Financial Management BY Prasanna Chandra Financial Management BY Khan and Jain Financial Management BY I.M.Pandey

FINANCIAL MANAGEMENT BY PRASANNA CHANDRA
FINANCIAL MANAGEMENT BY KHAN AND JAIN
FINANCIAL MANAGEMENT BY I.M.PANDEY

FIXED ASSETS/PROPERTY PLA
PROPOSING TO INVEST IN A CEMENT FACTORY 300 CR MACHINERIES
FURNITURES
OFFICE
VEHICLES
WORKING CAPITAL=CURREN
PROFIT
PROJECT REPORT
OWN CAPITAL 60 CR
FINANCIAL INSTITUIONS 240 CR
BANKS OR OTHER FINL INSTITUTIONS
XED ASSETS/PROPERTY PLANT AND EQMT
MACHINERIES QUOTATIONS
QUOTATIONS
QUOTATIONS
QUOTATIONS
WORKING CAPITAL=CURRENT ASSETS MINUS CURRENT LIABILITIES

RAW MATERIALS
FINISHED GOODS
SUNDRY DEBTORS
CASH AND BANK
BILLS RECEIVABLE
ADVANCE TO SUPPLIERS
SHORT TERM INVESTMENTS
SALES BUDGET
ROJECT REPORT
HOW THE CASH WILL BE GENERATED IN BUSINESS
15 YEARS
TIME VALUE OF MONEY

PRESENT VALUE COST OF CAPITAL
START=ZEROTH YEAR FIRST SECOND

100 10% 110 10% 121
=100000X(100/110) 90909.09 100000

=100000X(100/110)^2 165289.3 181818.182 200000
=100000X(100/110)^3 300525.9 330578.512 363636.4
OPPORTUNITY COST= COST OF AN OPP LOST BANK INT=6%

15 YEARS INTEREST- EX: 15% 15% TAX 30%
WEIGHTED AVERAGE COST OF CAPITAL=(60*6+240*15)/300 13.2

THIRD
10% 133.10
400000
15% CAN BE CLAIMED AS AN EXPENDITURE
INCOME WILL BE LESSENED BY A SIMILAR SUM
TAX SAVINGS OF 30% OF 15%
EQUITY SHARES DEBENTURES
OWNERS (WITH VOTING RIGHTS IN ANNUAL LENDERS
GENERAL BODY MEETINGS)
TAKING HIGHER RISK LOWER RISK RISK AND RETURN GO TOGETHER
EXPECT HIGH RETURNS STANDARD RETURN

PAYMENT OF DIVIDEND MAY BE FROM NIL
TO VERY HIGH GROWTH PROSPECTS
NEED NOT BE RETURNED TO BE RETURNED

(BUY BACK OF SHARES HAS COME TO STAY) Just for info
DIVI ARE PAID OUT OF PROFIT AFTER TAX INT TO BE PAID OUT OF PROFIT BEFORE TAX
RIGHT SHARES / BONUS SHARES MAY BE NO SUCH FEATURE

ISSUED (PREMPTIVE RIGHT)
RIGHT SHARES PROFIT BEFORE INTEREST AND TA

YOU CAN SELL THE "RIGHT TO RECEIVE THE SHARES" INTEREST (PART AND PARCEL OF E
PROFIT BEFORE TAX = TAXABLE IN
TAX
PROFIT AFTER TAX
BANKS / FINANCIAL INSTITUTIONS ARE ALSO LENDERS

THEY PROVIDE FUNDS WITH MORE RESTRICTIVE COVENANTS REPAYMENT OF LOAN
STRICT UTILISATION OF FUNDS FOR THE PURPOSE FOR WHICH IT IS GIVEN

(REALLY A GOOD COVENANT TO AVOID UNPLANNED EXPENDITURE)
(IF FOUND THAT THE UTILISATION IS NOT AS PER SANCTION, THE LOAN MAY BE
RECALLED)
RESTRICTIONS IN BORROWING FROM OTHER SOURCES
RESTRICTIONS TO DEAL WITH OTHER BANKS WITHOUT PRIOR PERMISSION

(PREVALENT PRACTICES FOR HUGE BORROWERS: CONSORTIUM LENDING AND INDIAN BANK
MULTIPLE BANK LENDING) 400
(SEPARATE SECURITIES TO BE OFFERED OR IN THE CASE OF HIGH VALUE SECURITIES,
FIRST CHARGE / SECOND CHARGE ETC OR PARI PASSU CHARGE (equal footing) MAY BE
GIVEN) CHARGE REGISTRATION
TYPES OF LOANS - I: (PERIODICITY/PURPOSE POINT OF VIEW)

A BANKS GIVE FUNDS FOR SHORT TERM NEEDS (FOR WORKING CAPITAL)
BUT THESE FUNDS ARE PERMANENTLY GETTING UTILISED BY PERIODICAL
REVIEW AND RENEWAL
CASH CREDIT TERM RANGES FROM ONE YEAR TO

(AGAINST STOCK AND DEBTORS) THREE YEARS (FOR HUGE BORROWERS IT
IS ONLY ONE YEAR)
OVERDRAFT -DO-
(AGAINST OTHER SECURITIES LIKE IMMOVABLES OR DEPOSITS IN BANK)
WORKING CAPITAL TERM LOANS PURELY FIXED TERM
B BANKS GIVE TERM LOANS ALSO (WHICH SHALL BE FULLY REPAID AT ONE POINT OF TIME)
TERM LOAN HAS TO BE FULLY REPAID AS PER THE SCHEDULE GIVEN BY THE BANK
TYPES OF LOANS - II: (SECURITY POINT OF VIEW)
A SECURED LOANS (PRIMARY AND COLLATERAL SECURITIES)(COLLATERAL MEANS ADDITIONAL)

https://www.bing.com/search?q=collateral+means&form=ANNTH1&refig=b42c2d69bf5a4a62b63705a3d3f18f74&sp=-1&p
B UNSECURED LOANS OR CLEAN LOANS TEMPORARY OVERDRAFT (15 DAYS)
GIVEN FOR EMERGENCIES TO REPUTED CUSTOMERS
TYPE OF LOANS III: (FUNDS POINT OF VIEW) BONDS
A FUND BASED
B NON-FUND BASED BANK GAURANTEE / LETTER OF CREDIT
LETTER OF UNDERTAKING
TWO TYPES OF GUARANTEES
PRIVATE FINANCIAL INSTITUTIONS COST OF FUNDS IS GENERALLY MORE HIGH PROCESSING CHARGES
(MAY BE NON-BANKING FINL INSTITUTIONS OR OTHERS) HIGH RATE OF INTEREST
METHODOLOGY OF WORKING OF
HIDDEN COSTS (SUCH AS HEAVY S
REDUCING BALANCE / FLAT METHOD OF COMPUTING THE INTEREST
EXAMPLE: DATE OF LOAN

LOAN
PROCESSING CHARGES
FLAT RATE OF INTEREST
PERIOD OF LOAN(2 years) 24
MONTHLY INSTALLMENT
FIRST INSTALLMENT ON
LAST INSTALLMENT ON
FIND THE EFFECTIVE RATE OF INTEREST (WITH MONTHLY
COMPOUNDING)
REDUCING BALANCE METHOD IS A VERY IMPORTANT FEATURE YOU
SHOULD LOOK FOR ESPECIALLY WHEN BORROWING FROM PRIVATE
SOURCES
RISK AND RETURN GO TOGETHER (MUTUAL FUND ADVTS- BY WAY OF A NOTE IT WILL BE MENTIONED THAT "RISK ATTACHED"
https://economictimes.indiatimes.com/markets/stocks/news/share-buyback-what-it-means-for-retail-investors
PROFIT BEFORE INTEREST AND TAX 1000000

NTEREST (PART AND PARCEL OF EXPENSES) 200000 12% 30% 3.600%
PROFIT BEFORE TAX = TAXABLE INCOME 800000
30% 240000
PROFIT AFTER TAX 560000 THIS AMOUNT ONLY CAN BE USED FOR DISTRIBUTION OF DIVIDEND
DIVIDEND IS NOT AN EXPENSE OF THE BUSINESS
REPAYMENT OF LOAN PRINC MAY BE EQUATED AND SPREAD OVER THE TERM OF THE LOAN 1000000
INTEREST AS AND WHEN DUE 8333.333

18333.33
OR
EMI
NDIAN BANK SBI BOB

400 200
SB RESTRICTIONS REG NUMBER OF TRANSACTIONS
CA NO RESTRICTION REG NO. OF TRANSACTIONS
SB INT 2.70%
CA NO INT & THEY WILL ALSO IMPOSE SERVICE CHARGES
a62b63705a3d3f18f74&sp=-1&pq=collateral+means&sc=4-16&qs=n&sk=&cvid=b42c2d69bf5a4a62b63705a3d3f18f74
HIGH PROCESSING CHARGES

HIGH RATE OF INTEREST
METHODOLOGY OF WORKING OF INTEREST MAY ALSO BE DIFFERENT
HIDDEN COSTS (SUCH AS HEAVY SERVICE CHARGES)
LOAN REPAYT
2/1/2021 0 2/1/2021 100000 7000 93000 -2
100000 1 3/1/2021 1718 5000 89718 22.17%
2% 2000 2 4/1/2021 1658 5000 86376
10% 3 5/1/2021 1596 5000 82972
EMIs 20000 120000 5000 4 6/1/2021 1533 5000 79505
5000 5 7/1/2021 1469 5000 75974
2/1/2021 6 8/1/2021 1404 5000 72378
1/1/2023 7 9/1/2021 1337 5000 68715
TH MONTHLY 8 10/1/2021 1270 5000 64985
9 11/1/2021 1201 5000 61186
10 12/1/2021 1130 5000 57316
PORTANT FEATURE YOU 11 1/1/2022 1059 5000 53375
ROWING FROM PRIVATE 12 2/1/2022 986 5000 49361
13 3/1/2022 912 5000 45273
14 4/1/2022 836 5000 41109
15 5/1/2022 759 5000 36868
16 6/1/2022 681 5000 32549
17 7/1/2022 601 5000 28150
18 8/1/2022 520 5000 23670
19 9/1/2022 437 5000 19107
20 10/1/2022 353 5000 14460
21 11/1/2022 267 5000 9727
22 12/1/2022 180 5000 4907
23 1/1/2023 91 5000 -2
ATTACHED"
eans-for-retail-investors/articleshow/60877781.cms?from=mdr
RIBUTION OF DIVIDEND
10%
PRESENT VALUE FACTORS
100 1% 101 FIRST YR 25678 25423.7624

SECOND YR 40000 39211.842
THIRD YR 50000 48529.5074
SIMPLE INTEREST: PNR/100 (NOTE for personal information: EDUCATIONAL LOANS shall be comp
Check the Sanction Letter from the Bank regarding this)
COMPUND INTEREST : P(1+R/100)^N minus P 10000 10%
DEPOSIT MATURITY FORMULAS
EXAMPLE:
SIMPLE INTEREST= PNR /100 150000 200=100*(1+r/100)^7
(WITHOUT CONSIDERING INT ON INT)
P PRINCIP 100000 (1+r/100)^7=2
N PERIOD 10 YEARS (1+r/100)=2^(1/7)
R ROI 15
0.14286
COMPOUND INT
INT=P(1+R/100)^N MINUS P 1+r/100
404555.8
r/100
BANKS…. COMPUND IT QUARTERLY r
INT=P(1+R/100)^N MINUS P WHERE N=NUMBER OF YEARS
DEPOSIT 100000
INT 10 %
PERIOD 5 YEAR
100000 MINUS 100000 0
ILLUSTRATION:7 MATURITY VALUE INTEREST
YEARLY COMPOUNDING 161051 61051
HALF YEARLY COMPOUNDING 162889 62889
QUARTERLY COMPOUNDING 163862 63862
MONTHLY COMPOUNDING 164531 64531
DAILY COMPOUNDING 164861 64861
ILLUSTRATION:8 DOUBLING THE PRINCIPAL IN 7 YEARS

INT=P(1+R/100)^N MINUS P WHERE N=NUMBER OF YEARS
2P = P*(1+(R/100))^7
2 = (1+(R/100))^7
2^(1/7) = (1+(R/100))
1.10409 = (1+(R/100))
0.10409 = R/100
10.409 = R
ILLUSTRATION:3
0.649931 10000 6499.31
ILLUSTRATION 10:
100.00 2.5 102.50 110.381289
102.50 2.5625 105.06
105.06 2.626563 107.69
107.69 2.692227 110.38
ILLUSTRATION:4 Compounding Rs.12000 @ 12% for five years with monthly rests
12000 21800.360382769
Amount P deposited now will become P*(1+(8/400))^20 at int
rate of 8% compunded at quarterly rests.
We know the maturity value i.e., Rs.21800.36 for which the
principal sum can be expressed as follows, with P as the principal
21800.36 = P*(1+8/400)^20 power 20 is taken because there a

21800.36 = P*(1+.02)^20
21800.36 = P*1.485947
14671.02 = P
Meaning that, He may sell the Property if he gets atleast
Rs.14671/- now.
12000 21800.36 0.672971 14671.017589028
ILLUSTRATION 9:
4/1/2005 INITIAL INVT 800
9/30/2005 MATURITY VALUE AFTER 6 M @6% 824.18
COMPOUNDED QUARTERLY
ADDITIONAL INVESTMENT 175.82
DEPOSIT ON 01.10.2005 1000
MATURITY VALUE AFTER 6 M @6% 1030.38
COMPOUNDED MONTHLY
TOTAL INTEREST EARNED 54.56
AMORTISATION
IS A TECHNIQUE BY WHICH THE LOAN AMOUNT OR AN INTANGIBLE ASSET
IS REDUCED OVER A SET PERIOD OF TIME.
(GENERALLY, THIS CONCEPT IS USED FOR WRITING OFF OF INTANGIBLE ASSETS)
IN RELATION TO A LOAN, AMORTISATION SPREADS THE AMOUNT OF
LOAN OVER A PERIOD OF TIME.
EXAMPLE: LOAN 120000
PERIOD 60 M
REPAYMENT 2000 PM TOWARDS PRINCIPAL + INT AS AND WHEN DUE
OR
CAN BE REPAID IN EQUATED MONTHLY INSTALLMENTS
IN RELATION TO AN ASSET IT IS SIMILAR TO THE CONCEPT OF DEPRECIATION
INTEREST RATES - TERMS AS PER THE PRACTICE IN THE INDIAN BANKS
FIXED INTEREST LOANS AND FLEXI (FLOATING) INTEREST RATES (OPTION GIVEN EARLIER
ESPECIALLY FOR HOUSING LOANS)
PAST TERMINOLOGIES JUST FOR INFORMATION

INTEREST RATES ARE BASED ON THE FOLLOWING CONCEPTS:
PLR PLUS SPREAD PRIME LENDING RATE
SPREAD MEANS ADDITIONAL INT OVER AND ABOVE THE PLR ACCORDING TO THE RISK RATING OF THE BORROWER
PTLR PLUS SPREAD PRIME TERM LENDING RATE
BENCHMARK PLR
BASE RATE CONCEPT
EXAPMLE: BASE RATE + 2%
PRESENTLY USED TERMINOLOGY:
MCLR EXAMPLE: 1 year MCLR WITH RESET CLAUSE
THIS CONCEPT GIVES BOTH THE FIXED / FLEXI INTEREST RATES (RATHER IT IS
SEMI-VARIABLE IN NATURE)(WITHOUT ANY OPTION BEING GIVEN TO THE BORROWER)
The full form of MCLR is the Marginal Cost of Funds based Lending
Rate. MCLR is the minimum rate of interest with which a bank
can lend. MCLR is an internal standard linked to tenor.
RISK RATING SPREAD WILL BE ADDED TO THE MCLR
CREDIT RATING: SEARCH IN GOOGLE AND LEARN ABOUT THESE

CRISIL
ICRA
EQUATED REPAYMENT COMPUTATION:

EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1]
EQUATED ANNUAL INSTALLMENT (compounding done annually) 10000
EXAMPLE: 1.331
LOAN 100000 10% 0.331
PERIOD 3 YEARS 40211.48
INT % 10% p.a.
EAI 40211.4804
EMI 100000 36 MONTHS 0.83% 833.333333
3226.71872 1.34818184
EMI = [P x R x (1+R)^N]/ [ (1+R)^N-1] 0.34818184
833.333333 1.348182 0.348182 3226.72
3226.71872
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 2500

9.3563344925069
8.3563344925069
2799.1742374892
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 2500

