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Kaplan Investment Planning 1 (SN3002) study group

Discussion in 'Financial Planning Study Group' started by K_veg, 10th Sep, 2011.

  1. K_veg

    K_veg Active Member

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    Milan, MI
    Hey guys

    I was part of an online study group for the Foundations unit, and it worked really well. Let me know if anyone out there's interested in joining a study group for Investment Planning? It'll be good to bounce ideas off each other.

    I'm just working through the notes and have started the assignment.

    Cheers
    Karen
     
    Last edited by a moderator: 26th Aug, 2013
  2. Sarah_Kate24

    Sarah_Kate24 New Member

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    23rd Feb, 2010
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    Location:
    Portland, Vic
    Hi Karen

    Are yo doing Investment Planning 1
    AS3002 Assignment?
    Im about to submit my assignment and am looking for someone to check my answers with.

    :)
     
  3. K_veg

    K_veg Active Member

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    Hi, sorry I'm only just starting it. Best of luck!
     
  4. Hector

    Hector Member

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    Adelaide
    Hi,

    I just got my assignment (3002) back last week and passed so if you need any info let me know. I only check Invested once a week though

    cheers
     
  5. Tia

    Tia New Member

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    Sydney
    Hi can anyone help me please with Q3 c)

    It would be appreciated!!!
     
  6. AAB

    AAB Member

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    Hi guys

    Ive started this assignment and up to Question 3.

    My calculated P/E ratio for Suncorp = 29.31. For question 3biii, it asks whether SUN warrants a buy, hold or sell recommendation.

    I have stated that SUN warrants a sell recommendation as it would take more than double the time for SUN to pay back her investment than the average company in the same industry that has a P/E ratio of 12.33 times.

    Can anyone confirm if this is correct or am I way off the mark??
     
  7. Kylie Stephens

    Kylie Stephens Member

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    Hi Karen
    Would be interested in study group. I am about half through investment planning assignment.

    Kylie
     
  8. Kylie Stephens

    Kylie Stephens Member

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    Hi AAB

    I am at work at the moment but will check my answers when I get home tonight and let you know. 29.1 P/E ratio is correct but what about the fair price now that the earnings per share has changed? I originally thought that the earnings per share was the same as the dividend but apparently not. They are not consistent with terminology. In the examples they use the term Future Maintainable Earnings but expect us to work with Net Profit After
    Tax in the assignment. This stuff gets are bit confusing and having to support our answer with Suncorp specific stuff is a bit ridiculous.
     
  9. AAB

    AAB Member

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    Hi Kylie

    Question 3bii:
    Isabella has received investment research from an equities broker that forecasts SUN’s EPS for the coming financial year to be $0.618 per share. The current industry average P/E ratio is 12.33 times. Calculate SUN’s fair price based on the earnings forecast. Please provide formula used and all workings.

    Now what confuses me is am I supposed to be consistent in my own workings out and calculate the fair price based on my own calculated EPS from q. 3bi - which is $0.29 - OR am I supposed to use the forecasted EPS of $0.618 as stated in the question??

    lol the structure of questions and study notes are a little bit ridiculous..and I couldnt agree with you more about them jumping around with their terminology. It makes it especially difficult for a 'novice' to investment planning to keep track of what they are talking about.
     
  10. AAB

    AAB Member

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    Hi Kylie

    Question 3bii:
    Isabella has received investment research from an equities broker that forecasts SUN’s EPS for the coming financial year to be $0.618 per share. The current industry average P/E ratio is 12.33 times. Calculate SUN’s fair price based on the earnings forecast. Please provide formula used and all workings.

    I believe we are supposed to use the $0.618 forecasted EPS rather than our own calculated EPS from the previous question - my calculated EPS for Q3bii is $0.29. You would think they would make the answers to each question relative to each other so there is consistency in our workings.

    lol the structure of questions and study notes are a little bit ridiculous..and I couldnt agree with you more about them jumping around with their terminology. It makes it especially difficult for a 'novice' to investment planning to keep track of what they are talking about. :eek::eek::eek:
     
  11. Kylie Stephens

    Kylie Stephens Member

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    Hi AAB
    What you have to do is remember that earnings per share is not limited to one decimal place, when trades are done, they are often done to three or four decimal places, so this will effect your P/E ratio calculation. Your earnings per share should be $0.288294 which will equate to a P/E ratio of 29.483, rounded to one decimal place is 29.5. Don't do the rounding until the last step.

