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)

 

 

ASSIGNMENT # 01

 

Marks=

 

 

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

 

consideration:

 

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

 

EBIT

 

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.

IMPORTANT NOTE:

 

24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

 

IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS

 

DEADLINE:

 

  • Make sure to upload the solution file before the due date on VULMS

 

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FORMATTING GUIDELINES:

 

  • Use the font style “Times New Roman” or “Arial” and   font size “12”
    • It is advised to compose your document in MS-Word format

 

  • You may also compose your assignment in Open Office format

 

  • Use black and blue font colors only

 

RULES FOR MARKING

 

  • Please note that your assignment will not be graded or graded as Zero (0), if:

 

  • It is submitted after the due date.

 

  • The file you uploaded does not open or is corrupt.

 

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  • etc.

 

  • Not submitted as per given format

 

  • It is cheated or copied from other students, internet, books, journals etc.

 

Note related to load shedding: Please be proactive

 

Dear students!

 

As you know that semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments or GDBs.

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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?

rCE*=(DIV1/Po)+g

for calculate the required rate of return 

PV=Po*=DIV1/(rCE-g)

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

Solve

Attachments:

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

Assalamialaikum.!
 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

interest 

30%Debt=(100,000*30%)*10%=3000

50%Debt=(100,000*50%)*15%=7500

ye ho ga 

Arry pta ni ab.

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