EQI (application may be quarterly) 1.3448888242463
100000 0.3448888242463
3 years 9748.7126988338
10% p.a
100000 12 QTRS 2.50%
9748.7127
2500 9748.713
1.344889
0.344889
AMORTISATION:
EXCEL WORKING - JUST FOR INFORMATION ONLY
MONTHLY QUARTERLY
PRINCIPAL 10000 PRINCIPAL
RATE OF INTEREST 0.83% RATE OF INTEREST
TIME PERIOD 2 TIME PERIOD
₹ 461.45 ₹ 9,748.71
0 10000 10000
1 83.33 ₹ 461.45 9621.8807366248 =P*R(1+r)^N/(1+R)^N -1
2 80.18 461.4493 9240.6114732497
3 77.01 461.4493 8856.1722098745 3226.71871938
4 73.8 461.4493 8468.5229464993
5 70.57 461.4493 8077.6436831242
6 67.31 461.4493 7683.504419749
7 64.03 461.4493 7286.0851563739
8 60.72 461.4493 6885.3558929987
9 57.38 461.4493 6481.2866296235
10 54.01 461.4493 6073.8473662484
11 50.62 461.4493 5663.0181028732
12 47.19 461.4493 5248.758839498
13 43.74 461.4493 4831.0495761229
14 40.26 461.4493 4409.8603127477
15 36.75 461.4493 3985.1610493725
16 33.21 461.4493 3556.9217859974
17 29.64 461.4493 3125.1125226222
18 26.04 461.4493 2689.703259247
19 22.41 461.4493 2250.6639958719
20 18.76 461.4493 1807.9747324967
21 15.07 461.4493 1361.5954691215
22 11.35 461.4493 911.49620574637
23 7.6 461.4493 457.6469423712
24 3.81 461.4493 0.0076789960358
WHAT RATE OF INTEREST DEPOSIT WILL YIELD IF THE EFFECTIVE RATE IS EXPECTED AT 10% P.A. ?
ANNUITY CONCEPT
0 100000.0000 100000.0000 9.569%
1 833.3300 100833.3300
2 833.3300 101666.6600
3 833.3300 102499.9900
4 833.3300 103333.3200
5 833.3300 104166.6500
6 833.3300 104999.9800
7 833.3300 105833.3100
8 833.3300 106666.6400
9 833.3300 107499.9700
10 833.3300 108333.3000
11 833.3300 109166.6300
12 833.3300 109999.9600
0.99009900990099
0.98029604940692
0.97059014792765
and so on
CATIONAL LOANS shall be compounded from the date interest become due and payable.
ank regarding this)
1 YEAR BANKS 11038.12891
OTHER FINANCIAL INSTITUTIONS 11047.13067
00=100*(1+r/100)^7
1+r/100)^7=2
1+r/100)=2^(1/7)
1.10408951367381
0.10408951367381
10.4089513673812
ER OF YEARS
ER OF YEARS
check
200.000616668806
ower 20 is taken because there are 20 qtrs in 5 years
G OF THE BORROWER
YEAR Loan & Int Repayt Bal

0 100000.00 100000.00 10%
1 10000.00 40211.48 69788.52 10%
2 6978.85 40211.48 36555.89 10%
3 3655.59 40211.48 0.00 10%
0 100000 100000 10%
1 833.33 3226.72 97606.61
2 813.39 3226.72 95193.28
3 793.28 3226.72 92759.84
4 773.00 3226.72 90306.12 2.652099 penal interest if there is a dela
5 752.55 3226.72 87831.95
6 731.93 3226.72 85337.16
7 711.14 3226.72 82821.58
8 690.18 3226.72 80285.04
9 669.04 3226.72 77727.36
10 647.73 3226.72 75148.37
11 626.24 3226.72 72547.89
12 604.57 3226.72 69925.74
13 582.71 3226.72 67281.73
14 560.68 3226.72 64615.69
15 538.46 3226.72 61927.43
16 516.06 3226.72 59216.77
17 493.47 3226.72 56483.52
18 470.7 3226.72 53727.5
19 447.73 3226.72 50948.51
20 424.57 3226.72 48146.36
21 401.22 3226.72 45320.86
22 377.67 3226.72 42471.81
23 353.93 3226.72 39599.02
24 329.99 3226.72 36702.29
25 305.85 3226.72 33781.42
26 281.51 3226.72 30836.21
27 256.97 3226.72 27866.46
28 232.22 3226.72 24871.96
29 207.27 3226.72 21852.51
30 182.1 3226.72 18807.89
31 156.73 3226.72 15737.9
32 131.15 3226.72 12642.33
33 105.35 3226.72 9520.96
34 79.34 3226.72 6373.58
35 53.11 3226.72 3199.97
36 26.67 3226.72 0
2.50% 0 100000 100000.00 10%

1 100000.00
2 100000.00
3 2500.00 9748.71 92751.29
4 92751.29
5 92751.29
6 2318.78 9748.71 85321.36
7 85321.36
8 85321.36
9 2133.03 9748.71 77705.68
10 77705.68
11 77705.68
12 1942.64 9748.71 69899.61
13 69899.61
14 69899.61
15 1747.49 9748.71 61898.38
16 61898.38
17 61898.38
18 1547.46 9748.71 53697.13
19 53697.13
20 53697.13
21 1342.43 9748.71 45290.85
22 45290.85
23 45290.85
24 1132.27 9748.71 36674.41
25 36674.41
26 36674.41
27 916.86 9748.71 27842.55
28 27842.55
29 27842.55
30 696.06 9748.71 18789.90
31 18789.90
32 18789.90
33 469.75 9748.71 9510.94
34 9510.94
35 9510.94
36 237.77 9748.71 0.00
100000
2.50%
3
S EXPECTED AT 10% P.A. ?
penal interest if there is a delay of 15 days
JUST FOR YOUR INFORMATION
IF A COMPANY IS WOUND UP WHAT WILL

HAPPEN ? CONSIDER THE FOLLOWING
BALANCE SHEET AND ASSUME THAT THIS
COMPANY IS GOING TO BE WOUND UP.
Rs. In lacs
SHARES 10 FIXED ASSETS 6
PREF SHARES 8
RES & SURP -20 INVESTMENTS 1
SECURED DEB 3
CRS 5 STOCK 1
TAX PAYABLE 4 DRS 1
BANK 1
TOTAL 10 TOTAL 10
IF DURING THE WINDING UP THE FIXED
ASSETS REALIZE RS.20 LACS AND THE RS.1
LAC ONLY CAN BE REALIZED FROM STOCK
AND DEBTORS, THE REALIZED FUNDS SHALL
BE DISTRIBUTED AS UNDER:STOCK:
SALE OF FIXED ASSETS 20

STOCK AND DEBTORS 1
BANK BALANCE 1
TOTAL FUNDS AVALABLE 22
THE FUNDS SHALL BE DISTRIBUTED IN THE

FOLLOWING ORDER:
TAX PAYABLE 4
SECURED DEB 3
CREDITORS 5
REMAINING BALANCE OF RS.10 LACS SHALL

BE FIRST GIVEN TO THE PREF
SHAREHOLDERS I.E., RS.8 LACS.
THE EQUITY SHAREHOLDERS SHALL GET

ONLY RS.2 LACS
FUTURE VALUE OF AN ANNUITY:
1 Find the amount of an annuity if payment of Rs. 500 is made annually (starting from
the end of the first year) for 7 years at interest rate of 14% (a) simple
interest (b) compounded annually.
INT FOR
end of yr 1 500 6 yrs 420
2 500 5 yrs 350
3 500 4 yrs 280
4 500 3 yrs 210
5 500 2 yrs 140
6 500 1 yrs 70
7 500 0 yrs 0
3500 1470
AMOUNT OF ANNUITY OF Rs.500 @ 14% simple interest for 7 years=4970
Sum of digits= n*(n+1)/2 21

=500*14%*21 1470
(a) Simple Interest
P 500
N 21
I 1470 MATURITY VALUE 4970
(b)Compound Interest (Compounded annually)

For an annual payment of Rs.500, the accumulated value= 10.730492 X 500
These values for a Re.1 investment, you can refer to Annuity tables available in books:
Cumulative workings Annuity factor Compounding
Deposit Int Balance
end of t1 1 1.000000 1 2.194972624
end of t2 1 0.140000 2.140000 2 1.925414582
end of t3 1 0.299600 3.439600 3 1.68896016
end of t4 1 0.481544 4.921144 4 1.481544
end of t5 1 0.688960 6.610104 5 1.2996
end of t6 1 0.925415 8.535519 6 1.14
end of t7 1 1.194973 10.730492 7 1
10.73049137
=A *(((1+(R/100))^N)-1)/(R/100)
10.73049 350974.7013907
20000
2.1058482083442
0.12
350974.7013907
A ((1+R)^N)-1 R
500 1.5022687912871 0.14
5365.246
2 Rs. 200 is invested at the end of each month in an account paying

interest @ 6% per annum compounded monthly. What is the
amount of this annuity after the 10th payment? COMPOUNDED
end of 1 200 200.00 209.18
end of 2 200 1.00 401.00 208.14
end of 3 200 2.01 603.01 207.11
end of 4 200 3.02 806.02 206.08
end of 5 200 4.03 1010.05 205.05
end of 6 200 5.05 1215.10 204.03
end of 7 200 6.08 1421.18 203.02
end of 8 200 7.11 1628.28 202.01
end of 9 200 8.14 1836.42 201.00
end of 10 200 9.18 2045.61 200.00
2045.61
It is sufficient that either one of the workings should form part of
the answer.
3 If Mr.A opens a Recurring deposit account in a Bank today with Rs.5000 to be deposited on
monthly basis, find out the maturity value, the interest rate being 7.5% (Compounded
monthly) and the period of the deposit is 5 years.
RECURRING DEPOSIT COMPUTATION

ANSWER JUST FOR YOUR INFORMATION
MONTHLY COMPOUNDED QTRLY COMPOUNDED (BANKS/PO)
NOW ITSELF 0 5000 5000 0 5000 0.00
end of 1 5000 31.25 10031.25 1 5000
2 5000 62.69531 15093.95 2 5000
3 5000 94.33716 20188.28 3 5000 187.50
4 5000 126.1768 25314.46 4 5000
5 5000 158.2154 30472.67 5 5000
6 5000 190.4542 35663.13 6 5000 472.27
7 5000 222.8946 40886.02 7 5000
8 5000 255.5376 46141.56 8 5000
9 5000 288.3848 51429.95 9 5000 762.37
10 5000 321.4372 56751.38 10 5000
11 5000 354.6961 62106.08 11 5000
12 5000 388.163 67494.24 12 5000 1057.92
13 5000 421.839 72916.08 13 5000
14 5000 455.7255 78371.81 14 5000
15 5000 489.8238 83861.63 15 5000 1359.00
16 5000 524.1352 89385.77 16 5000
17 5000 558.661 94944.43 17 5000
18 5000 593.4027 100537.8 18 5000 1665.73
19 5000 628.3614 106166.2 19 5000
20 5000 663.5387 111829.7 20 5000
21 5000 698.9358 117528.7 21 5000 1978.21
22 5000 734.5542 123263.2 22 5000
23 5000 770.3951 129033.6 23 5000
24 5000 806.4601 134840.1 24 5000 2296.56
25 5000 842.7505 140682.8 25 5000
26 5000 879.2677 146562.1 26 5000
27 5000 916.0131 152478.1 27 5000 2620.87
28 5000 952.9882 158431.1 28 5000
29 5000 990.1943 164421.3 29 5000
30 5000 1027.633 170448.9 30 5000 2951.26
31 5000 1065.306 176514.2 31 5000
32 5000 1103.214 182617.4 32 5000
33 5000 1141.359 188758.8 33 5000 3287.84
34 5000 1179.743 194938.5 34 5000
35 5000 1218.366 201156.9 35 5000
36 5000 1257.231 207414.1 36 5000 3630.74
37 5000 1296.338 213710.5 37 5000
38 5000 1335.69 220046.2 38 5000
39 5000 1375.289 226421.5 39 5000 3980.07
40 5000 1415.134 232836.6 40 5000
41 5000 1455.229 239291.8 41 5000
42 5000 1495.574 245787.4 42 5000 4335.94
43 5000 1536.171 252323.6 43 5000
44 5000 1577.022 258900.6 44 5000
45 5000 1618.129 265518.7 45 5000 4698.49
46 5000 1659.492 272178.2 46 5000
47 5000 1701.114 278879.3 47 5000
48 5000 1742.996 285622.3 48 5000 5067.84
49 5000 1785.139 292407.5 49 5000
50 5000 1827.547 299235 50 5000
51 5000 1870.219 306105.2 51 5000 5444.11
52 5000 1913.158 313018.4 52 5000
53 5000 1956.365 319974.7 53 5000
54 5000 1999.842 326974.6 54 5000 5827.44
55 5000 2043.591 334018.2 55 5000
56 5000 2087.614 341105.8 56 5000
57 5000 2131.911 348237.7 57 5000 6217.95
58 5000 2176.486 355414.2 58 5000
59 5000 2221.339 362635.5 59 5000
60 2266.472 364902 60 6615.79
LOAN 100000
INT 10%
PERIOD 10 YEARS
EAI ???
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1]
LOAN 100000 10000

INT 10% 2.5937
PERIOD 10 YEARS 1.5937
EAI 16274.54
IF THE BORROWER IS GOING TO PAY AN ANNUAL INSTALLMENT OF

RS.16274.54 FROM THE END OF THE FIRST YEAR FOR A PERIOD OF TEN YEARS
WHAT WILL BE THE PRESENT VALUE OF THE FUTURE INFLOWS (INT=10%)?
16274.54 0.909091 14795.04
16274.54 0.826446 13450.03 ANNUITY
16274.54 0.751315 12227.3 INT
16274.54 0.683013 11115.73 PERIOD
16274.54 0.620921 10105.21
16274.54 0.564474 9186.553
16274.54 0.513158 8351.412
16274.54 0.466507 7592.193
16274.54 0.424098 6901.993
16274.54 0.385543 6274.539
100000
16274.54 6.144567 100000
1000000
5365.246
MPOUNDED
5000.00 5000 1 5000 31.25
10000.00 10000 1 10000 62.5
15000.00 15000 1 15000 93.75
20187.50 187.5
25187.50
30187.50
35659.77
40659.77
45659.77
51422.14
56422.14
61422.14
67480.05
72480.05
77480.05
83839.05
88839.05
93839.05
100504.78
105504.78
110504.78
117483.00
122483.00
127483.00
134779.56
139779.56
144779.56
152400.42
157400.42
162400.42
170351.68
175351.68
180351.68
188639.52
193639.52
198639.52
207270.27
212270.27
217270.27
226250.33
231250.33
236250.33
245586.28
250586.28
255586.28
265284.77
270284.77
275284.77
285352.61
290352.61
295352.61
305796.72
310796.72
315796.72
326624.16
331624.16
336624.16
347842.11
352842.11
357842.11
364457.90
16274.54 0.909091 14795.04
16274.539 0.826446 13450.03
16274.539 0.751315 12227.3
16274.539 0.683013 11115.73
16274.539 0.620921 10105.21
16274.539 0.564474 9186.553
16274.539 0.513158 8351.412
16274.539 0.466507 7592.193
16274.539 0.424098 6901.993
16274.539 0.385543 6274.539
162745.39 100000
16274.54
10%
10 YEARS
Year end 1 2 3 4 5 6 7
Int for 6 5 4 3 2 1 0
Comp Int 2.194973 1.925415 1.68896 1.481544 1.2996 1.14 1 10.73049
Simp Int 0.84 0.7 0.56 0.42 0.28 0.14 0 9.94

4970
1 120000 120000 60000 60000 60000 60000
0.909091 30000 27272.73 40000 36363.64 40000 36363.64
0.826446 30000 24793.39 100000 82644.63 40000 33057.85
0.751315 30000 22539.44 40000 30052.59
0.683013 30000 20490.4 40000 27320.54
215096 236381.4 129421.5

CUMULATIVE PV 3.169865 3.169865 1.735537
67856.5 74571.43 74571.43
FOR CAPITAL BUDGETING ANALYSIS, BASIC DATA REQUIRED IS
CASH FLOW
WHAT IS THE DIFFERENCE BETWEEN NET PROFIT AND CASH FLOW…???