    When you calculate the fair share price, use the 0.618 per share that they have used because that is what the question asks for. the difficulty here is where you just use the straight earnings - eg 12.33 x .618 = $7.61994 so $7.62 or whether to use the discount method. If you use the discount method you have to provide support evidence about how you came up with the discount rate.
     
  12. AAB

    AAB Member

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    okay cool, thanks for the clarification :)
    im just gonna stick to the fair share price calculation based on the industry average p/e. if i get too technical there's a greater chance ill get it wrong!
     
  13. sweetp7282

    sweetp7282 Member

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    q 2(b) iii

    Hey guys,

    I would like to comfirm the answer for the price of the bond..

    Mine has come up as 99.34 .. is that correct???

    Thanks for the help in advance...
     
  14. AAB

    AAB Member

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    Hi Sweetp,

    Using the following formula:

    PV = C1/1+I + C2/(1+I)^2 + C3/(1+3)^3 + C4/(1+4)^4 + C5/(1+5)^5 + C6 + FV/(1+6)^6

    My answer was $81.121.

    As the coupon rate provided is 6.95% paid half yearly, the coupon payment is calculated as 6.95 / 2 = 3.475%. This can be applied to the formula as follows:

    = 3.475/1.072 + 3.475/(1.072)^2 + 3.475/(1.072)^3 + 3.475/(1.072)^4 + 3.475/(1.072)^5 + 103.475/(1.072)^6

    = $81.121
     
  15. sweetp7282

    sweetp7282 Member

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    Hi AAB,

    I came up with 3.475 as well... but I guess we differ in terms of Market yield..

    as It is annual rate and worked out as half yearly, u also have to make it half, i.e. 1.036 as a denominator.

    so the formula is

    = 3.475/1.036 + 3.475/(1.036)^2 + 3.475/(1.036)^3 + 3.475/(1.036)^4 + 3.475/(1.036)^5 + 103.475/(1.036)^6

    i am referring to page 4.34 from our study notes for that...

    Have a look and let me know if I am rong some whr... I am confused...

    Thanks,
     
  16. redknapp

    redknapp New Member

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    I put as buy recommendation, a higher P/E ratio than the current industry average may suggest that it may experience more positive earnings growth into the future than similar stocks in the same sector
     
  17. AAB

    AAB Member

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    Melbourne, Vic
    Hi redknapp,

    I think you're right...I've reviewed my answer and also taken into consideration the fair market price which is good value to the assumed current market price of $8.50.
     
  18. AAB

    AAB Member

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    Melbourne, Vic
    Hi sweetp,

    where are you getting the 1.036 from? the market interest rate is 7.20% plus 1 = 1.072 (3.475 / 1.072)?
    I think we only need to halve the coupon rate that is paid half yearly but the interest rate p.a. remains the same at 7.20% ??

    Now you have me confused...
     
  19. meg_piefke

    meg_piefke New Member

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    Newcastle NSW
    Your are right you do halve the coupon rate to get that it is paid half yearly 6.95/2 but you also have to do 7.20/200 is 0.036 for i

    C+fv/(1+i)power of n

    C = 6.95/2 = 3.475
    FV = 100
    i = 7.20/200 = 0.036
    n = 3 x 2 = 6
    hope this helps took me a while to get my head around it
     
  20. Kylie Stephens

    Kylie Stephens Member

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    Location:
    Devonport
    bond value

    Hi Sweet P

    I got the same answer as you.


    Here are the workings

    PV – the present value per $100 of the bond
    C- coupon payment amount per $100 of the bond, for each 6 months so $3.475
    i – current/prevailing interest rate ÷ 2
    n – number of payment periods (for coupons)
    FV – is the $100 comparison unit

    so to see what the value (per $100) of our bond is today the formula is:


    **** it doesn't copy and paste from word however I'm sure it is correct because the i - current interest rate 7.2% has to be divided by 2 because of the half yearly payments.


    So the current value is actually $99.34 per every $100

    good luck!!