and the UK, which do not have compulsory superannuation schemes in place. Valuation effects were an important factor behind the unprecedented growth in superannuation assets over the 1980s and 1990s, explaining around 70 per cent of the rise...
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...SECTION A: Multiple Choice 1. D 2. E 3. C 4. E 5. C 6. B 7. E 8. B 9. A 10. C 11. E 12. D 13. B 14. C 15. A SECTION B: Short Answer (8 Questions) (Answer all questions in this section, each question is worth 5 marks) 1. How is it possible that dividends are so important but, at the same time, dividend policy is irrelevant ? Answer : Signalling theory shows that dividends are important since they convey inside information to investors hence affect shares price. Under the MM assumptions, dividend policy is irrelevant because it only defines the form in which shareholders’ returns are received. Funds paid out as dividends can be replaced at zero cost by issuing more shares. From the shareholders’ viewpoint, returns can be received in the form of dividends (explicit cash flows) and capital gains (implicit cash flows). Changing dividend policy changes the form in which returns are received in a particular period, but cannot change the present value of the cash flows. 2. Suppose Growth Unlimited has just paid a $1 dividend. Over the next 3 years, you estimate the dividends will increase 50%, 25% and 20% respectively. After that, dividends should grow at 10% per year. An appropriate discount rate for this firm is 15%. What is the stock price for Growth Unlimited? Answer : P3=1*1.5*1.25*1.2*1.1/(0.15-0.1)=49.5 Current price P0=1*1.5/1.15 + 1*1.5*1.25/1.15^2 + 1*1.5*1...
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...taxation penalties in relation to unearned income. The first $416 earned is exempt from tax, however after this the thresholds are 66% to $1307, and 45% beyond this. As the amount would likely earn more than $416 it is best invested in the names of the parents. 3.4 Amanda and Chen have a joint account with the Westpac Bank and own a portfolio of Australian listed shares. Chen works full-time and pays tax at the highest marginal rate; Amanda is at home with twin boys. What is the best way of organising their affairs to minimise tax? Chen is considering putting all their investments in Amanda’s name. Identify the benefits of doing so and any possible costs. As the assets are currently in joint names earnings will be measured on a 50/50 split basis. This will result in Chen paying the full marginal tax rate of 45% on the dividend earnings. By transferring the funds into his wife’s full ownership, it will maximise the earnings of the investments. Possible costs may come from transfer costs, there may also be potential CGT liabilities as the transfer will trigger a capital event. 3.9 Paul acquires a holiday home for an amount of $380 000 and borrows $200 000 at an interest rate of 7% p.a. His annual loan repayments to the bank amounts to around $18 000 including interest of $14 000. Paul rents the holiday home out to friends during the year over the Christmas and Easter periods and earns rental income of $9000. Is the rental income from the holiday house assessable?...
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... 13% EQUITIES 38% Australian Fixed Income 13% World Fixed Income, Hedged 19% Australian Index-Linked Bonds 0% Australian Cash 1% FIXED INCOME 33% Australian Listed Property 8% Australian Direct Property 9% PROPERTY 17% Hedge Funds 9% Commodities 1% US Private Equity 2% ALTERNATIVES 12% TOTAL 100% Contents Some critical assumption……………………………2 Asset Class Considerations………………………….2 Equities…………………………………………………..2 Fixed Income………………………………………….3 Alternatives and Property………………………4 Analysis Mothod………………………………………….5 Historical 3 Year Rolling Returns…………….5 Bootstrap Analysis………………………………….5 Mean-Variance Optimizer……………………..6 Results…………………………………………………………7 Final Recommendation……………………………….8 Building a Concrete Portfolio for Jane and Douglas Breighton………………………………….8 Appendices………………………………………………….9 References………………………………………………..13 Minggang Gu|u5108473 Kejie Wang|u5133766 Tutorial Thursday 4pm Suggested Asset Allocation Breighton Holdings 14% Australian Equities 0% World Equities, Unhedged 0% World Equities, Hedged 11% Emerging Markets 13% EQUITIES 38% Australian Fixed Income 13% World Fixed Income, Hedged 19% Australian Index-Linked Bonds 0% Australian Cash 1% FIXED INCOME 33% Australian Listed Property...