REFER TO THE WORD FILE
1. ABC Ltd., is considering investing in a project that costs Rs.500000. The

estimated salvage value is zero and the tax rate is 35%. The Company uses
SLM depreciation and the proposed project has Net Profit before depreciation
& tax (PBDT) as follows:
Year PBDT
1 100000
2 100000
3 150000
4 150000
5 250000
Determine (i) the Payback period and (ii) Average rate of return.
(iii) Net Present Value (NPV) @ 15% (iv) Internal Rate of Return (IRR)
GIVEN TAXABLE INCOME Cash
Year PBDT DEPN INCOME TAX PAT Inflow CUM CF
1 100000 100000 0 0 0 100000 100000
2 100000 100000 0 0 0 100000 200000
3 150000 100000 50000 17500 32500 132500 332500
4 150000 100000 50000 17500 32500 132500 465000
5 250000 100000 150000 52500 97500 197500 662500
662500
Upto the year 4, Cum CF = 465000
Investment minus Cum CF up to the 4th year = 35000
CF in the fifth year = 197500
Proportionate time period required to get
a CF of Rs.35000 =35000*12m/197500 = 2.13
Therefore the Payback period (in years) =
4 years and 2.13 months
(ii) AVERAGE RATE OF RETURN
TOTAL OF "PAT" 162500
AVERAGE PAT 32500
AVERAGE INVESTMENT 250000 CAUTION: IF THE INVT IS VARIED , YOU HAVE TO TAKE T
AVERAGE RATE OF RETURN 13.000% THE BEGINNING OF EACH YEAR AND AVERAGE IT)
(iii) NPV: Disc

Year CF Factor @ DCF
15%
NOW 0 -500000 1 -500000
end of yr 1 100000 0.8696 86960
end of yr 2 100000 0.7561 75610
end of yr 3 132500 0.6575 87119
end of yr 4 132500 0.5718 75764
end of yr 5 197500 0.4972 98197
NPV -76351
Once you get a Negetive NPV, the project has to be rejected.
TUTORIAL NOTE: EXAMPLE FOR "PAYBACK PERIOD": TUTORIAL NOTE:

PROJ A PROJ A PROJ B
INITIAL OUTFLOW 500000 CUM CF 500000 CUM CF
CASH INFLOWS
1 400000 400000 100000 100000
2 300000 700000 200000 300000
3 200000 900000 300000 600000
4 100000 1000000 400000 1000000
5 50000 1050000 1000000 2000000
PAYBACK PERIOD 1 YR+4 M 2 YRS & 8 M
400000 300000
100000 200000
4M 8M
DISCOUNTED PAYBACK PERIOD: (TIME VALUE OF MONEY IS CONSIDERED HERE) DISCOUNTED PAYBACK
COST OF CAPITAL=10%=CUT OFF RATE=OPERTUNITY COST OF CAPITAL COST OF CAPITAL=10%
PROJ-A INITIAL OUTFLOW 500000 DISCOUNT DISCTD CUM PROJ-X
CASH INFLOWS FACTORS CASH I.F. DCF
1 400000 0.9091 363640 363640
2 300000 0.8264 247920 611560
3 200000 0.7513 150260 761820
4 100000 0.683 68300 830120
5 50000 0.6209 31045 861165
861165
UPTO THE FIRST YEAR END, THE DCF 363640
ADDL DCF REQUIRED TO MAKE IT 500000 136360
PERIOD APPXLY REQD FOR GETTING
BACK RS.136360 (in months) 6.600194
DISCOUNTED PAYBACK PERIOD ONE YR AND 6.6M
PROJ-B INITIAL OUTFLOW 500000 DISCOUNT DISCTD CUM PROJ-Y

1 100000 0.9091 90910 90910
2 200000 0.8264 165280 256190
3 300000 0.7513 225390 481580
4 400000 0.683 273200 754780
5 1000000 0.6209 620900 1375680
1375680
UPTO THE THIRD YEAR END, THE DCF 481580
BACK RS.18420 0.809078
DISCOUNTED PAYBACK PERIOD 3 YR AND 0.81 M
TUTORIAL NOTE: EXAMPLE FOR NPV

COMPUTE THE NPV TAKING THE COST OF CAPITAL @ 19%
PROJ-M DISCOUNT DISCTD
FACTORS CASH I.F.
INITIAL OUTFLOW -500000 1 -500000
CASH INFLOWS 1 100000 0.8403 84030
2 200000 0.7062 141240
3 300000 0.5934 178020
4 400000 0.4987 199480
5 1000000 0.419 419000
NET PRESENT VALUE 521770

SLM depreciation and the proposed project has cash flows before depreciation
& tax (CFBT) as follows:
Year CFBT
1 100000
2 100000
3 150000
4 150000
5 250000
2. XYZ Ltd., whose Cost of Capital is 10% is considering two mutually
exclusive projects X and Y, the details of which are as follows:
Project X Project Y
Investment Rs. 70000 70000
Cash Flow Year 1 10000 50000
2 20000 40000
3 30000 20000
4 45000 10000
5 60000 10000
Compute the NPV, Profitability Index and IRR for the two projects.
3.Royal Industries requires some machinery for a manufacturing process that

will be carried out for the next eight years. Two machines that meet the firm's
needs are available. The relevant data regarding these two machines are as
follows: Machine X Machine Y
Purchase cost Rs. 43600 72000
Annual Cash operating expenses 25000 25000
Salvage value as at the end of useful life 4000 8000
Useful life (in years) 4 8
The company makes use of SLM depreciation. It is estimated that the firm
would needRs.48000 to replace Machine X at the end of 4 years, if that
machine is selected.The other data applicable for Machine X above would
apply for the replacement modelas well.
Cost of Capital is 15% and tax rate is 35%. You are required to determine the
course of action that the firm should take.
TUTORIAL NOTE: INVESTMENT (IF WORKING CAPITAL IS NOT REFERRED TO, WILL HAVE TO BE CONSIDERED AS DEPRECIABLE I
DEPN=COST-SALVAGE VALUE/USEFUL LIFE PROFIT BEFORE DEPRECIATION XXXX

DEPN= (500000-0)/5 LESS: DEPRECIATION DDD
TAXABLE PROFIT TTTT
TAX (INCOME TAX) TAX
NET PROFIT NP
ADD BACK DEPRECIATION DDD
CASH INFLOW CF
PAT=PROFIT AFTER INCOME TAX
D , YOU HAVE TO TAKE THE INVT VALUE AT

AND AVERAGE IT)
TUTORIAL NOTE: EXAMPLE FOR "PAYBACK PERIOD": TUTORIAL NOTE:
PROJ X PROJ X PROJ Y PROJ Y
INITIAL OUTFLOW 800000 800000 INITIAL OUTFLOW
CASH INFLOWS CUM CF CUM CF CASH INFLOWS
1 500000 500000 100000 100000 end of yr 1
2 400000 900000 200000 300000 end of yr 2
3 300000 1200000 300000 600000 end of yr 3
4 200000 1400000 400000 1000000 end of yr 4
5 100000 1500000 500000 1500000 end of yr 5
PROJ X PAYBACK PERIOD 1 YR+9 M PROJ Y 3 YRS & 6 M
CUM CF UPTO THE 1ST YEAR 500000 CUM CF UPTO THE 3R 600000
CF REQD IN THE 2ND YEAR 300000 CF REQD IN THE 4TH 200000
PERIOD FURTHER REQD (MONTH 9 PERIOD FURTHER RE 6M
DISCOUNTED PAYBACK PERIOD: (TIME VALUE OF MONEY IS CONSIDERED HERE)
COST OF CAPITAL=10%=CUT OFF RATE=OPERTUNITY COST OF CAPITAL
INITIAL OUTFLOW 800000 DISCOUNT DISCTD CUM
1 500000 0.9091 454550 454550
2 400000 0.8264 330560 785110
3 300000 0.7513 225390 1010500
4 200000 0.683 136600 1147100
5 100000 0.6209 62090 1209190
1209190
UPTO THE 2ND YEAR END, THE DCF 785110 PROJ-B Compute NPV when the Cost of Capital
BACK RS.14890 0.792759 INITIAL OUTFLOW
DISCOUNTED PAYBACK PERIOD 2 YRs AND 0.79 M CASH INFLOWS
end of yr 1
INITIAL OUTFLOW 800000 DISCOUNT DISCTD CUM end of yr 2
CASH INFLOWS FACTORS CASH I.F. DCF end of yr 3
1 100000 0.9091 90910 90910 end of yr 4
2 200000 0.8264 165280 256190 end of yr 5
3 300000 0.7513 225390 481580
4 400000 0.683 273200 754780
5 500000 0.6209 310450 1065230
1065230
UPTO THE 4th YEAR END, THE DCF 754780
BACK RS.45220 1.747914
DISCOUNTED PAYBACK PERIOD 4 YRs AND 1.75 M
ONSIDERED AS DEPRECIABLE INVESTMENT OR FIXED ASSETS)
EXAMPLE FOR "NET PRESENT VALUE" @ 12%:
PROJ X FACTOR DCF PROJ Y FACTOR DCF
-800000 1 -800000 -800000 1 -800000
500000 0.8929 446450 100000 0.8929 89290

400000 0.7972 318880 200000 0.7972 159440
300000 0.7118 213540 300000 0.7118 213540
200000 0.6355 127100 400000 0.6355 254200
100000 0.5674 56740 500000 0.5674 283700
NPV 362710 200170
0TH YR END OF 1 END OF 2

100 10% 110 121
9090.909 909.0909 10000
24793.39 30000
2479.339
27272.73
2727.273
30000
NPV when the Cost of Capital is 17%
DISC DCF
FACTORS
-500000 1 -500000
100000 0.8547 85470

200000 0.7305 146100
300000 0.6244 187320
400000 0.5337 213480
1000000 0.4561 456100
NPV 588470
13%
PROJ-Y INITIAL OUTFLOW 800000 DISCOUNT DISCTD CUM
1 100000 0.885 88500 88500
2 200000 0.7831 156620 245120
3 300000 0.6931 207930 453050
4 400000 0.6133 245320 698370
5 500000 0.5428 271400 969770
969770
Up to the 4th yr the cum DCF 698370
For getting back Rs.800000 bal to be
recovered in the fifth year 101630
appx time reqd in the 5th year to get
back Rs.101630 4.493589
Discounted Payback Period 4 yrs & 4.49 months
SLM depreciation and the proposed project has Net Profit before depreciation
& tax (PBDT) as follows:
Year PBDT
1 100000
2 100000
3 150000
4 150000
5 250000
(iii) Net Present Value (NPV) @ 15% (iv) Internal Rate of Return (IRR)
Year Cash Disc Disctd

Flows Factors CF
Present 0 -500000 1.0000 -500000
end of yr 1 100000 0.8696 86960
end of yr 2 100000 0.7561 75610
end of yr 3 132500 0.6575 87119
end of yr 4 132500 0.5718 75764
end of yr 5 197500 0.4972 98197
NPV -76351
THIS PROJECT HAS TO BE REJECTED, AS THE NPV IS A NEGETIVE FIGURE.
PROBLEM:
In the following cases, compute the NPV of the various projects
PROJ A PROJ B PROJ C PROJ D
PROJECT COST (INVESTMENT) 2000000 1800000 800000 1500000
PERIOD OF THE PROJECT (IN YEARS) 6 6 6 6
COST OF CAPITAL 20% 10% 25% 30%
CASH INFLOW at the end of yr 1 500000 500000 500000 600000
2 600000 450000 500000 600000
3 700000 500000 500000 600000
4 800000 350000 500000 1000000
5 900000 500000 500000 1000000
6 1000000 1250000 500000 1000000
ANSWER: PROJECT A PROJECT B

PROJ A DF DCF PROJ B DF DCF
PROJECT COST (INVESTMENT) -2000000 1 -2000000 -1800000 1 -1800000
CASH INFLOW at the end of yr 1 500000 0.8333 416650 500000 0.9091 454550
2 600000 0.6944 416640 450000 0.8264 371880
3 700000 0.5787 405090 500000 0.7513 375650
4 800000 0.4823 385840 350000 0.683 239050
5 900000 0.4019 361710 500000 0.6209 310450
6 1000000 0.3349 334900 1250000 0.5645 705625
NPV 320830 657205
ANSWER: PROJECT C PROJECT D

25% DF DCF 30% DF DCF
PROJECT COST (INVESTMENT) -800000 1 -800000 -1500000 1 -1500000
CASH INFLOW at the end of yr 1 500000 0.8000 400000 600000 0.7692 461520
2 500000 0.6400 320000 600000 0.5917 355020
3 500000 0.5120 256000 600000 0.4552 273120
4 500000 0.4096 204800 1000000 0.3501 350100
5 500000 0.3277 163850 1000000 0.2693 269300
6 500000 0.2621 131050 1000000 0.2072 207200
NPV 675700 416260
NET PRESENT VALUE AND INTERNAL RATE OF RET
Qn: PROJECT COST RS.10000/- RATE OF TAX
LIFE OF THE PROJECT 5 YEARS METHOD OF DEPN
SALVAGE VALUE NIL
ANNUAL ESTIMATED PROFIT BEFORE DEPN AND TAX 4000
FROM THE ABOVE INFORMATION, COMPUTE THE CASH FLOWS, NPV at 10% AND INTERNAL RATE OF RE
PROFIT BEFORE DEPRECIATION AND TAX

Less: DEPRECIATION
Taxable Income
TAX 50%
PAT
CASH INFLOW
NPV DISC FACTORS DISC

YEAR CF at 10% CF
0 -10000 1 -10000.00
1 3000 0.9091 2727.30
2 3000 0.8264 2479.20
3 3000 0.7513 2253.90
4 3000 0.683 2049.00
5 3000 0.6209 1862.70
NPV 1372.10
IRR COMPUTATION:
YEAR CF at 15% CF
0 -10000 1 -10000.00
1 3000 0.8696 2608.80
2 3000 0.7561 2268.30
3 3000 0.6575 1972.50
4 3000 0.5718 1715.40
5 3000 0.4972 1491.60
NPV 56.60
TOTAL IMPACT ON NPV BY INCREASING THE % BY 1.

% INCREASE THAT WILL REDUCE THE NPV BY 56.60=
THEREFORE IRR=15% + 0.2425%
IRR COMPUTATION:
YEAR CF at 15% CF
0 -10000 1 -10000.00
1 3000 0.8696 2608.80
2 3000 0.7561 2268.30
3 3000 0.6575 1972.50
4 3000 0.5718 1715.40
5 3000 0.4972 1491.60
NPV 56.60
ONE % INCREASE BRINGS DOWN THE NPV BY=

WHAT SHOULD BE THE INCREASE IF THE REDUCTION IN NPV EXPECTED IS 56.60
THEREFORE THE IRR IS AT =15.2425%
PROBLEM COMPUTE THE IRR FROM THE FOLLOWING INFORMATION:

CASH FLOWS:
0th Year -500000
end of 1st year 250000
end of 2nd year 500000
end of 2nd year -150000
end of 3rd year 300000
FACTOR
25% 28%
0th Year -500000 1 -500000 1 -500000
1 250000 0.8 200000 0.7813 195325
2 350000 0.64 224000 0.6104 213640
3 300000 0.512 153600 0.4768 143040
77600 52005
34.877667%
0 -500000 1 -500000
1 250000 0.74141258686 185353.1
2 350000 0.54969262395 192392.4
3 300000 0.4075490303 122264.7
10.27419
HOME WORK:
A Finance Company gives the following offer. Find out the effective rate of Interest (monthly compounding-includin
charging from you if you borrow from them under this scheme:
Loan amount
Processing charges to be paid upfront
Period of Loan in months
Repayment to be made at the end of each month
12
1
-98000 1 -98000 -98000

1 5000 0.9901 4950.5 1 5000
2 5000 0.9803 4901.5 2 5000
3 5000 0.9706 4853 3 5000
4 5000 0.961 4805 4 5000
5 5000 0.9515 4757.5 5 5000
6 5000 0.942 4710 6 5000
7 5000 0.9327 4663.5 7 5000
8 5000 0.9235 4617.5 8 5000
9 5000 0.9143 4571.5 9 5000
10 5000 0.9053 4526.5 10 5000
11 5000 0.8963 4481.5 11 5000
12 5000 0.8874 4437 12 5000
13 5000 0.8787 4393.5 13 5000
14 5000 0.87 4350 14 5000
15 5000 0.8613 4306.5 15 5000
16 5000 0.8528 4264 16 5000
17 5000 0.8444 4222 17 5000
18 5000 0.836 4180 18 5000
19 5000 0.8277 4138.5 19 5000
20 5000 0.8195 4097.5 20 5000
21 5000 0.8114 4057 21 5000
22 5000 0.8034 4017 22 5000
23 5000 0.7954 3977 23 5000
24 5000 0.7876 3938 24 5000
8216
3% 3094
PROBLEM COMPUTE THE IRR FROM THE FOLLOWING CASH FLOWS:

CASH FLOWS:
0th Year -800000
end of 2nd year -150000
DISC DISC
FACTORS FACTORS
AT 25% AT 30%
0 -800000 1 -800000 1
1 500000 0.8000 400000 0.7692
2 350000 0.6400 224000 0.5917
3 600000 0.5120 307200 0.4552
NPV 131200 NPV
DISC
FACTORS
AT 35.5752%
1 -800000
0.7376 368800
0.5441 190435
0.4013 240780
NPV 15
PROBLEM:COMPUTE THE IRR FROM THE FOLLOWING CASH FLOWS:

CASH FLOWS:
0th Year -1000000 500000
end of 1st year 750000 250000
25 31
0 -1000000 1.0000 -1000000 1 -1000000

END OF 1 750000 0.8000 600000 0.7633587786 572519.08397
END OF 2 750000 0.6400 480000 0.5827166249 437037.46868
80000 9556.5526484
10933.963117
0.8740245917
IRR 31.8740

CASH FLOWS:
0th Year -2000000
end of 2nd year 500000 800000
end of 3rd year -200000 266666.66667
end of 3rd year 1500000 0.1212121212
15
0 -2000000 1 -2000000 0
1 1000000 0.869565 869565.21739 1
2 500000 0.756144 378071.83365 2
3 1300000 0.657516 854771.10216 3
102408.1532
PROBLEM:COMPUTE THE IRR FROM THE FOLLOWING CASH FLOWS:

CASH FLOWS:
0th Year -1200000 600000
end of 1st year 900000 300000
end of 2nd year 900000 -0.25
25 30
0 -1200000 1.0000 -1200000 0 -1200000 1.0000
1 900000 0.8000 720000 1 900000 0.7692
2 900000 0.6400 576000 2 900000 0.5917
96000
71147.928994
14229.585799

CASH FLOWS:
0th Year -1500000
end of 1st year 700000 600000
end of 2nd year 800000 200000
end of 2nd year -200000 0.1176470588
15% 18%
0 -1500000 1 -1500000 0 -1500000

1 700000 0.86956521739 608695.7 1 700000
2 600000 0.7561436673 453686.2 2 600000
3 800000 0.65751623243 526013 3 800000
88394.84
77359.143514
25786.381171

CASH FLOWS:
0th Year -2500000
end of 1st year 1000000 500000
end of 2nd year 1200000 166666.66667
end of 3rd year -200000 6.17%
Year end Cash flows 15% Year end Cash flows
Disc Factors Disctd CF
0 -2500000 1 -2500000 0 -2500000
1 1000000 0.86956521739 869565.2 1 1000000
2 1200000 0.7561436673 907372.4 2 1200000
3 800000 0.65751623243 526013 3 800000
-197049
INTERNAL RATE OF RETURN
50%
THOD OF DEPN SLM
at 10% AND INTERNAL RATE OF RETURN (IRR).
4000
2000
2000
1000
1000
3000
EXAMPLE ONLY:
YEAR CF at 12% CF
0 -10000 1 -10000.00
1 3000 0.8928571 2678.57
2 3000 0.7971939 2391.58
3 3000 0.7117802 2135.34 APPX WORKING:
4 3000 0.6355181 1906.55 278.8857
5 3000 0.5674269 1702.28 2.919937
NPV 814.33 557.77
TO CHECK WHETHER IRR IS 15.2425%

