WORKBOOK QUESTIONS OF F

AASTHA SAO, BCP/23/23

1. An investor deposits Rs. 10,000 at the end of each of next 20 years from today. He wants to find out his total accumulatio

ANS. PRESENT VALUE 0

YEARS 20
NPER 20
RATE 10%
PMT -10,000

FUTURE VALUE ₹ 572,749.99

2. XYZ Ltd is having two proposals A and B, out of which one is to be selected according to NPV,IRR.
PROJECT A
COST OF PROJECT -600,000
CASH FLOWS: YR. 1 250,000
YR. 2 200,000
YR. 3 250,000
YR. 4 300,000
YR. 5 350,000
REQUIRED RATE OF RETURN 14%

ANS. NPV ₹ 301,337.75

IRR 32%

3. Earning per share of A Ltd is Rs. 20. It's cost of capital (Ke) is 20%. Find out the market price of the shares under different r

ANS. EPS 20 20
Ke 20% 20%
r (rate of return) 25% 20%
b (payout ratio) 40% 40%

RETENTION RATIO (1-b) 60% 60%

GROWTH RATE (b*r) 10% 8%
MPS ₹ 120.00 ₹ 100.00

4. Balance Sheet of A Ltd is given:

LIABILITIES AMOUNT ASSETS AMOUNT
Equity capital(Rs. 10 per Share) 90,000 Fixed Assets 225,000
Retained Earning 30,000 Current Assets 75,000
10% Debt 120,000
Current Liabilities 60,000
300,000 300,000

Company's Total Assets Turnover Ratio(Sales/ Total Assets) is 3. It's Fixed Operating Cost is 1,50,000 and it's Variable Cost R
Calculate:
(i) Different types of leverages
(ii) EBIT if EPS is (a) Rs. 1, (b) Rs.2, (c) Rs. 0

ANS.(i) Total Assets Turnover Ratio 3

Total Assets 300,000
Sales 900000
Variable Cost 450000
Contribution Margin (CM) 450000
Fixed Cost 150,000
EBIT 300,000
Interest (10% Debt) 12000
Tax 0.50
Number of Shares (N) 9000

PARTICULARS AMOUNT
Sales 900,000
Variable Cost 450,000
Contribution Margin 450,000
Fixed Costs 150,000
EBIT 300,000
Interest 12000
EBT(EBIT-Interest) 288,000
Tax (50% of EBT) 144000
Profit after Tax (PAT) 144,000

LEVERAGES:

OPERATING LEVERGE Contribution/EBIT

FINANCIAL LEVERAGE EBIT/EBT
COMBINED LEVERAGE Operating Leverage* Financial Leverage

(ii) EPS=(EBIT-Interest)(1-Tax)/N
(a) If EPS= Rs. 1 EBIT ₹ 30,000.00
(b) If EPS= Rs. 2 EBIT ₹ 48,000.00
(c) If EPS= Rs. 0 EBIT ₹ 12,000.00

5. A Ltd Company has following capital structure:

Equity Shares (4,00,000) 8,000,000
10% Preference Shares 2,000,000
10% Debentures 6,000,000
16,000,000
The shares of a company sells for Rs. 25. It's expected that company will pay a dividend of Rs. 2 per share which will grow at
Compute WACC.

ANS. Cost of Debt:

Interest 10.00%
Tax 30%
Kd 7.00%

Cost of Equity:
D1 2
P0 25
g 7%

Ke 15.00%

Calculation of WACC:
SOURCE AMOUNT WEIGHT
Equity Share Capital 8,000,000 0.5
10% Preference Share Capital 2,000,000 0.125
!0% Debentures 6,000,000 0.375
TOTAL 16,000,000

The WACC is 11.375%.

BOOK QUESTIONS OF FINANCIAL MANAGEMENT

d out his total accumulation, given rate of interest at 10%.

PROJECT B
-800,000
240,000
290,000
350,000
400,000
450,000
14%

₹ 340,459.94 PROJECT B IS SELECTED AS PER NPV

29% PROJECT A IS SELECTED AS PER NPV

he shares under different rates of return of 25%, 20% and 15% and for different payout ratios of 40% and 60%. Apply Gordon's Model.

20 20 20 20
20% 20% 20% 20%
15% 25% 20% 15%
40% 60% 60% 60%

60% 40% 40% 40%

6% 15.00% 12.00% 9.00%
₹ 85.71 ₹ 160.00 ₹ 100.00 ₹ 72.73

00 and it's Variable Cost Ratio is 50%.Income Tax Rate is 50%.

 1.5
1.04166666666667
1.5625

er share which will grow at 7% forever. Tax Rate 30%.

SPECIFIC WACC
0.15 0.075
0.1 0.0125
0.07 0.02625
0.11375
0%. Apply Gordon's Model.