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...CHAPTER 1 NATURE OF FINANCIAL MANAGEMENT Q.1. A.1. Q.2. A.2. Q.3. A.3. Q.4. A.4. Define the scope of financial management. What role should the financial manager play in a modern enterprise? The scope of the financial management is to secure the capital needed by the enterprise, and employ it in production and marketing activities, in such a way that it can generate the sufficient returns on invested capital, with an intention to maximise the wealth of the owners. The financial manager plays the crucial role in the modern enterprise by supporting investment decision, financing decision, and also the profit distribution decision. He/she also helps the firm in balancing cash inflows and cash outflows, and in turn to maintain the liquidity position of the firm. How does the modern financial manager differ from the traditional financial manager? Does the modern financial manager's role differ for the large diversified firm and the small to medium size firm? The traditional financial manager was generally involved in the regular finance activities, e.g., banking operations, record keeping, management of the cash flow on a regular basis, and informing the funds requirements to the top management, etc. But, the role of financial manager has been enhanced in the today's environment; he/she takes an active role in financing, investment, distribution of profits, and liquidity decisions. In addition, he/she is also involved in the custody and safeguarding...
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...Practice final exam/guide PART A: Multiple choice and short answer questions 1) The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is a. behavioural economics. b. microeconomics. c. macroeconomics. d. normative economics. 2) You own a DVD of the film 'A Beautiful Mind'. The opportunity cost of watching the DVD the second time a. is zero as you already own the DVD. b. is one-half the cost of the DVD, since this is the second time you have watched it. c. the amount of money you could get from selling the DVD after watching it the first time. d. is the value of the best alternative use of the time you spend watching the DVD on this 3) A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was: a. zero. b. $260. c. The value of whatever she would have done with those 48 hours. d. The cost is impossible to determine. 4) If the supply curve for a product shifts to the right, which of the following could have caused this shift? a. A rise in wage costs. b. A rise in price of the product. c. An expectation that price will rise in the future. d. An improvement in productivity. 5) The price...
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...The external environment in which businesses operate can have a significant effect on their success. To what extent do you think the external environment in the UK is favourable for businesses at the moment? Justify your answer with reference to external factors and/or businesses that you know. (40 marks) External environment in the UK can be favourable in any market to a business based on social and economic factors. This is important because this involves the way that people live, the lifestyle they have and finally their needs and wants as a customer, this is extremely important to businesses as they would need to keep on top of these wants and needs and adapt to suit them so that they can continue to sell their product or service. As a result of adapting their services to the customers’ needs they will see greater benefits for example increased profitability. In the UK, Rolex Watches have benefitted in big size because the weekly wage from 2010 has increased by £44 therefore providing more of an opportunity for consumers to spend on non-essential items as the economy has grew. This positive income elasticity of demand meant big ticket items benefitted such as Rolex as they saw 30% operating profit in 2014 as sales increased by 40% in the UK from 2013. This is due to consumers demanding higher quality products and bigger brand products with brand recognition such as Rolex therefore benefitted as higher quality lifestyle is demanded. Therefore this is favourable for Rolex...
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...Economics Help Revision Guide Welcome to the Economics Help free Revision Guide. If you find this revision guide useful, the author would appreciate a donation which you can make via www.economicshelp.org/blog/donate It is not permissible to copy this guide for others. It is only freely available from www.economicshelp.org/ You are welcome to leave feedback and ask further questions on Economics at: www.economicshelp.org/blog Richard Tejvan Pettinger 29 Campbell Road mail@richardpettinger.com www.economicshelp.org 2 AQA Edexcel OCR • • • • • • • • • • • • • • • • • • Unit 5 Unit 4 Unit 4388 Costs Law of Diminishing Returns Economies and Diseconomies of Scale Production Decisions The Objectives of Firms Efficiency Competitive Markets Oligopoly Contestable Markets Monopoly Competition Policy Price discrimination The Labour Market Poverty and Alleviation of Poverty Market Failure Cost Benefit Analysis Privatisation Regulation of Privatised Industries www.economicshelp.org 3 Costs • • • • • • • • Fixed Costs: Variable Costs: Total Costs: Marginal Cost: Sunk Costs: These are fixed costs that do not vary with output. E.g. cost of building a factory These are costs that do vary with output E.g. electricity, raw materials Fixed + variable costs This is the cost of producing an extra unit These are costs that are not recoverable e.g. advertising = = = TC / Q VC / Q FC / Q Average Total Cost (ATC) Average Variable Cost (AVC) Average Foxed Costs (AFC) ...