NPV DISC FACTORS DISC NPV
YEAR CF at 16% CF YEAR CF
0 -10000 1 -10000.00 0 -10000
1 3000 0.8621 2586.30 1 3000
2 3000 0.7432 2229.60 2 3000
3 3000 0.6407 1922.10 3 3000
4 3000 0.5523 1656.90 4 3000
5 3000 0.4761 1428.30 5 3000
NPV -176.80
CREASING THE % BY 1. 233.40

CE THE NPV BY 56.60= 0.2425
15.2425%
FOR ENSURING THAT THE IRR IS CORREC

NPV DISC FACTORS DISC NPV
YEAR CF at 16% CF YEAR CF
0 -10000 1 -10000.00 0 -10000
1 3000 0.8621 2586.30 1 3000
2 3000 0.7432 2229.60 2 3000
3 3000 0.6407 1922.10 3 3000
4 3000 0.5523 1656.90 4 3000
5 3000 0.4761 1428.30 5 3000
NPV -176.80
233.40
CTION IN NPV EXPECTED IS 56.60 0.242502
INCREASE REDUCTION
3% 25595
34% 35%
1 -500000 1 -500000
0.7463 186575 0.7407 185175
0.5569 194915 0.5487 192045
0.4156 124680 0.4064 121920
6170 -860
DIFFERENCE 7030
INC IN % 0.877667
THEREFORE IRR= 34.878%
est (monthly compounding-including the charges) they intend
100000
2000 120000 22000
24 11000
5000 0.1122449
15 20
1.25 1.6666667
1 -98000 -98000 1 -98000

0.9877 4938.5 1 5000 0.9836066 4918.033
0.9755 4877.5 2 5000 0.9674819 4837.409
0.9634 4817 3 5000 0.9516215 4758.108
0.9515 4757.5 4 5000 0.9360211 4680.106
0.9398 4699 5 5000 0.9206765 4603.383
0.9282 4641 6 5000 0.9055835 4527.917
0.9167 4583.5 7 5000 0.8907379 4453.689
0.9054 4527 8 5000 0.8761356 4380.678
0.8942 4471 9 5000 0.8617727 4308.864
0.8832 4416 10 5000 0.8476453 4238.226
0.8723 4361.5 11 5000 0.8337495 4168.747
0.8615 4307.5 12 5000 0.8200814 4100.407
0.8509 4254.5 13 5000 0.8066375 4033.187
0.8404 4202 14 5000 0.7934139 3967.07
0.83 4150 15 5000 0.7804071 3902.036
0.8197 4098.5 16 5000 0.7676136 3838.068
0.8096 4048 17 5000 0.7550297 3775.149
0.7996 3998 18 5000 0.7426522 3713.261
0.7898 3949 19 5000 0.7304776 3652.388
0.78 3900 20 5000 0.7185025 3592.513
0.7704 3852 21 5000 0.7067238 3533.619
0.7609 3804.5 22 5000 0.6951382 3475.691
0.7515 3757.5 23 5000 0.6837425 3418.712
0.7422 3711 24 5000 0.6725336 3362.668
5122 239.9283
DIFFERENCE IN NPV BECAUSE OF INCREASE OF 1%

ADDITIONAL RATE OF INT TO BE TAKEN=
THE IRR IS = 20.2562%
DISC DISC
FACTORS FACTORS
AT 35% AT 36%
-800000 1 -800000 1 -800000
384600 0.7407 370350 0.7353 367650
207095 0.5487 192045 0.5407 189245
273120 0.4064 243840 0.3975 238500
64815 NPV 6235 NPV -4605
66385 DIFFERENCE DUE TO CHANGE IN % 10840

13277 THEREFORE TO GET A REDUCTION OF
6235 IN NPV, WE HAVE TO ADD A %
OF 0.5751845
32
1 -1000000
0.757575757576 568181.81818
0.573921028466 430440.77135
-1377.410468
RANDOM 18 RANDOM 17
-2000000 1 -2000000 0 -2000000 1 -2000000 0

1000000 0.8474576271 847457.6271186 1 1000000 0.8547 854700 1
500000 0.7181844298 359092.2148808 2 500000 0.7305 365250 2
1300000 0.6086308727 791220.1344831 3 1300000 0.6244 811720 3
-2230.0235175 31670
DIFFERENCE FOR 1% INCREASE

THEREFORE INC IN % FOR
GETTING A REDUCTION IN NPV
OF Rs.31670
THEREFORE IRR=
32
-1200000 0 1 1.0000 1
692307.6923077 1 0.769231 0.7576 0.5827506
532544.3786982 2 0.591716 0.5739 0.3395982
24852.07100592 1.9223488
IRR IS 32% AS THE NPV IS VERY CLOSE TO ZERO.
19%
1 -1500000 0 -1500000 1 -1500000 0

0.847457627119 593220.33898 1 700000 0.8403361 588235.29 1
0.718184429762 430910.65786 2 600000 0.7061648 423698.89 2
0.608630872679 486904.69814 3 800000 0.5934158 474732.65 3
11035.694983 -13333.16
DIFFERENCE IN NPV FOR AN INCREASE OF 1% IN RATE 24368.858

% CHANGE REQUIRED FOR REDUCING THE NPV
BY RS.11035.69 0.4528606
10% Year end Cash flows 11% Year end

Disc Factors Disctd CF Disc FactorsDisctd CF
1 -2500000 0 -2500000 1 -2500000 0
0.909090909091 909090.90909 1 1000000 0.9009 900900 1
0.826446280992 991735.53719 2 1200000 0.8116 973920 2
0.751314800902 601051.84072 3 800000 0.7312 584960 3
1878.2870023 -40220
DIFFERENCE IN NPV FOR A 1% CHANGE IN INT RATE= 42098.287
THEREFORE REQD CHANGE IN % FOR BRINGING DOWN THE
NPV BY RS.1878.287= 0.0446167
APPX WORKING:
WHETHER IRR IS 15.2425%

DISC FACTORS DISC
at 15.2425% CF
1 -10000.00
0.8677 2603.10
0.753 2259.00
0.6534 1960.20
0.567 1701.00
0.492 1476.00
NPV -0.70
URING THAT THE IRR IS CORRECT…

DISC FACTORS DISC
at 15.2425% CF
1 -10000.00
0.8677 2603.10
0.753 2259.00
0.6534 1960.20
0.567 1701.00
0.492 1476.00
NPV -0.70
21 20.2562
1.75 1.688017
-98000 1 -98000 -98000 1 -98000

1 5000 0.982801 4914.005 1 5000 0.9834 4917
2 5000 0.965898 4829.489 2 5000 0.9671 4835.5
3 5000 0.949285 4746.426 3 5000 0.951 4755
4 5000 0.932959 4664.793 4 5000 0.9352 4676
5 5000 0.916913 4584.563 5 5000 0.9197 4598.5
6 5000 0.901143 4505.713 6 5000 0.9044 4522
7 5000 0.885644 4428.219 7 5000 0.8894 4447
8 5000 0.870412 4352.058 8 5000 0.8747 4373.5
9 5000 0.855441 4277.207 9 5000 0.8601 4300.5
10 5000 0.840729 4203.643 10 5000 0.8459 4229.5
11 5000 0.826269 4131.344 11 5000 0.8318 4159
12 5000 0.812058 4060.289 12 5000 0.818 4090
13 5000 0.798091 3990.456 13 5000 0.8044 4022
14 5000 0.784365 3921.824 14 5000 0.7911 3955.5
15 5000 0.770875 3854.373 15 5000 0.778 3890
16 5000 0.757616 3788.082 16 5000 0.765 3825
17 5000 0.744586 3722.93 17 5000 0.7523 3761.5
18 5000 0.73178 3658.9 18 5000 0.7399 3699.5
19 5000 0.719194 3595.97 19 5000 0.7276 3638
20 5000 0.706825 3534.123 20 5000 0.7155 3577.5
21 5000 0.694668 3473.339 21 5000 0.7036 3518
22 5000 0.68272 3413.601 22 5000 0.6919 3459.5
23 5000 0.670978 3354.891 23 5000 0.6804 3402
24 5000 0.659438 3297.19 24 5000 0.6692 3346
-696.5718 -2
BECAUSE OF INCREASE OF 1% 936.5

F INT TO BE TAKEN= 0.256197
RANDOM 18
-2000000 1 -2000000
1000000 0.8475 847500
500000 0.7182 359100
1300000 0.6086 791180
-2220
CE FOR 1% INCREASE 33890

RE INC IN % FOR
A REDUCTION IN NPV
0.9345
18.4529%
-1500000 1 -1500000
700000 0.8442 590940
600000 0.7127 427620
800000 0.6017 481360
-80
Cash flows 10.0446%

Disc Factors Disctd CF
-2500000 1 -2500000
1000000 0.9087 908700
1200000 0.8258 990960
800000 0.7504 600320
-20
JUST TO CONFIRM THE WORKING OF IRR THIS COMPUTAION IS GIVEN
Loan / Int epayment
1.85
0 100000 2000 98000 20.2562%
1 1654.26 5000 94654.26
2 1597.78 5000 91252.04
3 1540.35 5000 87792.39
4 1481.95 5000 84274.34
5 1422.56 5000 80696.9
6 1362.18 5000 77059.08
7 1300.77 5000 73359.85
8 1238.33 5000 69598.18
9 1174.83 5000 65773.01
10 1110.26 5000 61883.27
11 1044.6 5000 57927.87
12 977.83 5000 53905.7
13 909.94 5000 49815.64
14 840.9 5000 45656.54
15 770.69 5000 41427.23
16 699.3 5000 37126.53
17 626.7 5000 32753.23
18 552.88 5000 28306.11
19 477.81 5000 23783.92
20 401.48 5000 19185.4
21 323.85 5000 14509.25
22 244.92 5000 9754.17
23 164.65 5000 4918.82
24 83.03 5000 1.85
ONE MORE CONFIRMATION
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1]
P 98000
R 20.2562% 1654.26
1.6880%
1.49
0.49
EMI 5000.301
PROBLEM: Suppose we have three projects involving discounted cash outflow of Rs.5,50,000, Rs75,000 and
Rs.1,00,20,000
are Rs. 6,50,000,respectively. Suppose
Rs. 95,000 and further that
Rs 1,00,30,000 the sum of Calculate
respectively. discountedthecash inflows for these projects
desirability factors for the
three projects.
DESIRABILITY FACTOR OR PROFITABILITY INDEX

PROJ 1 PROJ 2 PROJ 3
DISCOUNTED CASH OUTFLOWS 550000 75000 10020000
DISCOUNTED CASH INFLOWS 650000 95000 10030000
NET PRESENT VALUE 100000 20000 10000
PROFITABILITY INDEX OR D F 1.182 1.267 1.001

50,000, Rs75,000 and
sh inflows for these projects
PROBLEM: Cash flows
Year 0 (C0) Year 1 (C1)
CASH FLOW
PROJECT A -100000 150000
PROJECT B -500000 625000
Compute the NPV @ 10% for the above projects and also the
IRR. Also compare the results from both the Capital budgeting
techniques.
NPV PROJECT A PROJECT B

FACTORS
0TH YEAR -100000 1 -100000 -500000 -500000
END OF THE 1ST YR 150000 0.9091 136365 625000 568187.5
NPV 36365 68187.5
IRR
PROJECT A PROJECT B
DF at 50% DCF DF at 25% DCF
YEAR 0 -100000 1 -100000 YEAR 0 -500000 1 -500000
YEAR 1 150000 0.666667 100000 YEAR 1 625000 0.8 500000
NPV 0 0
PROJECT B ONLY SHOULD BE ACCEPTED AS THE NPV IS MORE IN THAT PROJECT AND THE COST
OF CAPITAL HAS ALREADY BEEN CONSIDERED IN THE NPV MODEL, WHEREAS IRR DOES NOT
CONSIDER THE COST OF CAPITAL.
R= C1-C0
C0
R= C1 -1
C0
1+R= C1
C0
C0= C1
1+R
PROJ A PROJ B
Disc Dicted Dicted
Compute the IRR for the following project
40 2
Year ended Cash Flow 50 1229
160 60 1955
0 -25000 1 -25000 80 2477
1 100000 0.3846 38460 90 2423
2 -91000 0.1479 -13458.9 100 2250
1.1 110 1981
120 1650
140 872
160 1
EXAMPLES FOR MULTIPLE IRRs:

0 -1000 1 -1000 1 -1000
1 4000 0.6667 2666.8 0.40000 1600
2 -3750 0.4444 -1666.5 0.16000 -600
NPV 0.3 NPV 0
0.0009 300
0 -20000 1 -20000 1 -20000
1 100000 0.999991 99999.1 0.25 25000
2 -80000 0.999982 -79998.56 0.0625 -5000
0.539989 0
12.5672 159.73
0 -33400 1 -33400 1 -33400
1 101590 0.888358 90248.31 0.385015 39113.69
2 -75620 0.78918 -59677.82 0.148237 -11209.66
3 100000 0.701075 70107.49 0.057073 5707.339
4 40000 0.622806 24912.23 0.021974 878.9649
5 -100000 0.553275 -55327.45 0.00846 -846.0371
6 -75000 0.491506 -36862.95 0.003257 -244.3029
-0.194016 -0.001367
REFER TO PAGES 162/171 OF FM BY I.M. PANDEY

0 -1000 1 -1000 1 -1000
1 4000 0.6667 2666.8 0.40000 1600
2 -3750 0.4444 -1666.5 0.16000 -600 Example not relating to the problem
NPV 0.3 NPV 0 -100000 150000
0.666667
r = c1-c0 -100000 100000
c0
r = c1 - 1
c0
r+1 = c1
c0
c0 = c1
r+1
c1 - c0 = 0
r+1
Working in similar lines, the IRR equation is as follows:
c2 + c1 - c0 = 0
(r+1)^2 r+1
Taking "1/(r+1)" as "x", we get

c2 * x^2 + c1*x - c0 = 0
-3750 * x^2 + 4000*x - -1000 = 0
This is a quadratic equation of the form: ax2 + bx + c = 0, and we can solve it

by using the following formula:
x = -b (+/-) Root of ((b^2)-(4ac))

2a
Substituting the values,
x=-4000 (+/-) Root of ((4000^2)-(4*-3750*-1000))
2*-3750
x=-4000 (+/-) Root of ((16000000)-(15000000))

-7500
x=-4000 (+/-) Root of (1000000)

-7500
x=-4000 (+/-) (1000) x=4000 (+/-) 1000

-7500 7500
x=3000 or 5000
7500
x = 3000 or x = 5000
7500 7500
x=2/5 or x=2/3
We know that "1/(r+1)" = "x"
Therefore,
1 = 2 1 = 2
(r+1) 5 (r+1) 3
5 = 2(r+1) 3 = 2(r+1)
2r = 3 2r = 1
r = 3/2 r = 1/2
r = 150% r = 50%
Therefor the IRRs are 50% and 150%

not relating to the problem
50%
40 160 10 50 150
1 -25000 1 -25000 1 -1000 1 -1000 1

0.714286 71428.57 0.384615 38461.54 0.909091 3636.364 0.666667 2666.667 0.4
0.510204 -46428.57 0.147929 -13461.54 0.826446 -3099.174 0.444444 -1666.667 0.16
0 0 -462.8099 0
-1000
1600
-600
0
PROBLEM A firm wants to replace an old machine with a new machine. From the
following details decide whether to retain the old machine or replace it with the
new one:
Old machine New Machine
Present book value Rs.70000 Cost Price Rs.420000
Estimated rest of the life -10 Years Estimated life 10 years
Probable sale price Rs.105000 Salvage value Rs.20000
Annual Cost of operation Rs.600000 Annual Cost of operation Rs.420000
Tax rate 50% and Rate of discount 10%
PROBLEM
Royal Industries requires some machinery for a manufacturing process that Machine X
will be carried out for the next eight years. Two machines that meet the firm's
needs are available. The relevant data regarding these two machines are as
follows: Machine X Machine Y
Purchase cost Rs. 40000 72000
Annual Cash operating expenses 26000 25000
Salvage value as at the end of useful life 4000 8000
Useful life (in years) 4 8
The company makes use of SLM depreciation. It is estimated that the firm
would need Rs.48000 to replace Machine X at the end of 4 years, if that
machine is selected.The other data applicable for Machine X above would
apply for the replacement model as well.
Cost of Capital is 15% and tax rate is 35%. You are required to determine the
course of action that the firm should take.
MACHINE X Disc Disc CF
Factors
OTH YEAR COST OF THE MACHINE -40000 1 -40000 OTH YEAR
END OF YEAR 1 END OF YEAR 1

CASH OPERATING EXPENSES -26000
TAX SAVINGS 9100
DEPRECIATION 9000
TAX SAVINGS THEREON 3150 -13750 0.8696 -11957
END OF YEAR 2 -13750 0.7561 -10396.38 END OF YEAR 2

END OF YEAR 3 -13750 0.6575 -9040.625 END OF YEAR 3
END OF YEAR 4
END OF YEAR 4 END OF YEAR 5
CASH OPERATING EXPENSES -26000 END OF YEAR 6
TAX SAVINGS 9100 END OF YEAR 7
DEPRECIATION 9000
TAX SAVINGS THEREON 3150 END OF YEAR 8
COST OF NEW MACHINE -48000
SALVAGE VALUE OF OLD MACHI 4000 -57750 0.5718 -33021.45
END OF YEAR 5
TAX SAVINGS 9100
DEPRECIATION 11000
DEPRECIATION 3850 -13050 0.4972 -6488.46
END OF YEAR 6 -13050 0.4323 -5641.515

