Financial Administration Comp Composition

Assignment A

1 . a.

Should the games of control mechanism and treasurer be used under Of india context? Do you want to modify their functions in view of the company practice in India? Justify your opinion?

Ans.

The title of controller and treasurer not been implemented in India. In India, generally the official designated as financial control mechanism performs the function of chief curator. The title of finance mind is generally finance manager who is involved in the managing of company fund.

1 ) b.

A firm purchases a machinery to get Rs. eight, 00, 000 by making a down payment of Rs. one particular, 50, 000 and remainder in similar installments of Rs. one particular, 50, 500 for half a dozen years. Precisely what is the rate interesting to the organization? Ans.

Facts

Cost

of

Machinery

Deposit

Financed

Repayment in

similar

installment

Total

paid

interest

Rate of interest

Interest rates

per annum

Fascination cost

Ref

a

365 days 0

800, 000. 00

b

c=a-b

d=6*150,

500

150, 1000. 00

600, 000. 00

900, 500. 00

e=d-c

250, 000. 00

f=e/c

g=f/6

35. 46%

6. 41%

l

21

250, 000. 00

Principal

i=d-h

Outstanding

Season

wise j

interest rate

Interest rate k

one particular

650, 500. 00

600, 000. 00

Yr 1

Yr two

Yr 3

Yr four

150, 000

. 00

a hundred and fifty, 000

. 00

150, 000. 150, 500. 150, 500. 150, 000.

00

00

00

00

6

=(250, 0

00*6/21

)=71, 40

9

78, 571.

00

571, 429

. 00

eleven. 0%

5

=(250, zero

00*5/21

)=59, 52

four

90, 476.

00

480, 952

. 00

10. 4%

4

=(250, 0

00*4/21

)=47, sixty one

9

102, 381.

00

378, 571.

00

being unfaithful. 9%

a few

=(250, 0

00*3/21

)=35, 71

5

114, 286.

00

264, 286.

00

9. 4%

Yr a few

2

=(250, 0

00*2/21

)=23, seventy eight

0

126, 190.

00

138, 095.

00

on the lookout for. 0%

Yr 6

1

=(250, zero

00*1/21

)=11, 90

5

138, 095.

00

0

8. 6%

2 . a.

Explain the mechanism of calculating the current value of cash flows. What is annuity thanks? How can you estimate the present and future principles of an pension due? Demonstrate Ans.

Funds has period value: e. g. Rs 1, 000 received today is not the same after yr

Present benefit of cash movement: It displays the value of predicted amount in current benefit. Discount level = Pumpiing rate & required charge of go back + risk free premium price Details necessary for calculating present value of money flows: Income year wise, discount level. This technique is incredibly useful for decision making.

Present Worth of Premium

Worth of lump sum consideration today which is going

to get received tomorrow

Computation:

Long term Value of Annuity

Benefit of set investment annually – really worth

tomorrow

Calculation:

Annuity * Present value annuity element (PVAF)

Annuity * Future value premium factor (FVAF)

PVAF = 1-[1/(1+r)^n]

FVAF = [(1+r)^n]-1

Illustration:

Model:

Mr. By would like to receive Rs. you, 000/- every year for Mister. X want to grow simply by investment of Rs. 15, 000/10 years from at this point for 10 years from at this point

It is assumed lower price rate 10%, the present benefit Rate of interest @ 10%, the near future value annuity factor premium factor for 10 years 10% is 6th. 144

intended for 10 years 10% is 1 . 594

Present value of annuity sama dengan 1, 500 * 6. 144 = Rs. 6th, 145/-

Long term value of annuity = 10, 500 * 1 ) 594 sama dengan Rs. 12-15, 937/-

installment payments on your b.

”The increase in the risk-premium of all stocks, irrespective of their beta is the same when risk aversion increases” Comment with practical examples

Ans.

The safety beta is a function of correlation of security returns with the industry index results and the variability of the investments returns relative to the variability of index returns. Beta measures the sensitivity with the stocks with regards to broad centered market index. For instance: a beta to get 1 . 2 for a stock would suggest that this inventory is 20% riskier compared to the index and similarly beta of zero. 9 for the stock reveal 10% much less riskier than the index. Finally, a beta of 1. zero means, stock is as dangerous as the stock market index.

Therefore , the given declaration is false. Expected risk premium to get stock is beta time the market risk premium. E. g. presume beta sama dengan 1 . two times, market risk premium = 10%,...



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