MGT201 - Financial Management Assignment No. 01 Solution and Discussion Spring 2017 Due Date July 24, 2017

MGT201 - Financial Management Assignment No. 01 Solution and Discussion Spring 2017 Due Date July 24, 2017  


Financial Management (MGT201)








Due Date= July 24, 2017







XYZ Company is currently 100% Equity with 10,000 common stocks of Rs. 10 each. However, company is considering to change its capital structure for next year by including debt financing along with equity in its capital structure. For this, following debt financing plans are under




Plan 1                         30% long term debt with interest rate of 10%


Plan 2                         50% long term debt with interest rate of 15%


Marginal Tax rate is 20%, EBIT is Rs. 36,000 and preferred dividend is Rs. 5,000.


Requirement I: You are required to complete the given table for 100% equity, 30% debt and 50% debt by using the above information. Suggest which plan is better for the company and why?

100% equity   30% debt         50% debt


Common Stockholder’s equity (in Rs.)


Number of common Stocks




Interest expenses


Earnings before taxes


Income taxes


Earnings after taxes


Earnings available to common stockholders


Earnings per share (EPS)

Requirement II:


Calculate the value of common stock for 50% debt level if required rate of return on investment in common stock equity is 12% and present value of growth opportunities is Rs. 40. Also determine whether the stock is overvalued or undervalued if it is trading in the market at Rs. 65.


Note: It is mandatory to provide the solution of Requirement I in the given table; otherwise it will be marked as zero. Moreover, at the end of the table, supporting working of this table is required.



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Tags: -, 01, 2017, 24, Assignment, Date, Discussion, Due, Financial, July, More…MGT201, Management, No., Solution, Spring, and

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Replies to This Discussion

me also

kuch samj nhe a rhe ......kis lesson say hai ye assignment .

can any one tell me about lesson no plzzzzzzz

plz add formulas at least.....lesson from which asgs ???

which formula? can you mention formula?


for calculate the required rate of return 


ye under or over valued market price k lay ho gay .i think  

koi haaa jo help kre 2nd wly me kiaaa pochna chahta ha



which file format you uploaded? bcuz its not opening....please can you change format?

 ap ny 30% debt me interest galat calculate kia va ha. wo sahi kr ln.
=100000*30% ==> 30000/-

=100000-30000=70000 * 10% ==> 7000

aise hna ha 30% wala




ye ho ga 

Arry pta ni ab.




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