END OF YEAR 7 -13050 0.3759 -4905.495
END OF YEAR 8
TAX SAVINGS 9100
DEPRECIATION 11000
DEPRECIATION 3850
SALVAGE VALUE 4000 -9050 0.3269 -2958.445
NPV -124409
Initial
Projects PV of CF NPV PI
outlay
1 800000 1000000 200000 1.25 800000
2 1500000 1900000 400000 1.266667
3 700000 1140000 440000 1.628571 700000
4 1300000 2000000 700000 1.538462 1300000
200000 1.611 322200 0.567 182687.4
2982687
IF NEW MACHINE IS GOING TO BE PURCHASED, THE FOLLOWING THINGS WILL DISC
HAPPEN IMMEDIATELY (I.E. 0TH YEAR) FACTORS
0TH YEAR COST PRICE OF THE NEW MACHINE -420000
OLD MACHINE SALE VALUE 105000
PROFIT ON SALE OF OLD MACHIN 35000
TAX PAYABLE ON RS.35000 -17500
NET IMMEDIATE CASH FLOW -332500 -332500 1
AT THE END OF YEAR 1
DEPRECIATION ON OLD MACHINE 7000
DEPRECIATION ON NEW MACHINE 40000
EXCESS DEPN THAT CAN BE AVAILED 33000
TAX SAVINGS BECAUSE OF THE EXCESS DEPN 16500
SAVINGS IN COST OF OPERATION 180000
TAX PAYABLE THEREON -90000 90000 106500 0.9091
AT THE END OF YEAR 2 106500 0.8264
AT THE END OF YEAR 10 106500
AND THE SALVAGE VALUE WILL BE REALIZED 20000 126500 0.3855
NPV RS.
MACHINE Y Disc Disc CF
Factors
COST OF THE MACHINE -72000 1 -72000
END OF YEAR 1
TAX SAVINGS 8750
DEPRECIATION 8000
TAX SAVINGS THEREON 2800 -13450 0.8696 -11696.12
END OF YEAR 2 -13450 0.7561 -10169.55

END OF YEAR 3 -13450 0.6575 -8843.375
END OF YEAR 4 -13450 0.5718 -7690.71
END OF YEAR 5 -13450 0.4972 -6687.34
END OF YEAR 6 -13450 0.4323 -5814.435
END OF YEAR 7 -13450 0.3759 -5055.855
END OF YEAR 8
TAX SAVINGS 8750
DEPRECIATION 8000
TAX SAVINGS THEREON 2800
SALVAGE VALUE 8000 -5450 0.3269 -1781.605
NPV -129739
DISCTD CF
-332500
96819
88012
80013
72740
66126
60119
54656
49682
45167
48766
329599.3
Pentagan ltd., is evaluating a project that has the following Cash flow stream associated
4 with it:
Year Cash Flow
0 -120
1 -80
2 20
3 60
4 80
5 100
6 120
Cost of capital for Pentagon ltd., is 15%. Compute the MIRR.
Amounts are given in Lakhs of Rs.
(Page No.11.16 of Financial Management by Prasanna Chandra)
Year Cash Flow ** TV
2 20 4 34.9801
3 60 3 91.2525
4 80 2 105.8
5 100 1 115
6 120 0 120
TOTAL OF TV 467.0326
** COMPOUNDING TO BE DONE FOR
PV of the Cash Outflows

FACTORS
0 -120 1 -120
1 -80 0.8696 -69.568
-189.568
PV of the Cash Outflows = TV / (1+MIRR)^(No. of years)

189.568 = 467.0326 / (1+MIRR)^6
(1+MIRR)^6 = 2.463668
(1+MIRR) = 1.162154
MIRR = 16.22%
TUTORIAL NOTE:
IF YOU COMPUTE THE NPV AT THE MIRR RATE, YOU WILL NOT GET ZERO.
PV of the Cash Outflows Year Cash Flow Factors DCOF
0 -120 1 -120
1 -80 0.8696 -69.568
-189.568
Year Cash Flow Comp yrs C.Value

2 20 4 34.9801
3 60 3 91.2525
4 80 2 105.8000
5 100 1 115.0000
6 120 0 120.0000
467.0326
189.568 = 467.0326 /(1+MIRR)^6 TUTORIAL NOTE: LEFT HAND SIDE AVO

(1+MIRR)^6 = 2.463668
(1+MIRR) = 1.162154
MIRR = 16.215%
Year Cash Flow TV
2 20 34.9801
3 60 91.2525
4 80 105.8
5 100 115
6 120 120
467.0326
PV of the Cash Outflows

Year Cash Flow Factors DCOF
0 -120 1 -120
1 -80 0.8696 -69.568
-189.568
189.568 = 467.0326/ (1+MIRR)^6

(1+MIRR)^6 = 2.463668
(1+MIRR) = 1.162154
MIRR = 16.22%
Year Cash Flow
0 -120 1 -120
1 -80 0.860437 -68.83497
2 20 0.740352 14.80704
3 60 0.637026 38.22158
4 80 0.548121 43.84969
5 100 0.471624 47.16237
6 120 0.405803 48.69631
3.902018
L NOTE: LEFT HAND SIDE AVOID THE NEGETIVE SIGN

Venture Ltd. has Rs. 30 lakhs available for investment in capital projects. It has the option
of making investment in projects 1,2,3 or 4. Each project is entirely independent and has
a useful life of 5 years. The expected present value of cash flows from the projects is as
2 follows:
Initial
Projects PV of CIF
outlay
1 800000 1000000
2 1500000 1900000
3 700000 1140000
4 1300000 2000000
TOTAL 4300000
What are the projects or other investment, the Company should make using the available capital
of RS.30 lakhs and what will be the NPV if those projects and investment are opted for ? Assume
that the cost of capital is 12% and risk-free interest rate is 10% per annum. Given compounded
sum of Re. 1 at 10% in 5 years is Rs. 1.611 and discount factor of Re. 1 at 12% rate for 5 years is
0.567.
ANSWER:
Initial RANKING
Projects PV of CIF AS PER
outlay
NPV NPV PI
1 800000 1000000 200000 4 125%
2 1500000 1900000 400000 3 127%
3 700000 1140000 440000 2 163%
4 1300000 2000000 700000 1 154%
4300000
CAPITAL INVT 2800000 200000 1.611 322200 0.567
We have to opt for Projects 1, 3 and 4, investing RS.2800000/-. The remaining sum of Rs.200000 out of
the total availability of Rs.30 lacs, has to be invested at Risk free interest rate of 10%
The Resulting NPV due to the decision taken thus, is Rs.1522687
3 Alpha Limited is considering five capital projects for the years 2000,2001,2002 and
2003. The company is financed by equity entirely and its cost of capital is 12%. The
expected cash flows of the projects are as follows :
YEAR AND CASH FLOWS
PROJECT 2000 2001 2002 2003
A -70 35 35 20
B -40 -30 45 55
C -50 -60 70 80
D 0 -90 55 65
E -60 20 40 50
Note : Figures are in '000 and amounts with negative signs represent cash outflows.
All projects are divisible i.e. size of investment can be reduced, if necessary in
relation to availability of funds. None of the projects can be delayed or undertaken
more than once. Calculate which project Alpha Limited should undertake if the capital
available for investment is limited to Rs. 110000 in year 2000 and with no
limitation in subsequent years. For your analysis, use the following present value factors:
YEAR 2000 2001 2002 2003

DISCOUNTING FACTORS 1 0.89 0.8 0.71
PROJECT A B C E
CF DF DCF DF DCF DF DCF DF
2000 -70 1.00 -70.00 -40 -40.00 -50 -50.00 -60
2001 35 0.89 31.15 -30 -26.70 -60 -53.40 20
2002 35 0.80 28.00 45 36.00 70 56.00 40
2003 20 0.71 14.20 55 39.05 80 56.80 50
PI:
DISC C OUTFLOW 70.00 66.70 103.40
DISC C INFLOW 73.35 75.05 112.80
PI 105% 113% 109%
PROFITABILITY RANKS 4 2 3
CAPITAL ALLOCATION 40000 10000
A B C
PROJECT D.FACT D.C.F. D.C.F. D.C.F.
2000 -70 1 -70 -40 -40 -50 -50
2001 35 0.89 31.15 -30 -26.7 -60 -53.4
2002 35 0.8 28 45 36 70 56
2003 20 0.71 14.2 55 39.05 80 56.8
DISC C OUTFLOWS 70 66.7 103.4
DISC C INFLOWS 73.35 75.05 112.8
PI 104.79% 112.52% 109.09%

(BALANCE)
A
PROJECT A D Factors DCF B C
2000 -70 1 -70.000 -40 -40.000 -50 -50.000
2001 35 0.89 31.150 -30 -26.700 -60 -53.400
2002 35 0.8 28.000 45 36.000 70 56.000
2003 20 0.71 14.200 55 39.050 80 56.800
DISC C INFLOWS 73.350 75.050 112.800
DISC C OUTFLOWS 70.000 66.700 103.400
PI 104.79% 112.52% 109.09%

NPV FOR
RANKING SELECTED
AS PER PI INVTS
4 200000
3
1 440000
2 700000
182687
1522687
sum of Rs.200000 out of
E D
DCF
-60.00 0
17.80 -90
32.00 55
35.50 65
60.00
85.30
142%
60000
E
D.C.F. D
-60 -60 0
20 17.8 -90
40 32 55
50 35.5 65
60
85.3
142.17%
60000
(BALANCE)
E D
-60 -60 0
20 17.8 -90
40 32 55
50 35.5 65
85.300
60.000
142.17%
60000
PROJECT D
0
-90
55
65
PROJECT D PROJECT E
0.00 -60 0.00

0.00 20 0.00
0.00 40 0.00
0.00 50 0.00
0.00 0.00
0.00 0.00
#DIV/0! #DIV/0!
2 1
0.00 0.00
HOW CHITS OPERATE ? - FOR YOUR INFORMATION ONLY
REGISTERED CHITS
MUTUAL ASSOCAITION CHITS
START A CHIT OF RS.200000 WITH 20 MEMBERS
EACH WILL CONTRIBUTE RS.10000 FOR 20 MONTHS

COMMN AUCTION
FIRST CONTRIBUTION 200000 10000 190000
SECOND CONTN 160000 10000 190000

2000 REDUCTION WILL BE CALLED CHIT DIVIDEND
THIRD CONTN 165000
and so on
MR.A EXCESS
LOWEST BIDDER 150000 40000 WILL BE SHARED BY ALL 20 PERSONS
MR.B
LOWEST BIDDER 155000 35000 WILL BE SHARED BY ALL 20 PERSONS
ED CHIT DIVIDEND
CAUTION:
POINTS TO BE NOTED IN THE EXAMS:
WHILE SCANNING BE CAREFUL THAT THE LETTERS ARE LEGIBLE. YOU HAVE TO
PRACTICE IN ADVANCE, HOW TO SCAN PROPERLY ?
SCANNED PICURES SHOULD GIVE A CLEAR AND BRIGHT VIEW OR ELSE ANY
EXAMINER SHALL GET UNNECESSARILY IRRITATED..
IN THE SCANNED PICTURES YOUR OWN SHADOW IS SPOILING THE PICTURE. YOU
SHOULD SEE THAT THE LIGHT IS GOOD AND BEFORE YOU WHEN YOU SCAN IT.
SCANNED ANSWERS CONTAIN UNNECESSARY THINGS KEPT AROUND THE ANSWER

SHEET. YOU SHOULD FOCUS PROPERLY AND SCAN THE ANSWER SHEET ALONE.
ONE OF THE STUDENTS HAS SCANNED THE ANSWERS WITH LEFT AND RIGHT SIDE
MARGINS LEFT OUT AND THE ANSWERS WERE NOT VISIBLE.
WRITE IN BLACK. DON’T USE DULL BLUE COLOUR INK AND IF USED IT GREATLY
AFFECTS THE VISIBILITY. ALSO USE BRIGHT / WHITE PAPER SO THAT THE VISIBILITY
OF THE ANSWERS IS INCREASED.
HINTS AND WORKINGS WITHOUT GIVIN
1 WHEREVER ALTERNATIVE WORKINGS A
A WRITE A SHORT NOTE ON THE FOLLOWING:
Financial Management Meaning
Other general features
Effective Utilization of funds

Expected to talk about
Short term investments
Dead capital
Over investment in anything
B WRITE A SHORT NOTE ON THE FOLLOWING:

Procurement of Funds methods to procure funds
own capital/ borrowed capit
shares-equity / preference sh
types of preference shares- g
Debentures
Banks / Financial institutions
Amortization
Intangibles
Reduction in value of the loa
simple examples
2A a. From the following information, Compute the EMI:

Loan 100000
Period of loan 15 years
Rate of Interest 15%
b. Compute the Annuity value for the following annual investment:

Investment at the end of the year Rs.10000
Period of Investment 10 years
B a. From the following information, Compute the EMI:

Loan 200000
3A A project is going to be started with an initial investment of Rs.100000/- The Profit

before Depreciation and Tax for the next 4 years are furnished hereunder. The
project which is going to have a life of 4 years has a salvage value of Rs.NIL. The
Depreciation is going to be computed on Straight Line Method and the tax rate is
40%. You are required to compute the Cash flow, the NPV at 18% and the IRR for
the above project:
End of year 1 60000
End of year 2 70000
End of year 3 80000
End of year 4 90000
B A project is going to be started with an initial investment of Rs.500000/- The Profit

the above project:
End of year 1 125000
D WORKINGS WITHOUT GIVING A DETAILED ANSWER
ER ALTERNATIVE WORKINGS ARE GIVEN, ONE IS SUFFICIENT IN THE EXAM
eral features
to talk about
Short term investments
Dead capital
Over investment in anything including stock
methods to procure funds

own capital/ borrowed capital
shares-equity / preference shares
types of preference shares- general mention
Debentures
Banks / Financial institutions
Intangibles
Reduction in value of the loans by repayment
simple examples
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 1250

=[100000 x 15% x (1+.15)^180]/ [ ((1+.15)^180)-1] 9.356334
8.356334
1399.587
9 8 7 6 5 4 3 2 1
10000 10000 10000 10000 10000 10000 10000 10000 10000
175487.4 27730.78757 24759.63 22106.81 19738.23 17623.42 15735.19 14049.28 12544 11200
'=A *(((1+(R/100))^N)-1)/(R/100) 10000

=20000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
175487.3507 0.12
175487.4
EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 2500

=[200000 x 15% x (1+.15)^180]/ [ ((1+.15)^180)-1] 9.356334
8.356334
2799.174
9 8 7 6 5 4 3 2 1
20000 20000 20000 20000 20000 20000 20000 20000 20000
350974.7 55461.57515 49519.26 44213.63 39476.45 35246.83 31470.39 28098.56 25088 22400
'=A *(((1+(R/100))^N)-1)/(R/100) 20000

=20000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
350974.7014 0.12
350974.7
18 38
100000 60% -100000 1 -100000 1
1 60000 25000 35000 21000 46000 0.8475 38985 0.7246
2 70000 25000 45000 27000 52000 0.7182 37346.4 0.5251
3 80000 25000 55000 33000 58000 0.6086 35298.8 0.3805
4 90000 25000 65000 39000 64000 0.5158 33011.2 0.2757
44641.4
EXCEL FORMULA IRR 38.2184%
12 17
500000 60% -500000 1 -500000 1
1 125000 125000 0 0 125000 0.8929 111612.5 0.8547
2 175000 125000 50000 30000 155000 0.7972 123566 0.7305
3 300000 125000 175000 105000 230000 0.7118 163714 0.6244
4 350000 125000 225000 135000 260000 0.6355 165230 0.5337
64122.5