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...Business plan for {Enter your business name here} Date: 21 February 2013 {Guidance for completing your business plan can be found at the end of this document} Business profile |Structure |Sole Trader Partnership Company | |established |{Enter date} | |Date registered |{Enter date registered at Companies Office – if applicable} | |Registration # |{Enter the company number} | Contact details |Contact name |{Enter your name} | |DD |{Enter your main phone number} | |Mobile |{Enter your mobile phone number} | |Email |{Enter your email address} | |Postal address |{Enter your postal address} | |Physical address...
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...∆AA=∆YY-α∆KK-1-α∆YY ∆AA=0.05-0.20.07-0.80.01=2.8% b) The new production function is: Y=Kα(AL)1-α I will compute the Solow residual in the same way as before. Starting with taking natural logarithms: ln(Y)=αln(K)+(1-α)ln(A)+1-αln(L) Taking the first difference: ln(Y)-ln(Y-1)=α(ln(K)-ln(K-1))+(1-α)(ln(A)-ln(A-1))+1-α(ln(L)-ln(L-1)) Using the approximation: : lnX-lnX-1≅X-X-1X-1=∆XX to give the growth accounting equation: ∆YY=α∆KK+(1-α)∆AA+1-α∆LL And rearranging to give the Solow residual and plugging the numbers in: ∆AA=11-α∙∆YY-α1-α∙∆KK-∆LL=3.5% Note that the growth rate of technology when the labour-augmented production function is used, of 3.5% is greater than that of the Standard Cobb-Douglas, of 2.8%. Your boss was hoping it would fall, but it has risen. c) The Long run growth rate of human capital is ∆HH=2.5% Our new production function is: Y=Kα(AHL)1-α Again, computing the Solow residual in the same was as before. Taking natural logarithms: ln(Y)=αln(K)+1-αln(A)+1-αln(H)+1-αln(L) After taking the first differences and making the approximation: lnX-lnX-1≅X-X-1X-1=∆XX We get:...
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...October/November 2013 1 hour Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) *9990546754* READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use staples, paper clips, highlighters, glue or correction fluid. Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet. This document consists of 13 printed pages and 3 blank pages. IB13 11_9708_32/3RP © UCLES 2013 [Turn over 2 1 What is the purpose of trying to achieve economic efficiency? A B C D 2 to ensure that economic decisions are made equitably to ensure that firms are internationally competitive to ensure that firms maximise their profit levels to ensure that the economy does not waste scarce resources The table shows the total utility that an individual derives from consuming different quantities of a good. quantity of good (units) 1 2 3 4 5 6 total utility (units) 24 45 63 78 90 99 The individual’s marginal...
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...My Task – P1 Scenario –I Barry Andrews work as a junior journalist for the local newspaper which is planning to run a feature article on businesses. Tesco: Jack Cohen was reluctant to go back to tailoring after the First World War. This is when he started selling stuff on market stalls. In 1919, Jack Cohen started selling surplus groceries from a market stall in the east end of London. He then owned a number of stalls which at first were ran by his family but after time he gradually employed non-family members. By now he had also had a wholesale business. In 1924 Jack sold his own-brand product which was tea. This tea had come from a firm of tea suppliers of whom T.E Stockwell was a partner. Jack then came up with the name of Tesco by using the initials from T.E Stockwell and the first to letters of his surname. After a while the market trading business became difficult as partners became unreliable so he eventually turned to high street shops without doors. The first two Tesco stores were opened in London in a large estate in the Borough of Barking and Dagenham. This area was called Becontree. The other was in Burnt Oak. These were opened in 1931. By 1939 Jack Cohen had opened up over 100 Tesco Stores. Tesco showed its expansionary zeal early on by buying up rival shops. In the 1950s the retailer bought 70 Williams stores and 200 Harrow stores, followed by 97 Charles Philips stores and the Victor Value chain in the early 1960s. In 1961 Tesco Leicester entered the Guinness...
