Financial Management

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FINANCIAL MANAGEMENT – ASSIGNMENT

Answer any 5 problem. To be submitted on or before 12.00 pm 17th Dec 2012.
1. The following information is available for NCEP Limited.

Profit and Loss Account Data Balance Sheet Data

Beginning of 20X6End of 20X6

Sales 6000Inventory 800 820
Cost of goods sold 4000Accounts receivable 500 490
Accounts payable 290 205

What is the duration of the cash cycle?

2. Pioneer Stores is trying to determine the economic order quantity for a certain type of machine tool. The firm sells 60,000 numbers of this machine tool annually at a price of Rs.80 per piece. The purchase price per machine tool to the firm is, however, Rs.65. The cost of carrying a machine tool is Rs.10 per year and the cost of placing an order is Rs.80. (a) What is the total cost associated with placing one, two, five, and ten orders per year? (b) What is the economic order quantity?

3. You plan to go abroad for higher studies after working for the next five years and understand that an amount of Rs.2,000,000 will be needed for this purpose at that time. You have decided to accumulate this amount by investing a fixed amount at the end of each year in a safe scheme offering a rate of interest at 10 percent. What amount should you invest every year to achieve the target amount?

4. The market value of a Rs.1,000 par value bond, carrying a coupon rate of 10 percent and maturing after 5 years, is Rs.850. What is the yield to maturity on this bond?

5. You are considering purchasing the equity stock of Empire Corporation. The current price per share is Rs.180. You expect the dividend a year hence to be Re.8.00. You expect the price per share of Empire Corporation stock a year hence to have the following probability distribution.

Price a year henceRs.175180200
Probability 0.20.30.5...
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