0
1
2
3
4
0 5
10000 6
10000 7
8
9
10
11
12
13
14
15
16
17
0 18
20000 19
20000 20
21
22
23
24
25
26
27
28
29
18 44641.4 30
39 38.2194 38 350.6 31
-100000 1 -100000 1 -100000 39 -1247.6 32
33331.6 0.7194 33092.4 0.7235 33281 33
27305.2 0.5176 26915.2 0.5234 27216.8 1598.2 34
22069 0.3724 21599.2 0.3787 21964.6 0.2194 35
17644.8 0.2679 17145.6 0.274 17536 36
350.6 -1247.6 -1.6 IRR 38.2194 37
38
39
40
12 64122.5 41
18 17.2198 17 2439 42
-500000 1 -500000 1 -500000 18 -8655.5 43
106837.5 0.8475 105937.5 0.8531 106637.5 44
113227.5 0.7182 111321 0.7278 112809 11094.5 45
143612 0.6086 139978 0.6209 142807 0.2198 46
138762 0.5158 134108 0.5297 137722 47
2439 -8655.5 -24.5 IRR 17.2198 48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
EMI-CHECKING 0.118626 EMI-CHECKING -0.122748
100000 100000 0 200000 200000
1250.00 1399.59 99850.41 1 2500.00 2799.17 199700.8
1248.13 1399.59 99698.96 2 2496.26 2799.17 199397.9
1246.24 1399.59 99545.61 3 2492.47 2799.17 199091.2
1244.32 1399.59 99390.34 4 2488.64 2799.17 198780.7
1242.38 1399.59 99233.13 5 2484.76 2799.17 198466.3
1240.41 1399.59 99073.96 6 2480.83 2799.17 198147.9
1238.42 1399.59 98912.79 7 2476.85 2799.17 197825.6
1236.41 1399.59 98749.61 8 2472.82 2799.17 197499.2
1234.37 1399.59 98584.4 9 2468.74 2799.17 197168.8
1232.30 1399.59 98417.11 10 2464.61 2799.17 196834.2
1230.21 1399.59 98247.73 11 2460.43 2799.17 196495.5
1228.10 1399.59 98076.24 12 2456.19 2799.17 196152.5
1225.95 1399.59 97902.61 13 2451.91 2799.17 195805.2
1223.78 1399.59 97726.8 14 2447.57 2799.17 195453.6
1221.59 1399.59 97548.8 15 2443.17 2799.17 195097.6
1219.36 1399.59 97368.58 16 2438.72 2799.17 194737.2
1217.11 1399.59 97186.1 17 2434.21 2799.17 194372.2
1214.83 1399.59 97001.34 18 2429.65 2799.17 194002.7
1212.52 1399.59 96814.27 19 2425.03 2799.17 193628.5
1210.18 1399.59 96624.87 20 2420.36 2799.17 193249.7
1207.81 1399.59 96433.09 21 2415.62 2799.17 192866.2
1205.41 1399.59 96238.91 22 2410.83 2799.17 192477.8
1202.99 1399.59 96042.32 23 2405.97 2799.17 192084.6
1200.53 1399.59 95843.26 24 2401.06 2799.17 191686.5
1198.04 1399.59 95641.71 25 2396.08 2799.17 191283.4
1195.52 1399.59 95437.64 26 2391.04 2799.17 190875.3
1192.97 1399.59 95231.03 27 2385.94 2799.17 190462.1
1190.39 1399.59 95021.83 28 2380.78 2799.17 190043.7
1187.77 1399.59 94810.01 29 2375.55 2799.17 189620
1185.13 1399.59 94595.56 30 2370.25 2799.17 189191.1
1182.44 1399.59 94378.41 31 2364.89 2799.17 188756.8
1179.73 1399.59 94158.55 32 2359.46 2799.17 188317.1
1176.98 1399.59 93935.95 33 2353.96 2799.17 187871.9
1174.20 1399.59 93710.56 34 2348.40 2799.17 187421.1
1171.38 1399.59 93482.35 35 2342.76 2799.17 186964.7
1168.53 1399.59 93251.29 36 2337.06 2799.17 186502.6
1165.64 1399.59 93017.35 37 2331.28 2799.17 186034.7
1162.72 1399.59 92780.48 38 2325.43 2799.17 185561
1159.76 1399.59 92540.65 39 2319.51 2799.17 185081.3
1156.76 1399.59 92297.83 40 2313.52 2799.17 184595.6
1153.72 1399.59 92051.96 41 2307.45 2799.17 184103.9
1150.65 1399.59 91803.02 42 2301.30 2799.17 183606
1147.54 1399.59 91550.97 43 2295.08 2799.17 183101.9
1144.39 1399.59 91295.78 44 2288.77 2799.17 182591.5
1141.20 1399.59 91037.39 45 2282.39 2799.17 182074.8
1137.97 1399.59 90775.77 46 2275.93 2799.17 181551.5
1134.70 1399.59 90510.89 47 2269.39 2799.17 181021.7
1131.39 1399.59 90242.69 48 2262.77 2799.17 180485.3
1128.03 1399.59 89971.13 49 2256.07 2799.17 179942.2
1124.64 1399.59 89696.18 50 2249.28 2799.17 179392.3
1121.20 1399.59 89417.8 51 2242.40 2799.17 178835.6
1117.72 1399.59 89135.93 52 2235.44 2799.17 178271.8
1114.20 1399.59 88850.54 53 2228.40 2799.17 177701
1110.63 1399.59 88561.59 54 2221.26 2799.17 177123.1
1107.02 1399.59 88269.02 55 2214.04 2799.17 176538
1103.36 1399.59 87972.79 56 2206.72 2799.17 175945.5
1099.66 1399.59 87672.86 57 2199.32 2799.17 175345.7
1095.91 1399.59 87369.19 58 2191.82 2799.17 174738.3
1092.11 1399.59 87061.71 59 2184.23 2799.17 174123.4
1088.27 1399.59 86750.39 60 2176.54 2799.17 173500.8
1084.38 1399.59 86435.19 61 2168.76 2799.17 172870.3
1080.44 1399.59 86116.04 62 2160.88 2799.17 172232
1076.45 1399.59 85792.9 63 2152.90 2799.17 171585.8
1072.41 1399.59 85465.72 64 2144.82 2799.17 170931.4
1068.32 1399.59 85134.46 65 2136.64 2799.17 170268.9
1064.18 1399.59 84799.05 66 2128.36 2799.17 169598.1
1059.99 1399.59 84459.45 67 2119.98 2799.17 168918.9
1055.74 1399.59 84115.61 68 2111.49 2799.17 168231.2
1051.45 1399.59 83767.47 69 2102.89 2799.17 167534.9
1047.09 1399.59 83414.97 70 2094.19 2799.17 166829.9
1042.69 1399.59 83058.07 71 2085.37 2799.17 166116.1
1038.23 1399.59 82696.72 72 2076.45 2799.17 165393.4
1033.71 1399.59 82330.84 73 2067.42 2799.17 164661.6
1029.14 1399.59 81960.39 74 2058.27 2799.17 163920.7
1024.50 1399.59 81585.31 75 2049.01 2799.17 163170.6
1019.82 1399.59 81205.54 76 2039.63 2799.17 162411
1015.07 1399.59 80821.02 77 2030.14 2799.17 161642
1010.26 1399.59 80431.69 78 2020.52 2799.17 160863.3
1005.40 1399.59 80037.51 79 2010.79 2799.17 160075
1000.47 1399.59 79638.39 80 2000.94 2799.17 159276.7
995.48 1399.59 79234.28 81 1990.96 2799.17 158468.5
990.43 1399.59 78825.13 82 1980.86 2799.17 157650.2
985.31 1399.59 78410.85 83 1970.63 2799.17 156821.6
980.14 1399.59 77991.4 84 1960.27 2799.17 155982.7
974.89 1399.59 77566.7 85 1949.78 2799.17 155133.3
969.58 1399.59 77136.7 86 1939.17 2799.17 154273.3
964.21 1399.59 76701.32 87 1928.42 2799.17 153402.6
958.77 1399.59 76260.5 88 1917.53 2799.17 152520.9
953.26 1399.59 75814.18 89 1906.51 2799.17 151628.3
947.68 1399.59 75362.27 90 1895.35 2799.17 150724.5
942.03 1399.59 74904.71 91 1884.06 2799.17 149809.3
936.31 1399.59 74441.44 92 1872.62 2799.17 148882.8
930.52 1399.59 73972.37 93 1861.03 2799.17 147944.6
924.65 1399.59 73497.43 94 1849.31 2799.17 146994.8
918.72 1399.59 73016.56 95 1837.43 2799.17 146033
912.71 1399.59 72529.69 96 1825.41 2799.17 145059.3
906.62 1399.59 72036.72 97 1813.24 2799.17 144073.3
900.46 1399.59 71537.59 98 1800.92 2799.17 143075.1
894.22 1399.59 71032.23 99 1788.44 2799.17 142064.4
887.90 1399.59 70520.54 100 1775.80 2799.17 141041
881.51 1399.59 70002.46 101 1763.01 2799.17 140004.8
875.03 1399.59 69477.9 102 1750.06 2799.17 138955.7
868.47 1399.59 68946.79 103 1736.95 2799.17 137893.5
861.83 1399.59 68409.03 104 1723.67 2799.17 136818
855.11 1399.59 67864.55 105 1710.22 2799.17 135729
848.31 1399.59 67313.28 106 1696.61 2799.17 134626.5
841.42 1399.59 66755.11 107 1682.83 2799.17 133510.1
834.44 1399.59 66189.96 108 1668.88 2799.17 132379.8
827.37 1399.59 65617.74 109 1654.75 2799.17 131235.4
820.22 1399.59 65038.38 110 1640.44 2799.17 130076.7
812.98 1399.59 64451.77 111 1625.96 2799.17 128903.4
805.65 1399.59 63857.83 112 1611.29 2799.17 127715.6
798.22 1399.59 63256.47 113 1596.44 2799.17 126512.8
790.71 1399.59 62647.59 114 1581.41 2799.17 125295.1
783.09 1399.59 62031.09 115 1566.19 2799.17 124062.1
775.39 1399.59 61406.89 116 1550.78 2799.17 122813.7
767.59 1399.59 60774.9 117 1535.17 2799.17 121549.7
759.69 1399.59 60135 118 1519.37 2799.17 120269.9
751.69 1399.59 59487.1 119 1503.37 2799.17 118974.1
743.59 1399.59 58831.11 120 1487.18 2799.17 117662.1
735.39 1399.59 58166.91 121 1470.78 2799.17 116333.7
727.09 1399.59 57494.41 122 1454.17 2799.17 114988.7
718.68 1399.59 56813.5 123 1437.36 2799.17 113626.9
710.17 1399.59 56124.09 124 1420.34 2799.17 112248
701.55 1399.59 55426.05 125 1403.10 2799.17 110852
692.83 1399.59 54719.29 126 1385.65 2799.17 109438.4
683.99 1399.59 54003.7 127 1367.98 2799.17 108007.2
675.05 1399.59 53279.16 128 1350.09 2799.17 106558.1
665.99 1399.59 52545.56 129 1331.98 2799.17 105091
656.82 1399.59 51802.79 130 1313.64 2799.17 103605.4
647.53 1399.59 51050.74 131 1295.07 2799.17 102101.3
638.13 1399.59 50289.28 132 1276.27 2799.17 100578.4
628.62 1399.59 49518.31 133 1257.23 2799.17 99036.47
618.98 1399.59 48737.71 134 1237.96 2799.17 97475.25
609.22 1399.59 47947.34 135 1218.44 2799.17 95894.52
599.34 1399.59 47147.09 136 1198.68 2799.17 94294.02
589.34 1399.59 46336.84 137 1178.68 2799.17 92673.53
579.21 1399.59 45516.47 138 1158.42 2799.17 91032.78
568.96 1399.59 44685.84 139 1137.91 2799.17 89371.51
558.57 1399.59 43844.82 140 1117.14 2799.17 87689.48
548.06 1399.59 42993.3 141 1096.12 2799.17 85986.42
537.42 1399.59 42131.13 142 1074.83 2799.17 84262.08
526.64 1399.59 41258.18 143 1053.28 2799.17 82516.18
515.73 1399.59 40374.32 144 1031.45 2799.17 80748.46
504.68 1399.59 39479.42 145 1009.36 2799.17 78958.65
493.49 1399.59 38573.32 146 986.98 2799.17 77146.45
482.17 1399.59 37655.9 147 964.33 2799.17 75311.61
470.70 1399.59 36727.02 148 941.40 2799.17 73453.83
459.09 1399.59 35786.52 149 918.17 2799.17 71572.83
447.33 1399.59 34834.26 150 894.66 2799.17 69668.31
435.43 1399.59 33870.11 151 870.85 2799.17 67739.99
423.38 1399.59 32893.9 152 846.75 2799.17 65787.57
411.17 1399.59 31905.48 153 822.34 2799.17 63810.73
398.82 1399.59 30904.71 154 797.63 2799.17 61809.19
386.31 1399.59 29891.44 155 772.61 2799.17 59782.62
373.64 1399.59 28865.49 156 747.28 2799.17 57730.73
360.82 1399.59 27826.72 157 721.63 2799.17 55653.18
347.83 1399.59 26774.97 158 695.66 2799.17 53549.67
334.69 1399.59 25710.07 159 669.37 2799.17 51419.87
321.38 1399.59 24631.86 160 642.75 2799.17 49263.44
307.90 1399.59 23540.17 161 615.79 2799.17 47080.06
294.25 1399.59 22434.84 162 588.50 2799.17 44869.38
280.44 1399.59 21315.69 163 560.87 2799.17 42631.08
266.45 1399.59 20182.55 164 532.89 2799.17 40364.8
252.28 1399.59 19035.25 165 504.56 2799.17 38070.18
237.94 1399.59 17873.6 166 475.88 2799.17 35746.89
223.42 1399.59 16697.43 167 446.84 2799.17 33394.55
208.72 1399.59 15506.56 168 417.43 2799.17 31012.81
193.83 1399.59 14300.81 169 387.66 2799.17 28601.29
178.76 1399.59 13079.98 170 357.52 2799.17 26159.64
163.50 1399.59 11843.89 171 327.00 2799.17 23687.47
148.05 1399.59 10592.36 172 296.09 2799.17 21184.38
132.40 1399.59 9325.168 173 264.80 2799.17 18650.01
116.56 1399.59 8042.141 174 233.13 2799.17 16083.96
100.53 1399.59 6743.084 175 201.05 2799.17 13485.84
84.29 1399.59 5427.787 176 168.57 2799.17 10855.23
67.85 1399.59 4096.05 177 135.69 2799.17 8191.75
51.20 1399.59 2747.663 178 102.40 2799.17 5494.976
34.35 1399.59 1382.426 179 68.69 2799.17 2764.491
17.28 1399.59 0.118626 180 34.56 2799.17 -0.122748
1
Profit and Cash Flow
Opportunity Cost

Goals of the Firm
Time Value of Money

Loan 300000


Loan 400000

the above project:

the above project:
HINTS AND WORKINGS WITHOUT GIVING A DETAILED ANSWER
WHEREVER ALTERNATIVE WORKINGS ARE GIVEN, ONE IS SUFFICIENT IN THE EXAM
MEANING OF PROFIT CASH FLOW
HOW CASH FLOW IS COMPUTED
SOME OF THE STUDENTS HAVE GIVEN EXPLANATION HAVING CASH FLOW STATEMENT IN MIND
SOME OF THE STUDENTS UNNECESSARILY WRITTEN ABOUT ACCRUAL BASIS, WHICH IS NOT RELEVANT
MEANING
ECONOMICS DEFINITION
EXAMPLE- CHANGE THE NUMERALS ATLEAST…EVERYBODY TALKED ABOUT DEPOSIT AS THE ALTERNATIVE INVESTM
DIFFERENCE IN GAINS
MEANING
Major goals profit maximization
wealth maximization
Other Goals Sales Maximization
Market share
etc.,
MEANING
Example is essential to explain this concept.
3750
9.356334
8.356334
4198.761
9 8 7 6 5 4 3 2 1
30000 30000 30000 30000 30000 30000 30000 30000 30000
526462.1 83192.36 74278.9 66320.44 59214.68 52870.25 47205.58 42147.84 37632 33600
'=A *(((1+(R/100))^N)-1)/(R/100) 30000

30000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
526462.1 0.12
526462.1
5000
9.356334
8.356334
5598.348
9 8 7 6 5 4 3 2 1
40000 40000 40000 40000 40000 40000 40000 40000 40000
701949.4 110923.2 99038.53 88427.26 78952.91 70493.67 62940.77 56197.12 50176 44800
=A *(((1+(R/100))^N)-1)/(R/100) 40000
=40000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
701949.4 0.12
701949.4
20 10
1000000 70% -1000000 1 -1000000 1
1 310000 250000 60000 42000 292000 0.8333 243323.6 0.9091
2 340000 250000 90000 63000 313000 0.6944 217347.2 0.8264
3 370000 250000 120000 84000 334000 0.5787 193285.8 0.7513
4 400000 250000 150000 105000 355000 0.4823 171216.5 0.683
-174826.9
22 9
1000000 70% -1000000 1 -1000000 1
1 320000 250000 70000 49000 299000 0.8197 245090.3 0.9174
2 370000 250000 120000 84000 334000 0.6719 224414.6 0.8417
3 300000 250000 50000 35000 285000 0.5507 156949.5 0.7722
4 350000 250000 100000 70000 320000 0.4514 144448 0.7084
-229097.6

