Some general key information about the project of BFC5914:
1. The project will be 45% of your overall grade.
2. You need to complete a project report and a presentation video.
3. You have to complete the project individually (Requirement).
4. One same firm can't be selected by more than 2 students.
5. Do not copy others' analyses. Otherwise, you will get 0.
6. Submit the project report and video via Moodle.
7. Collect the needed information by yourself. (e.g., financial reports, industry information, stock market information, etc.)
8. Choose your firm and post the name of the firm and the Student ID on the shared Excel sheet before Friday in week 5.
9. The chosen firm should be a non-financial and publicly listed company.
Penalties for late lodgement:
If your submission is late by less than one day, 2.5% of the marks will be deducted; thereafter, a penalty of 5% per day applies. Assessments submitted after 7 calendar days will NOT be marked. Note: You get marks off if you do not follow the project’s requirements
Part 1: Project Report (28%, 28 marks in total)
Due date: 18/10/2024, Friday, 11:55 pm (Week 12) Context
Assume that the firm chosen by you would like to borrow an AU$1 million 3- year loan from your bank now. As a lending officer, you are asked to use different methods to conduct the credit analysis and make decisions on this loan application.
(1) Method 1: Five Cs (9 marks)
Collect relevant data (both the firm level and industry level) and insert it into an excel file; show your calculations in the excel file. Then conduct the analysis and make a loan decision.
(2) Method 2: Risk Premium Analysis. (5 marks)
According to your bank policy, all loans with a cumulative probability of default higher than 7% will be rejected. You need to collect the borrowing firm's relevant bond information to derive the computations and thus make loan decisions. If the borrowing firm has no bond information, you can use its closest peer's bond rating.
There are two possible ways to get the return rates of bonds.
(A)You can use the following table as the return rates of bonds.
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Table 1A Corporate bond ratings and yields with different maturities
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1-year
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2-year
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3-year
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4-year
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5-year
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AAA
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2.50%
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3.20%
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3.70%
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4.45%
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5.50%
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AA
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2.70%
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3.60%
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4.30%
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5.15%
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6.12%
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A
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3.10%
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3.90%
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4.60%
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5.35%
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6.30%
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BBB
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4.30%
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4.60%
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5.22%
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6.30%
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7.40%
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BB
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4.80%
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5.50%
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6.55%
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7.35%
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8.45%
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B
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5.70%
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6.50%
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7.80%
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8.95%
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10.20%
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CCC
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6.50%
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7.10%
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8.20%
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10.55%
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11.10%
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CC
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7.80%
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8.80%
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9.60%
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10.50%
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12.80%
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Table 1B Government bond yields with different maturities
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Maturity
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1-year
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2-year
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3-year
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4-year
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5-year
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Returns
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1.50%
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2.10%
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2.50%
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3.20%
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4.10%
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(B) You can also find out the average return rates of different bonds from the internet and use it to derive the computations.
(3) Method 3: The Altman Z-score. (2 marks)
(4) Method 4: The KMV Model. (4 marks)
For unavailable information, you need to make relevant assumption to derive the computation. Provide reasonable evidence to justify that your assumption is valid. You can take the slide's Expected Default Frequency table to determine the EDF of the borrowing firm or search other sources from the internet.
(5) Suppose that you approved the loan one year ago. Now that the borrowing firm's financial situation has deteriorated, combing the industry risk of the borrowing firm, how can the bank hedge this increased credit risk? (3 marks)
(6) Suppose that you approved the loan three years ago. Now the borrowing firm cannot pay back the loan as scheduled. What would you do as a loan officer? (3 marks)
(7) Format requirements and others. (2 marks)
Steps of the project:
(1) Choose your publicly listed non-financial company as the borrowing firm, and post
this information on the shared Excel sheet. Here is the link to fill in: https://docs.google.com/spreadsheets/d/1ee5iXoKv-
VSTpffxblcR08uRc4ZnDT0hvKyrllckQLw/edit?gid=0#gid=0
The link is available in Week 4. You can access the link only via your Monash student email address.
(Tips: Manufacturing firms would be easier for you to derive ratios)
(2) Collect the information of the firm, including the financial reports (at least 3 years), bond market information (if not available, you could use the bond information of its peer firms), and stock market information, industry information etc.
(3) Apply the methods and do the computations (e.g., related ratios, default probabilities, etc.).
(4) Edit your project and make one loan decision for each method.
(5) The final report will include two files: (i) the data collected in the excel file and (ii) the computation and analysis in the word file.
Requirements for the project report submission:
1. You need to submit two files: 1 excel file and 1 writing report,
2. For the writing report, only accept Word files. (Name of your files in the following way: Group number and Firm name; e.g., 1Apple)
3. Each student submits only once, and do not repeat your submission.
4. Polish your writing before submissions. (Poor writing could lead to low scores)
5. Format of the Word: font 12 and 1.5 lining spaces.
6. Words limit on the second part of computation and analysis: min 2000 words and max 3000 words.
7. The title page should include your full name, student ID, the name of the firm and your group number.
Part 2: Presentation ((17%), 17 marks in total)
Due Date: 18/10/2024, Friday, 11:55 pm (Week 12)
Students are expected to shoot a presentation video based on the writing report as described in part 1.
Format Requirements: Students must show the PPT and record themselves in the video (i.e., video recording but not picture). The required recording format is shown as follows (i.e., show PPT as background and your face at the top right corner):
https://support.zoom.us/hc/en-us/articles/360025561091-Recording-layouts
Recording software: Zoom
Length: 10 mins (+ or –1 min)
File format: mp4
File size: 500MB max strictly (e.g., a 10 mins zoom video should be about 120MB) Presentation tips:
A guide to oral presentations: https://www.monash.edu/rlo/quick-study-guides/a-guide-to- oral-presentations#text
https://www.monash.edu/rlo/assignment-samples/business-and-economics/oral-presentation
The following links show some insightful tips for good presentation slides:
http://www.garrreynolds.com/preso-tips/design/
Recording equipment: Computer or phone with a camera. You can use other software or equipment; however, you need to ensure the uploading file is in mp4 format and does not exceed the required length and size.
Video edit: Not allowed. However, you can use the pause function in Zoom.
Technical issues: This task aims to exercise students’ virtual learning and working abilities. Students are expected to self-resolve the technical issues and record the video using Zoom. Students are responsible for ensuring the image and audio are functioning well in the video and the uploading file is not exceed the required length and size.
. Important note: There were some submissions without audio or image. Make sure you check and play your video after recording. DO NOT submit at the last minute as the uploading takes time.
Use Zoom to Record:
Using a computer, you can save the recorded zoom video locally. The following link shows the steps of local recording:
https://support.zoom.us/hc/en-us/articles/201362473-Local-recording
If you record using the zoom app of your phone, the procedure is similar, except the video is saved in the cloud. You can download it from your zoom account after the recording.
https://support.zoom.us/hc/en-us/articles/205347605-Managing-cloud-recordings
Submission:
. Submit the electronic copy via Moodle.
. The electronic submission should be in mp4 format. Do not compress the file. Marks Allocations: (1) PPT (10 marks) and (2) Oral Presentation (7 marks).
PPT: 1. A complete, comprehensive, and short story
2. Clear bullet points on each page, not long sentences
3. Show some solid evidence to support your conclusion
4. Conclude your finding.
Oral Presentation: 1. Speak clearly
2. Don’t read slides
3. Show your face in the video.