Financial Management Comp
Assignment A
1.a.
Should the titles of controller and treasurer be adopted under Indian context? Would you like to modify their functions in view of the company practice in India? Justify your opinion?
Ans.
The title of controller and treasurer not been followed in India. In India, generally the officer designated as financial controller performs the function of chief accountant. The title of finance head is generally finance manager who is involved in the management of company fund.
1.b.
A firm purchases a machinery for Rs. 8,00,000 by making a down payment of Rs.1,50,000 and remainder in equal installments of Rs. 1,50,000 for six years. What is the rate of interest to the firm?
Ans.
Particulars
Cost
of
Machinery
Down Payment
Financed
Repayment in equal installment
Total
paid interest Rate of interest
Rate of interest per annum
Interest cost
Ref a Yr 0
800,000.00
b c=a-b d=6*150,
000
150,000.00
650,000.00
900,000.00
e=d-c
250,000.00
f=e/c g=f/6 38.46%
6.41%
h
21
250,000.00
Principal i=d-h Outstanding
Year
wise j interest rate
Rate of interest k
1
650,000.00
650,000.00
Yr 1
Yr 2
Yr 3
Yr 4
150,000
.00
150,000
.00
150,000. 150,000. 150,000. 150,000.
00
00
00
00
6
=(250,0
00*6/21
)=71,42
9
78,571.
00
571,429
.00
11.0%
5
=(250,0
00*5/21
)=59,52
4
90,476.
00
480,952
.00
10.4%
4
=(250,0
00*4/21
)=47,61
9
102,381.
00
378,571.
00
9.9%
3
=(250,0
00*3/21
)=35,71
4
114,286.
00
264,286.
00
9.4%
Yr 5
2
=(250,0
00*2/21
)=23,81
0
126,190.
00
138,095.
00
9.0%
Yr 6
1
=(250,0
00*1/21
)=11,90
5
138,095.
00
0
8.6%
2.a.
Explain the mechanism of calculating the present value of cash flows.What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate
Ans.
Money has time value: e.g. Rs 1,000 received today is not the same after year
Present value of cash flow: It shows the value of expected amount at current value.
Discount rate = Inflation rate + required rate of return + risk free premium rate
Details required
1.a.
Should the titles of controller and treasurer be adopted under Indian context? Would you like to modify their functions in view of the company practice in India? Justify your opinion?
Ans.
The title of controller and treasurer not been followed in India. In India, generally the officer designated as financial controller performs the function of chief accountant. The title of finance head is generally finance manager who is involved in the management of company fund.
1.b.
A firm purchases a machinery for Rs. 8,00,000 by making a down payment of Rs.1,50,000 and remainder in equal installments of Rs. 1,50,000 for six years. What is the rate of interest to the firm?
Ans.
Particulars
Cost
of
Machinery
Down Payment
Financed
Repayment in equal installment
Total
paid interest Rate of interest
Rate of interest per annum
Interest cost
Ref a Yr 0
800,000.00
b c=a-b d=6*150,
000
150,000.00
650,000.00
900,000.00
e=d-c
250,000.00
f=e/c g=f/6 38.46%
6.41%
h
21
250,000.00
Principal i=d-h Outstanding
Year
wise j interest rate
Rate of interest k
1
650,000.00
650,000.00
Yr 1
Yr 2
Yr 3
Yr 4
150,000
.00
150,000
.00
150,000. 150,000. 150,000. 150,000.
00
00
00
00
6
=(250,0
00*6/21
)=71,42
9
78,571.
00
571,429
.00
11.0%
5
=(250,0
00*5/21
)=59,52
4
90,476.
00
480,952
.00
10.4%
4
=(250,0
00*4/21
)=47,61
9
102,381.
00
378,571.
00
9.9%
3
=(250,0
00*3/21
)=35,71
4
114,286.
00
264,286.
00
9.4%
Yr 5
2
=(250,0
00*2/21
)=23,81
0
126,190.
00
138,095.
00
9.0%
Yr 6
1
=(250,0
00*1/21
)=11,90
5
138,095.
00
0
8.6%
2.a.
Explain the mechanism of calculating the present value of cash flows.What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate
Ans.
Money has time value: e.g. Rs 1,000 received today is not the same after year
Present value of cash flow: It shows the value of expected amount at current value.
Discount rate = Inflation rate + required rate of return + risk free premium rate
Details required