S NOT RELEVANT
AS THE ALTERNATIVE INVESTMENT
0
1
2
3
4
0 5
30000 6
30000 7
8
9
10
11
12
13
14
15
16
17
18
0 19
40000 20
40000 21
22
23
24
25
26
20 -174826.9 27
11 10.7833 10 17519.6 28
-1000000 1 -1000000 1 -1000000 11 -4847.1 29
265457.2 0.9009 263062.8 0.9027 263588.4 30
258663.2 0.8116 254030.8 0.8148 255032.4 22366.7 31
250934.2 0.7312 244220.8 0.7355 245657 0.7833 32
242465 0.6587 233838.5 0.6639 235684.5 33
17519.6 -4847.1 -37.7 IRR 10.7833 34
35
36
37
22 -229097.6 38
10 9.1013 9 2195.4 39
-1000000 1 -1000000 1 -1000000 10 -19481 40
274302.6 0.9091 271820.9 0.9166 274063.4 41
281127.8 0.8264 276017.6 0.8401 280593.4 21676.4 42
220077 0.7513 214120.5 0.77 219450 0.1013 43
226688 0.683 218560 0.7058 225856 44
2195.4 -19481 -37.2 IRR 9.1013 45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
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180
EMI-CHECKING 0.065878 EMI-CHECKING 0.074504
300000 300000 0 400000 400000
3750.00 4198.76 299551.2 1 5000.00 5598.35 399401.7
3744.39 4198.76 299096.9 2 4992.52 5598.35 398795.8
3738.71 4198.76 298636.8 3 4984.95 5598.35 398182.4
3732.96 4198.76 298171 4 4977.28 5598.35 397561.4
3727.14 4198.76 297699.4 5 4969.52 5598.35 396932.5
3721.24 4198.76 297221.9 6 4961.66 5598.35 396295.8
3715.27 4198.76 296738.4 7 4953.70 5598.35 395651.2
3709.23 4198.76 296248.8 8 4945.64 5598.35 394998.5
3703.11 4198.76 295753.2 9 4937.48 5598.35 394337.6
3696.91 4198.76 295251.3 10 4929.22 5598.35 393668.5
3690.64 4198.76 294743.2 11 4920.86 5598.35 392991
3684.29 4198.76 294228.8 12 4912.39 5598.35 392305
3677.86 4198.76 293707.9 13 4903.81 5598.35 391610.5
3671.35 4198.76 293180.4 14 4895.13 5598.35 390907.3
3664.76 4198.76 292646.4 15 4886.34 5598.35 390195.3
3658.08 4198.76 292105.8 16 4877.44 5598.35 389474.4
3651.32 4198.76 291558.3 17 4868.43 5598.35 388744.4
3644.48 4198.76 291004 18 4859.31 5598.35 388005.4
3637.55 4198.76 290442.8 19 4850.07 5598.35 387257.1
3630.54 4198.76 289874.6 20 4840.71 5598.35 386499.5
3623.43 4198.76 289299.3 21 4831.24 5598.35 385732.4
3616.24 4198.76 288716.8 22 4821.65 5598.35 384955.7
3608.96 4198.76 288126.9 23 4811.95 5598.35 384169.3
3601.59 4198.76 287529.8 24 4802.12 5598.35 383373.1
3594.12 4198.76 286925.1 25 4792.16 5598.35 382566.9
3586.56 4198.76 286312.9 26 4782.09 5598.35 381750.6
3578.91 4198.76 285693.1 27 4771.88 5598.35 380924.1
3571.16 4198.76 285065.5 28 4761.55 5598.35 380087.3
3563.32 4198.76 284430 29 4751.09 5598.35 379240.1
3555.38 4198.76 283786.7 30 4740.50 5598.35 378382.2
3547.33 4198.76 283135.2 31 4729.78 5598.35 377513.7
3539.19 4198.76 282475.7 32 4718.92 5598.35 376634.2
3530.95 4198.76 281807.8 33 4707.93 5598.35 375743.8
3522.60 4198.76 281131.7 34 4696.80 5598.35 374842.3
3514.15 4198.76 280447.1 35 4685.53 5598.35 373929.5
3505.59 4198.76 279753.9 36 4674.12 5598.35 373005.2
3496.92 4198.76 279052.1 37 4662.57 5598.35 372069.4
3488.15 4198.76 278341.4 38 4650.87 5598.35 371122
3479.27 4198.76 277622 39 4639.02 5598.35 370162.6
3470.27 4198.76 276893.5 40 4627.03 5598.35 369191.3
3461.17 4198.76 276155.9 41 4614.89 5598.35 368207.9
3451.95 4198.76 275409.1 42 4602.60 5598.35 367212.1
3442.61 4198.76 274652.9 43 4590.15 5598.35 366203.9
3433.16 4198.76 273887.3 44 4577.55 5598.35 365183.1
3423.59 4198.76 273112.1 45 4564.79 5598.35 364149.6
3413.90 4198.76 272327.3 46 4551.87 5598.35 363103.1
3404.09 4198.76 271532.6 47 4538.79 5598.35 362043.5
3394.16 4198.76 270728 48 4525.54 5598.35 360970.7
3384.10 4198.76 269913.3 49 4512.13 5598.35 359884.5
3373.92 4198.76 269088.5 50 4498.56 5598.35 358784.7
3363.61 4198.76 268253.4 51 4484.81 5598.35 357671.2
3353.17 4198.76 267407.8 52 4470.89 5598.35 356543.7
3342.60 4198.76 266551.6 53 4456.80 5598.35 355402.2
3331.89 4198.76 265684.7 54 4442.53 5598.35 354246.3
3321.06 4198.76 264807 55 4428.08 5598.35 353076.1
3310.09 4198.76 263918.4 56 4413.45 5598.35 351891.2
3298.98 4198.76 263018.6 57 4398.64 5598.35 350691.5
3287.73 4198.76 262107.5 58 4383.64 5598.35 349476.8
3276.34 4198.76 261185.1 59 4368.46 5598.35 348246.9
3264.81 4198.76 260251.2 60 4353.09 5598.35 347001.6
3253.14 4198.76 259305.5 61 4337.52 5598.35 345740.8
3241.32 4198.76 258348.1 62 4321.76 5598.35 344464.2
3229.35 4198.76 257378.7 63 4305.80 5598.35 343171.6
3217.23 4198.76 256397.2 64 4289.65 5598.35 341862.9
3204.96 4198.76 255403.4 65 4273.29 5598.35 340537.9
3192.54 4198.76 254397.1 66 4256.72 5598.35 339196.3
3179.96 4198.76 253378.3 67 4239.95 5598.35 337837.9
3167.23 4198.76 252346.8 68 4222.97 5598.35 336462.5
3154.34 4198.76 251302.4 69 4205.78 5598.35 335069.9
3141.28 4198.76 250244.9 70 4188.37 5598.35 333659.9
3128.06 4198.76 249174.2 71 4170.75 5598.35 332232.3
3114.68 4198.76 248090.1 72 4152.90 5598.35 330786.9
3101.13 4198.76 246992.5 73 4134.84 5598.35 329323.4
3087.41 4198.76 245881.1 74 4116.54 5598.35 327841.6
3073.51 4198.76 244755.9 75 4098.02 5598.35 326341.2
3059.45 4198.76 243616.6 76 4079.27 5598.35 324822.2
3045.21 4198.76 242463 77 4060.28 5598.35 323284.1
3030.79 4198.76 241295.1 78 4041.05 5598.35 321726.8
3016.19 4198.76 240112.5 79 4021.58 5598.35 320150
3001.41 4198.76 238915.1 80 4001.88 5598.35 318553.6
2986.44 4198.76 237702.8 81 3981.92 5598.35 316937.1
2971.29 4198.76 236475.3 82 3961.71 5598.35 315300.5
2955.94 4198.76 235232.5 83 3941.26 5598.35 313643.4
2940.41 4198.76 233974.2 84 3920.54 5598.35 311965.6
2924.68 4198.76 232700.1 85 3899.57 5598.35 310266.8
2908.75 4198.76 231410.1 86 3878.34 5598.35 308546.8
2892.63 4198.76 230103.9 87 3856.84 5598.35 306805.3
2876.30 4198.76 228781.5 88 3835.07 5598.35 305042
2859.77 4198.76 227442.5 89 3813.03 5598.35 303256.7
2843.03 4198.76 226086.8 90 3790.71 5598.35 301449.1
2826.08 4198.76 224714.1 91 3768.11 5598.35 299618.8
2808.93 4198.76 223324.2 92 3745.24 5598.35 297765.7
2791.55 4198.76 221917 93 3722.07 5598.35 295889.4
2773.96 4198.76 220492.2 94 3698.62 5598.35 293989.7
2756.15 4198.76 219049.6 95 3674.87 5598.35 292066.2
2738.12 4198.76 217589 96 3650.83 5598.35 290118.7
2719.86 4198.76 216110.1 97 3626.48 5598.35 288146.8
2701.38 4198.76 214612.7 98 3601.84 5598.35 286150.3
2682.66 4198.76 213096.6 99 3576.88 5598.35 284128.9
2663.71 4198.76 211561.5 100 3551.61 5598.35 282082.1
2644.52 4198.76 210007.3 101 3526.03 5598.35 280009.8
2625.09 4198.76 208433.6 102 3500.12 5598.35 277911.6
2605.42 4198.76 206840.3 103 3473.89 5598.35 275787.1
2585.50 4198.76 205227 104 3447.34 5598.35 273636.1
2565.34 4198.76 203593.6 105 3420.45 5598.35 271458.2
2544.92 4198.76 201939.8 106 3393.23 5598.35 269253.1
2524.25 4198.76 200265.3 107 3365.66 5598.35 267020.4
2503.32 4198.76 198569.8 108 3337.76 5598.35 264759.8
2482.12 4198.76 196853.2 109 3309.50 5598.35 262471
2460.66 4198.76 195115.1 110 3280.89 5598.35 260153.5
2438.94 4198.76 193355.2 111 3251.92 5598.35 257807.1
2416.94 4198.76 191573.4 112 3222.59 5598.35 255431.3
2394.67 4198.76 189769.3 113 3192.89 5598.35 253025.9
2372.12 4198.76 187942.7 114 3162.82 5598.35 250590.3
2349.28 4198.76 186093.2 115 3132.38 5598.35 248124.4
2326.17 4198.76 184220.6 116 3101.55 5598.35 245627.6
2302.76 4198.76 182324.6 117 3070.34 5598.35 243099.6
2279.06 4198.76 180404.9 118 3038.74 5598.35 240540
2255.06 4198.76 178461.2 119 3006.75 5598.35 237948.4
2230.77 4198.76 176493.2 120 2974.35 5598.35 235324.4
2206.17 4198.76 174500.6 121 2941.55 5598.35 232667.6
2181.26 4198.76 172483.1 122 2908.34 5598.35 229977.6
2156.04 4198.76 170440.4 123 2874.72 5598.35 227253.9
2130.51 4198.76 168372.2 124 2840.67 5598.35 224496.2
2104.65 4198.76 166278.1 125 2806.20 5598.35 221704.1
2078.48 4198.76 164157.8 126 2771.30 5598.35 218877.1
2051.97 4198.76 162011 127 2735.96 5598.35 216014.7
2025.14 4198.76 159837.4 128 2700.18 5598.35 213116.5
1997.97 4198.76 157636.6 129 2663.96 5598.35 210182.1
1970.46 4198.76 155408.3 130 2627.28 5598.35 207211
1942.60 4198.76 153152.1 131 2590.14 5598.35 204202.8
1914.40 4198.76 150867.7 132 2552.54 5598.35 201157
1885.85 4198.76 148554.8 133 2514.46 5598.35 198073.1
1856.94 4198.76 146213 134 2475.91 5598.35 194950.7
1827.66 4198.76 143841.9 135 2436.88 5598.35 191789.2
1798.02 4198.76 141441.2 136 2397.37 5598.35 188588.2
1768.01 4198.76 139010.4 137 2357.35 5598.35 185347.2
1737.63 4198.76 136549.3 138 2316.84 5598.35 182065.7
1706.87 4198.76 134057.4 139 2275.82 5598.35 178743.2
1675.72 4198.76 131534.4 140 2234.29 5598.35 175379.2
1644.18 4198.76 128979.8 141 2192.24 5598.35 171973
1612.25 4198.76 126393.3 142 2149.66 5598.35 168524.4
1579.92 4198.76 123774.4 143 2106.55 5598.35 165032.6
1547.18 4198.76 121122.8 144 2062.91 5598.35 161497.1
1514.04 4198.76 118438.1 145 2018.71 5598.35 157917.5
1480.48 4198.76 115719.8 146 1973.97 5598.35 154293.1
1446.50 4198.76 112967.6 147 1928.66 5598.35 150623.4
1412.09 4198.76 110180.9 148 1882.79 5598.35 146907.9
1377.26 4198.76 107359.4 149 1836.35 5598.35 143145.9
1341.99 4198.76 104502.6 150 1789.32 5598.35 139336.8
1306.28 4198.76 101610.1 151 1741.71 5598.35 135480.2
1270.13 4198.76 98681.51 152 1693.50 5598.35 131575.3
1233.52 4198.76 95716.27 153 1644.69 5598.35 127621.7
1196.45 4198.76 92713.96 154 1595.27 5598.35 123618.6
1158.92 4198.76 89674.12 155 1545.23 5598.35 119565.5
1120.93 4198.76 86596.29 156 1494.57 5598.35 115461.7
1082.45 4198.76 83479.98 157 1443.27 5598.35 111306.6
1043.50 4198.76 80324.72 158 1391.33 5598.35 107099.6
1004.06 4198.76 77130.01 159 1338.75 5598.35 102840
964.13 4198.76 73895.38 160 1285.50 5598.35 98527.16
923.69 4198.76 70620.31 161 1231.59 5598.35 94160.41
882.75 4198.76 67304.3 162 1177.01 5598.35 89739.07
841.30 4198.76 63946.84 163 1121.74 5598.35 85262.46
799.34 4198.76 60547.42 164 1065.78 5598.35 80729.89
756.84 4198.76 57105.5 165 1009.12 5598.35 76140.66
713.82 4198.76 53620.55 166 951.76 5598.35 71494.07
670.26 4198.76 50092.05 167 893.68 5598.35 66789.4
626.15 4198.76 46519.44 168 834.87 5598.35 62025.93
581.49 4198.76 42902.17 169 775.32 5598.35 57202.9
536.28 4198.76 39239.69 170 715.04 5598.35 52319.59
490.50 4198.76 35531.43 171 653.99 5598.35 47375.23
444.14 4198.76 31776.81 172 592.19 5598.35 42369.07
397.21 4198.76 27975.26 173 529.61 5598.35 37300.33
349.69 4198.76 24126.18 174 466.25 5598.35 32168.24
301.58 4198.76 20229 175 402.10 5598.35 26971.99
252.86 4198.76 16283.1 176 337.15 5598.35 21710.79
203.54 4198.76 12287.88 177 271.38 5598.35 16383.82
153.60 4198.76 8242.719 178 204.80 5598.35 10990.27
103.03 4198.76 4146.987 179 137.38 5598.35 5529.303
51.84 4198.76 0.065878 180 69.12 5598.35 0.074504
1
Non-Fund based advances Bank Guarantees
Letters of Credit- Inland and Foreign
Letter of Undertaking
CFO's Functions
Procurement of funds
Utilisation of funds
Managing Working Capital
Investment decisions etc.,

Accounting Rate of Return FORMULA
EXAMPLE
Discounting factors MEANING

EXAMPLE

Loan 600000


Loan 700000


the above project:

the above project:
HINTS AND WORKINGS WITHOUT GIVING A DETAILED ANSWER
WHEREVER ALTERNATIVE WORKINGS ARE GIVEN, ONE IS SUFFICIENT IN THE EXAM
Credit- Inland and Foreign

Undertaking
ent of funds
Working Capital
nt decisions etc.,
7500
9.356334
8.356334
8397.523
9 8 7 6 5 4 3 2 1
100000 100000 100000 100000 100000 100000 100000 100000 100000
1754874 277307.9 247596.3 221068.1 197382.3 176234.2 157351.9 140492.8 125440 112000
'=A *(((1+(R/100))^N)-1)/(R/100) 100000

=100000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
1754874 0.12
1754874
8750
9.356334
8.356334
9797.11
9 8 7 6 5 4 3 2 1
200000 200000 200000 200000 200000 200000 200000 200000 200000
3509747 554615.8 495192.6 442136.3 394764.5 352468.3 314703.9 280985.6 250880 224000
'=A *(((1+(R/100))^N)-1)/(R/100) 200000

=200000(((1+(12/100))^10)-1)/(12/100) 3.105848 2.105848
3509747 0.12
3509747
17 10
1500000 65% -1500000 1 -1500000 1
1 500000 375000 125000 81250 456250 0.8547 389956.9 0.9091
2 530000 375000 155000 100750 475750 0.7305 347535.4 0.8264
3 560000 375000 185000 120250 495250 0.6244 309234.1 0.7513
4 590000 375000 215000 139750 514750 0.5337 274722.1 0.683
-178552
18 9
1200000 35% -1200000 1 -1200000 1
1 340000 300000 40000 26000 326000 0.8475 276285 0.9174
2 390000 300000 90000 58500 358500 0.7182 257474.7 0.8417
3 440000 300000 140000 91000 391000 0.6086 237962.6 0.7722
4 490000 300000 190000 123500 423500 0.5158 218441.3 0.7084
-209836.4

