Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call us at : 08263069601
NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
Internal Assignment Applicable for December 2015 Examination
Assignment Marks: 30
- Suppose, a prospective client who wants to invest certain amount of money comes to you but does not know anything about ‘Time Value of Money’. So, please explain to the person the concept of ‘Time Value of Money’ in detail.
Answer : The time value of money is one of the basic theories of financial management. The theory of states that the value of money you have now is greater than a reliable promise to receive the same amount of money at a future date. This may sound simple, but it underpins the concept of interest, and can be used to compare investments, such as loans, bonds, mortgages, leases and savings.
Definition
- A limited company is considering investing a project requiring a capital outlay of Rs. 2, 00,000. Forecast for annual income after depreciation but before tax is as follows :
| Year
|
Rs.
|
| 1 | 1,00,000
|
| 2 | 1,00,000
|
| 3 | 80,000
|
| 4 | 80,000
|
| 5 | 40,000
|
Depreciation may be taken as 20% on original cost taxation at 50% of net income.
You are required to evaluate the project according to each of the following methods:
Answer : Profitability Statement
| Year Profit after
Depreciation $ 1 1,00,000 2 1,00,000 3 80,000 |
Less
Tax $ 50,000 50,000 |
PAT
$
50,00 |
Add Profit before
Depreciation Depreciation $. but after tax $ 40,000 90,000 40,000 90,000 40,0
|
- a) Pay back method
Answer : I year 90,000
II year 90,000
1,80,000
Balance 20,000
- b) Rate of return on original investment method
Answer : Year Net Profit after
Tax and depreciation ($)
1 50,000
2 50,000
Return represents the Average Return
- c) Rate of return on average investment method
Answer : Return = Average Investment x 100
Return = $ 40,000
- d) Discounted cash flow method taking cost of capital as 10%
Answer : Year Cash Inflows Discount Factor Present Value
At 10% p.a. $
1 90,000 0.909 81,810
2 90,000 0.826 74,340
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call us at : 08263069601