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...Retention of Visitor spending: The key to achieving economic sustainability for tourism in (i.e. California and Giants Causeway) is maximising the economic retention of tourist spending in your local economy. The sustainable tourism businesses need to develop strategies that are capable of meeting the long-term economic needs and aspirations of the local community. If the communities are engaged by tourism organisations as stakeholders in tourism, and economic partners in the tourism industry, this will actively support local tourism businesses. Tourism is a rapidly growing industry and has far-reaching economic and environmental impact across the destinations; hence, if tourism is an important source of local employment and a significant buyer of local goods and services, residents are more likely to be supportive. The business operators and local communities need to work together to maximise local economic benefits as well as the positive impacts of destinations. The possible strategies to use to manage responsible tourism are, seeking out ways to include local service providers and producers in your business, encourage your local business suppliers to develop sustainable goods and services that reflect local nature, history and culture. Widening access to facilities: One of the key challenges for Responsible Tourism is to broaden access. The local governors would need to approach their responsible side to the tourism facilities to make it more sustainable and using tourism...
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...Moral Philosophies Consequentialist theories. The morality (right vs wrong) of an action is judged entirely by its on consequences. Right and wrong are determined by the outcome of an action. “The end justifies the means” -Egoism -Utilitarianism Non consequentialist theories Based on inputs and intentions Actions are intrinsically good or bad by themselves. The right or wrong of these actions is not determined by their consequences. Utilitarianism Actions are judged by how much they benefit the majority. The greatest good for the greatest number of people. It is ethical to make the minority unhappy or suffer to create the greatest good The various ways of defining the greatest good should be taken into consideration. Promulgated by John Stuart Mill and Jeremy Bentham Act Utilitarianism Every act has an individual moral obligation. Rule Utilitarianism Apply utilitarianism to a set of rules that will benefit the majority. Kantian Ethics Intention based The categorical Imperative contains three maxims. Universality: You should only do something if you think it would be ok if everyone did it all the time. E.g. cheating in business, if everyone did it the economy would collapse. Every human should be treated as an end not a means to an end: So you can’t manipulate people to achieve an end. Contrasts to consequentialism which is based on ‘the greater good’. Means you cannot lie, (example about com101 being fav class) Act as if you were...
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... Gift of a golf club from a tax client as a birthday present 7 6. Net proceeds from business – Tax advice given to private clients 7 7. Hobby earnings from garage sales at his home 8 8. Sale of household goods on the internet 8 9. Gross Capital Gains from selling a jewellery piece 8 10. Gross Capital Proceeds from sale of shares in Eastfarmers Ltd 9 11. Net Dividend BHX Ltd – non-resident company 9 12. Winnings at Casino 10 13. Dominic’s gross service pay in the Army Reserve (PAYGW $1,000) 10 14. Fully franked dividends- XLY Pty Ltd – resident company 10 15. Unfranked Dividends- Excel Mining NL 10 16. Partially franked Dividends – 50% franked- Rio Ltd 10 17. Maintenance payments made by Dominic relating to a previous marriage 10 18. Medical expenses paid by Dominic 10 19. Gift to Royal Children’s Hospital 11 20. Brief Case for work related purposes – receipt kept 11 21. Payment of interest charged by Taxation Office on unpaid tax in 2012 11 22. Self-Education expense: 11 23. Superannuation paid to AMP Superannuation Ltd 11 24. Life insurance policy 12 25. Personal accident and sickness policy 12 According to ATO “you can claim the cost of any premiums you pay for insurance against the loss of your income”, and that you “must include any payment you received under the policy for loss of your income … on your tax return”. But it is not mentioned in Dominic’s case if there was any loss of income, so we will not include in his tax declaration. 12 26. Membership...
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