ICIENT IN THE EXAM
0
1
2
3
4
5
0 6
100000 7
100000 8
9
10
11
12
13
14
15
16
17
18
19
20
0 21
200000 22
200000 23
24
25
26
27
28
29
30
31
32
33
17 -178552 34
11 10.9503 10 31592.25 35
-1500000 1 -1500000 1 -1500000 11 -1653.05 36
414776.9 0.9009 411035.6 0.9013 411218.1 37
393159.8 0.8116 386118.7 0.8123 386451.7 33245.3 38
372081.3 0.7312 362126.8 0.7322 362622.1 0.9503 39
351574.3 0.6587 339065.8 0.6599 339683.5 40
31592.25 -1653.05 -24.575 IRR 10.9503 41
42
43
44
18 -209836.4 45
10 9.1018 9 2759.45 46
-1200000 1 -1200000 1 -1200000 10 -24360.2 47
299072.4 0.9091 296366.6 0.9166 298811.6 48
301749.5 0.8264 296264.4 0.8401 301175.9 27119.65 49
301930.2 0.7513 293758.3 0.77 301070 0.1018 50
300007.4 0.683 289250.5 0.7058 298906.3 51
2759.45 -24360.2 -36.25 IRR 9.1018 52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
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100
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115
116
117
118
119
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121
122
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125
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128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
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146
147
148
149
150
151
152
153
154
155
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158
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160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
EMI-CHECKING -0.068244 EMI-CHECKING 0.070382
600000 600000 0 700000 700000
7500.00 8397.52 599102.5 1 8750.00 9797.11 698952.9
7488.78 8397.52 598193.7 2 8736.91 9797.11 697892.7
7477.42 8397.52 597273.6 3 8723.66 9797.11 696819.2
7465.92 8397.52 596342 4 8710.24 9797.11 695732.4
7454.28 8397.52 595398.8 5 8696.65 9797.11 694631.9
7442.48 8397.52 594443.7 6 8682.90 9797.11 693517.7
7430.55 8397.52 593476.8 7 8668.97 9797.11 692389.6
7418.46 8397.52 592497.7 8 8654.87 9797.11 691247.3
7406.22 8397.52 591506.4 9 8640.59 9797.11 690090.8
7393.83 8397.52 590502.7 10 8626.14 9797.11 688919.8
7381.28 8397.52 589486.5 11 8611.50 9797.11 687734.2
7368.58 8397.52 588457.5 12 8596.68 9797.11 686533.8
7355.72 8397.52 587415.7 13 8581.67 9797.11 685318.4
7342.70 8397.52 586360.9 14 8566.48 9797.11 684087.7
7329.51 8397.52 585292.9 15 8551.10 9797.11 682841.7
7316.16 8397.52 584211.5 16 8535.52 9797.11 681580.1
7302.64 8397.52 583116.6 17 8519.75 9797.11 680302.8
7288.96 8397.52 582008.1 18 8503.78 9797.11 679009.4
7275.10 8397.52 580885.7 19 8487.62 9797.11 677699.9
7261.07 8397.52 579749.2 20 8471.25 9797.11 676374.1
7246.87 8397.52 578598.6 21 8454.68 9797.11 675031.7
7232.48 8397.52 577433.5 22 8437.90 9797.11 673672.4
7217.92 8397.52 576253.9 23 8420.91 9797.11 672296.2
7203.17 8397.52 575059.6 24 8403.70 9797.11 670902.8
7188.24 8397.52 573850.3 25 8386.29 9797.11 669492
7173.13 8397.52 572625.9 26 8368.65 9797.11 668063.6
7157.82 8397.52 571386.2 27 8350.79 9797.11 666617.2
7142.33 8397.52 570131 28 8332.72 9797.11 665152.8
7126.64 8397.52 568860.1 29 8314.41 9797.11 663670.1
7110.75 8397.52 567573.3 30 8295.88 9797.11 662168.9
7094.67 8397.52 566270.5 31 8277.11 9797.11 660648.9
7078.38 8397.52 564951.3 32 8258.11 9797.11 659109.9
7061.89 8397.52 563615.7 33 8238.87 9797.11 657551.7
7045.20 8397.52 562263.4 34 8219.40 9797.11 655974
7028.29 8397.52 560894.1 35 8199.67 9797.11 654376.5
7011.18 8397.52 559507.8 36 8179.71 9797.11 652759.1
6993.85 8397.52 558104.1 37 8159.49 9797.11 651121.5
6976.30 8397.52 556682.9 38 8139.02 9797.11 649463.4
6958.54 8397.52 555243.9 39 8118.29 9797.11 647784.6
6940.55 8397.52 553787 40 8097.31 9797.11 646084.8
6922.34 8397.52 552311.8 41 8076.06 9797.11 644363.7
6903.90 8397.52 550818.1 42 8054.55 9797.11 642621.2
6885.23 8397.52 549305.9 43 8032.76 9797.11 640856.8
6866.32 8397.52 547774.7 44 8010.71 9797.11 639070.4
6847.18 8397.52 546224.3 45 7988.38 9797.11 637261.7
6827.80 8397.52 544654.6 46 7965.77 9797.11 635430.4
6808.18 8397.52 543065.2 47 7942.88 9797.11 633576.1
6788.32 8397.52 541456 48 7919.70 9797.11 631698.7
6768.20 8397.52 539826.7 49 7896.23 9797.11 629797.8
6747.83 8397.52 538177 50 7872.47 9797.11 627873.2
6727.21 8397.52 536506.7 51 7848.42 9797.11 625924.5
6706.33 8397.52 534815.5 52 7824.06 9797.11 623951.5
6685.19 8397.52 533103.2 53 7799.39 9797.11 621953.7
6663.79 8397.52 531369.5 54 7774.42 9797.11 619931.1
6642.12 8397.52 529614.1 55 7749.14 9797.11 617883.1
6620.18 8397.52 527836.7 56 7723.54 9797.11 615809.5
6597.96 8397.52 526037.1 57 7697.62 9797.11 613710
6575.46 8397.52 524215.1 58 7671.38 9797.11 611584.3
6552.69 8397.52 522370.2 59 7644.80 9797.11 609432
6529.63 8397.52 520502.4 60 7617.90 9797.11 607252.8
6506.28 8397.52 518611.1 61 7590.66 9797.11 605046.3
6482.64 8397.52 516696.2 62 7563.08 9797.11 602812.3
6458.70 8397.52 514757.4 63 7535.15 9797.11 600550.3
6434.47 8397.52 512794.4 64 7506.88 9797.11 598260.1
6409.93 8397.52 510806.8 65 7478.25 9797.11 595941.3
6385.08 8397.52 508794.3 66 7449.27 9797.11 593593.4
6359.93 8397.52 506756.7 67 7419.92 9797.11 591216.2
6334.46 8397.52 504693.7 68 7390.20 9797.11 588809.3
6308.67 8397.52 502604.8 69 7360.12 9797.11 586372.3
6282.56 8397.52 500489.9 70 7329.65 9797.11 583904.9
6256.12 8397.52 498348.4 71 7298.81 9797.11 581406.6
6229.36 8397.52 496180.3 72 7267.58 9797.11 578877
6202.25 8397.52 493985 73 7235.96 9797.11 576315.9
6174.81 8397.52 491762.3 74 7203.95 9797.11 573722.7
6147.03 8397.52 489511.8 75 7171.53 9797.11 571097.1
6118.90 8397.52 487233.2 76 7138.71 9797.11 568438.7
6090.41 8397.52 484926.1 77 7105.48 9797.11 565747.1
6061.58 8397.52 482590.1 78 7071.84 9797.11 563021.8
6032.38 8397.52 480225 79 7037.77 9797.11 560262.5
6002.81 8397.52 477830.3 80 7003.28 9797.11 557468.7
5972.88 8397.52 475405.6 81 6968.36 9797.11 554639.9
5942.57 8397.52 472950.7 82 6933.00 9797.11 551775.8
5911.88 8397.52 470465 83 6897.20 9797.11 548875.9
5880.81 8397.52 467948.3 84 6860.95 9797.11 545939.7
5849.35 8397.52 465400.1 85 6824.25 9797.11 542966.9
5817.50 8397.52 462820.1 86 6787.09 9797.11 539956.9
5785.25 8397.52 460207.9 87 6749.46 9797.11 536909.2
5752.60 8397.52 457562.9 88 6711.37 9797.11 533823.5
5719.54 8397.52 454884.9 89 6672.79 9797.11 530699.2
5686.06 8397.52 452173.5 90 6633.74 9797.11 527535.8
5652.17 8397.52 449428.1 91 6594.20 9797.11 524332.9
5617.85 8397.52 446648.5 92 6554.16 9797.11 521089.9
5583.11 8397.52 443834 93 6513.62 9797.11 517806.4
5547.93 8397.52 440984.5 94 6472.58 9797.11 514481.9
5512.31 8397.52 438099.2 95 6431.02 9797.11 511115.8
5476.24 8397.52 435178 96 6388.95 9797.11 507707.7
5439.72 8397.52 432220.2 97 6346.35 9797.11 504256.9
5402.75 8397.52 429225.4 98 6303.21 9797.11 500763
5365.32 8397.52 426193.2 99 6259.54 9797.11 497225.4
5327.41 8397.52 423123.1 100 6215.32 9797.11 493643.6
5289.04 8397.52 420014.6 101 6170.55 9797.11 490017.1
5250.18 8397.52 416867.2 102 6125.21 9797.11 486345.2
5210.84 8397.52 413680.6 103 6079.31 9797.11 482627.4
5171.01 8397.52 410454 104 6032.84 9797.11 478863.1
5130.68 8397.52 407187.2 105 5985.79 9797.11 475051.8
5089.84 8397.52 403879.5 106 5938.15 9797.11 471192.8
5048.49 8397.52 400530.5 107 5889.91 9797.11 467285.6
5006.63 8397.52 397139.6 108 5841.07 9797.11 463329.6
4964.24 8397.52 393706.3 109 5791.62 9797.11 459324.1
4921.33 8397.52 390230.1 110 5741.55 9797.11 455268.5
4877.88 8397.52 386710.5 111 5690.86 9797.11 451162.3
4833.88 8397.52 383146.8 112 5639.53 9797.11 447004.7
4789.34 8397.52 379538.7 113 5587.56 9797.11 442795.2
4744.23 8397.52 375885.4 114 5534.94 9797.11 438533
4698.57 8397.52 372186.4 115 5481.66 9797.11 434217.5
4652.33 8397.52 368441.2 116 5427.72 9797.11 429848.1
4605.52 8397.52 364649.2 117 5373.10 9797.11 425424.1
4558.12 8397.52 360809.8 118 5317.80 9797.11 420944.8
4510.12 8397.52 356922.4 119 5261.81 9797.11 416409.5
4461.53 8397.52 352986.4 120 5205.12 9797.11 411817.5
4412.33 8397.52 349001.2 121 5147.72 9797.11 407168.2
4362.52 8397.52 344966.2 122 5089.60 9797.11 402460.6
4312.08 8397.52 340880.8 123 5030.76 9797.11 397694.3
4261.01 8397.52 336744.3 124 4971.18 9797.11 392868.4
4209.30 8397.52 332556 125 4910.85 9797.11 387982.1
4156.95 8397.52 328315.5 126 4849.78 9797.11 383034.8
4103.94 8397.52 324021.9 127 4787.93 9797.11 378025.6
4050.27 8397.52 319674.6 128 4725.32 9797.11 372953.8
3995.93 8397.52 315273 129 4661.92 9797.11 367818.6
3940.91 8397.52 310816.4 130 4597.73 9797.11 362619.2
3885.21 8397.52 306304.1 131 4532.74 9797.11 357354.9
3828.80 8397.52 301735.4 132 4466.94 9797.11 352024.7
3771.69 8397.52 297109.6 133 4400.31 9797.11 346627.9
3713.87 8397.52 292425.9 134 4332.85 9797.11 341163.6
3655.32 8397.52 287683.7 135 4264.55 9797.11 335631.1
3596.05 8397.52 282882.2 136 4195.39 9797.11 330029.4
3536.03 8397.52 278020.7 137 4125.37 9797.11 324357.6
3475.26 8397.52 273098.5 138 4054.47 9797.11 318615
3413.73 8397.52 268114.7 139 3982.69 9797.11 312800.6
3351.43 8397.52 263068.6 140 3910.01 9797.11 306913.5
3288.36 8397.52 257959.4 141 3836.42 9797.11 300952.8
3224.49 8397.52 252786.4 142 3761.91 9797.11 294917.6
3159.83 8397.52 247548.7 143 3686.47 9797.11 288806.9
3094.36 8397.52 242245.5 144 3610.09 9797.11 282619.9
3028.07 8397.52 236876.1 145 3532.75 9797.11 276355.5
2960.95 8397.52 231439.5 146 3454.44 9797.11 270012.9
2892.99 8397.52 225935 147 3375.16 9797.11 263590.9
2824.19 8397.52 220361.6 148 3294.89 9797.11 257088.7
2754.52 8397.52 214718.6 149 3213.61 9797.11 250505.2
2683.98 8397.52 209005.1 150 3131.32 9797.11 243839.4
2612.56 8397.52 203220.1 151 3047.99 9797.11 237090.3
2540.25 8397.52 197362.9 152 2963.63 9797.11 230256.8
2467.04 8397.52 191432.4 153 2878.21 9797.11 223337.9
2392.90 8397.52 185427.8 154 2791.72 9797.11 216332.5
2317.85 8397.52 179348.1 155 2704.16 9797.11 209239.6
2241.85 8397.52 173192.4 156 2615.49 9797.11 202058
2164.91 8397.52 166959.8 157 2525.72 9797.11 194786.6
2087.00 8397.52 160649.3 158 2434.83 9797.11 187424.3
2008.12 8397.52 154259.9 159 2342.80 9797.11 179970
1928.25 8397.52 147790.6 160 2249.62 9797.11 172422.5
1847.38 8397.52 141240.5 161 2155.28 9797.11 164780.7
1765.51 8397.52 134608.5 162 2059.76 9797.11 157043.3
1682.61 8397.52 127893.5 163 1963.04 9797.11 149209.2
1598.67 8397.52 121094.7 164 1865.12 9797.11 141277.2
1513.68 8397.52 114210.8 165 1765.97 9797.11 133246.1
1427.64 8397.52 107241 166 1665.58 9797.11 125114.6
1340.51 8397.52 100183.9 167 1563.93 9797.11 116881.4
1252.30 8397.52 93038.72 168 1461.02 9797.11 108545.3
1162.98 8397.52 85804.18 169 1356.82 9797.11 100105
1072.55 8397.52 78479.21 170 1251.31 9797.11 91559.22
980.99 8397.52 71062.68 171 1144.49 9797.11 82906.6
888.28 8397.52 63553.43 172 1036.33 9797.11 74145.82
794.42 8397.52 55950.33 173 926.82 9797.11 65275.53
699.38 8397.52 48252.19 174 815.94 9797.11 56294.36
603.15 8397.52 40457.82 175 703.68 9797.11 47200.93
505.72 8397.52 32566.01 176 590.01 9797.11 37993.83
407.08 8397.52 24575.57 177 474.92 9797.11 28671.64
307.19 8397.52 16485.24 178 358.40 9797.11 19232.93
206.07 8397.52 8293.784 179 240.41 9797.11 9676.23
103.67 8397.52 -0.068244 180 120.95 9797.11 0.070382

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FINANCIAL MANAGEMENT BY PRASANNA CHANDRA

FINANCIAL MANAGEMENT BY KHAN AND JAIN

FINANCIAL MANAGEMENT BY I.M.PANDEY

WORKING CAPITAL=CURRENT ASSETS MINUS CURRENT LIABILITIES

TIME VALUE OF MONEY

START=ZEROTH YEAR FIRST SECOND

=100000X(100/110) 90909.09 100000

OPPORTUNITY COST= COST OF AN OPP LOST BANK INT=6%

WEIGHTED AVERAGE COST OF CAPITAL=(60*6+240*15)/300 13.2

TAKING HIGHER RISK LOWER RISK RISK AND RETURN GO TOGETHER

EXPECT HIGH RETURNS STANDARD RETURN

NEED NOT BE RETURNED TO BE RETURNED

RIGHT SHARES / BONUS SHARES MAY BE NO SUCH FEATURE

RIGHT SHARES PROFIT BEFORE INTEREST AND TA

BANKS / FINANCIAL INSTITUTIONS ARE ALSO LENDERS

STRICT UTILISATION OF FUNDS FOR THE PURPOSE FOR WHICH IT IS GIVEN

RESTRICTIONS IN BORROWING FROM OTHER SOURCES

RESTRICTIONS TO DEAL WITH OTHER BANKS WITHOUT PRIOR PERMISSION

TYPES OF LOANS - I: (PERIODICITY/PURPOSE POINT OF VIEW)

CASH CREDIT TERM RANGES FROM ONE YEAR TO

WORKING CAPITAL TERM LOANS PURELY FIXED TERM

TYPES OF LOANS - II: (SECURITY POINT OF VIEW)

A SECURED LOANS (PRIMARY AND COLLATERAL SECURITIES)(COLLATERAL MEANS ADDITIONAL)

TYPE OF LOANS III: (FUNDS POINT OF VIEW) BONDS

REDUCING BALANCE / FLAT METHOD OF COMPUTING THE INTEREST

EXAMPLE: DATE OF LOAN

PROFIT BEFORE INTEREST AND TAX 1000000

INTEREST AS AND WHEN DUE 8333.333

NDIAN BANK SBI BOB

HIGH PROCESSING CHARGES

100 1% 101 FIRST YR 25678 25423.7624

COMPUND INTEREST : P(1+R/100)^N minus P 10000 10%

DEPOSIT MATURITY FORMULAS

ILLUSTRATION:8 DOUBLING THE PRINCIPAL IN 7 YEARS

21800.36 = P*(1+8/400)^20 power 20 is taken because there a

12000 21800.36 0.672971 14671.017589028

IN RELATION TO AN ASSET IT IS SIMILAR TO THE CONCEPT OF DEPRECIATION

INTEREST RATES - TERMS AS PER THE PRACTICE IN THE INDIAN BANKS

PAST TERMINOLOGIES JUST FOR INFORMATION

RISK RATING SPREAD WILL BE ADDED TO THE MCLR

CREDIT RATING: SEARCH IN GOOGLE AND LEARN ABOUT THESE

EQUATED REPAYMENT COMPUTATION:

EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 2500

EMI = [P x R x (1+R)^N]/ [ ((1+R)^N)-1] 2500

1 YEAR BANKS 11038.12891

OTHER FINANCIAL INSTITUTIONS 11047.13067

YEAR Loan & Int Repayt Bal

2.50% 0 100000 100000.00 10%

IF A COMPANY IS WOUND UP WHAT WILL

SALE OF FIXED ASSETS 20

THE FUNDS SHALL BE DISTRIBUTED IN THE

REMAINING BALANCE OF RS.10 LACS SHALL

THE EQUITY SHAREHOLDERS SHALL GET

Sum of digits= n*(n+1)/2 21

(b)Compound Interest (Compounded annually)

2 Rs. 200 is invested at the end of each month in an account paying

RECURRING DEPOSIT COMPUTATION

WEIGHTED AVERAGE COST OF CAPITAL=(606+24015)/300 13.2