Professional Documents
Culture Documents
8524
8524
(Department of Commerce)
Textbook (one)
Course Outline
Assignment No. 1, 2
Assignment Forms ( 2 sets )
In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:
Mailing Officer
Allama Iqbal Open University
H-8, Islamabad
Ph: 051-9057611-12
Moazzam Ali
(Course Coordinator)
WARNING
1.
2.
ASSIGNMENT No. 1
Q.1 During the expansion phase of business, companies undertake some big projects
that involve decisions on using large sum of money generally called capital
budgeting decisions. These projects include installing new machinery or plant in a
company. Elaborate in detail the methods of evaluating the feasibility of
undertaking a large project in business.
(20)
Q.2 It is usual practice in corporate world to acquire or merge with other companies for
achieving economies of scale and getting additional revenues. However, before
entering into a merger or acquisition transaction, a detailed analysis is conducted
by booth companies. You are required to explain the motives for merger and
acquisition transactions and explain in detail the characteristics of mergers and
acquisitions transactions.
(20)
Q.3 a)
b)
A project has a total cost of Rs. 455,000. The cash flows are 100,000 in the
first year, 200,000 in second year and 300,000 in the third year. Calculate the
Net Present Value (NPV) and also find the Internal Rate of Return if the
required rate of return is 17%.
(10)
A company sells food packages at Rs. 17 per pack. The variable cost is Rs. 8
per pack and the fixed cost is 130,000 per year. Depreciation is recorded of
Rs. 69,000 per year. What is the accounting break-even? Also find the
increase in operating cash flows if the sales increase by 11% above the
break-even quantity.
(10)
Q.4 Determine whether it will be cheaper for the company to lease or to buy the asset in
the following case.
(20)
a)
A construction company has conducted an investment appraisal on a four
year project and has decided to proceed with the project. The project involves
the acquisition of plant and machinery that could be purchased for Rs.
29,00,000. The plant and machinery is expected to have a negligible residual
value at the end of the project.
b)
Alternatively the asset could be leased using a finance lease for Rs. 185,000
per year, payable in arrears. Under the finance lease, the lessee is responsible
for all maintenance costs of the plant and machinery during the lease term.
After the lease period ownership of the plant and equipment would pass to
the construction company. The implied interest and straight line accounting
depreciation will be tax allowable.
The company is subject to tax at 25%. Tax depreciation allowances are
available to the purchaser of business assets at 40% per year on a reducing
balance basis. The company can borrow at a rate of 9% per annum.
a)What is the Weighted Average Cost of Capital (WACC) in the following
case?
The Glass Ltd. has 1.3 million shares outstanding. The stock currently trades
for Rs. 45 per share. The firm debt has a face value of Rs. 6 million quoted at
92% of face value and is priced to yield at 12%. The risk free rate is 9% and
the market risk premium is 8%. The beta of Glass Ltd. is 0.64 and the
corporate tax rate is 32%.
Q.5 a)
b)
A company may face financial distress due to its wrong financial decisions.
Further, it can go bankrupt and may face liquidation. You are required to
explain what is bankruptcy? Explain in detail the procedures to be followed
by a company for liquidation in the bankruptcy cases.
(10)
Explain in detail the following theories of capital structure:
(10)
i.
Trade off Theory
ii.
Signalling Theory
iii. Peking Order Theory
How well you can use your knowledge in solving problems, explaining situations,
and describing organizations and management;
How professional you are, and how much care and attention you give to what you do.
To answer a question effectively, address the question directly, bring important related
issues into the discussion, refer to sources, and indicate how principles from the course
materials apply. The student must also be able to identify important problems and
implications arising from the answer.
For citing references, writing bibliographies, and formatting the assignment, APA format
should be followed.
ASSIGNMENT No. 2
This assignment is a research-oriented activity. You are required to select any trading/
manufacturing/ non-trading organization of your interest which supports you in preparing
a report of about 1000 words on the topic allotted to you, to be submitted to your teacher
for evaluation.
Select one of the following topics according to the last digit of your roll number. For
example, if your roll number is P-3427180 then you will select issue # 0 (the last digit): TOPICS:
0
The corporate governance practices in the listed companies in Pakistan
1.
Does the Board of Directors (BoD) have absolute powers in Pakistan?
2.
The suggestions on reforming corporate taxation in Pakistan
3.
Leasing or long term loans, which is the optimal way of financing in Pakistan?
4.
The history of bankruptcy among the listed companies in Pakistan
5.
The capital budgeting tools practiced by the listed companies in Pakistan
6.
The integration of the stock exchanges in Pakistan
7.
The potential of Sukuk financing in the corporate growth of Pakistan
8.
The benefits of mergers and acquisitions in banking sector of Pakistan
9.
Does debt financing reduce tax liability of a company?
Title page
Acknowledgements
An abstract (one page summary of the paper)
Table of contents
Introduction to the issue (brief history & significance of issue assigned)
Practical study of the organization (with respect to the issue)
Data collection methods
8.
9.
10.
11.
12.
WORKSHOPS
The workshop presentations provide students opportunity to express their communication
skills, knowledge & understanding of concepts learned during practical study assigned in
assignment # 2.
You should use transparencies and any other material for effective presentation. The
transparencies are not the presentation, but only a tool; the presentation is the
combination of the transparencies and your speech. Workshop presentation transparencies
should only be in typed format.
The transparencies should follow the following format:
1)
Title page
2)
An abstract (one page summary of the paper)
3)
Introduction to the issue (brief history & significance of issue assigned)
4)
Practical study of the organization (with respect to the issue)
5)
Data collection methods
6)
SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the
issue assigned
7)
Conclusion (one page brief covering important aspects of your report)
8)
Recommendations (specific recommendations relevant to issue assigned)
Make eye contact and react to the audience. Don't read from the transparencies or
from report, and don't look too much at the transparencies (occasional glances are
acceptable to help in recalling the topic to cover).
Assignment # 2 & workshop presentations are evaluated on the basis of theory & its
applicability. The weightage of each aspect would be:
Theory:
............................................................................60%
Applicability (practical study of the organization):................40%
UNIT No 2:
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UNIT No 9:
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