Assignment on Manage

Shahina Akter 10/1/23 Managerial Finance FIN-701

Canadian University of Bangladesh
School of Business
EMBA, Spring-2023

Assignment on Managerial Finance

Submitted To: Md. S.M. ARIFUZZAMAN
Head and Professor
School of Business
Canadian University of Bangladesh Submitted By:
Date: 05.10.23 Name: Shahina Akter
ID: 23106002
Batch: 23rd
Course: Managerial Finance
Course Code: FIN-701
EMBA
 Solution to the Problem no 01

Total Asset: Total Liabilities

A/P = 24000
A/R= 4000

Cash = 12000
Buildings & Equipment = 68000

TA = TL+OE

TA-TL = OE

OE = TA-TL

= (84,000-24000)

= 60,000

So, Common Stock = TE-RE

= (60000-8000)

= 52,000

Answer: 52,000.

Solution to the Problem no 02

Given that,

CR=4:1 CR=4:1 Working Capital = CA-CL

WC=30,000 CA/CL=4/1 30000 = 4CL-CL
CA-4CL 30000 = 3CL
CL = 30000/3
CL = 10000

So, WC = CA-CL

WC + CL = CA

CA = 30,000 + 10,000= 40,000

Answer: 40,000.
 Solution to the Problem no 03

Yes, it's a significant concern when a company's Gross Profit Margin (GPM)

remains stable over the years, but its Net Profit Margin (NPM) is on a declining

trend. This situation indicates that the company is struggling to manage its

operating expenses, interest costs, and tax liabilities, all of which are eroding

its net income.

Here's the reasoning:

 The company might be allocating a larger portion of its budget to Research

& Development and marketing activities that aren't directly tied to production costs.
 The company could be relying on increased borrowing to fund its investments,
leading to higher interest expenses.
 The company might be subject to higher tax rates, resulting in a greater portion
of its income being allocated to taxes.

To validate this concern, we should examine three key financial ratios:

 Operating Profit Margin:

This ratio reveals the portion of revenue remaining after accounting for indirect costs.
 Interest Coverage Ratio:
This ratio assesses the company's ability to meet its interest obligations comfortably.
 Effective Tax Rate (ETR):
This ratio measures the proportion of the company's income that goes toward
paying taxes.
 Solution to the Problem no 04

Here are the probable effects of each action on a company's financial position:

 When Accounts Receivable are paid in cash:

This action increases both the cash and current liabilities by the same amount.
Consequently, the current assets (CA) will remain unchanged.

 When Notes Payable are paid off with cash:

This action decreases the cash and net income (NIP) by a certain amount.
As a result, the total current assets (CA) and current liabilities (CL) will decrease
proportionally.

 When Inventory is sold on account:

This action decreases current assets (CA) due to the reduction in inventory.
Simultaneously, it increases current assets (CA) in the form of accounts receivable
(AR).
The net effect is that the current assets (CA) remain unchanged.

 When Inventory is purchased on account:

This action increases inventory and also increases accounts payable (A/P).
Consequently, both current assets (CA) and current liabilities (CL) increase by the
same proportion, leaving CA unchanged.

 When Accrued Wages and Taxes are recorded:

This action increases the balances of wages and taxes without affecting current
assets (CA).
As a result, the current assets (CA) remain unchanged.
However, this decrease in CA may signify a reduction in liquidity.
 Solution to the Problem no 05

Given that,

CA = 1M or 10,00,000

CL = 5,25,000

Inventory = 3,75,000

Q/R = CA-Inventory/CL

= 10,00,000 - 3,75,000/ 5,25,000

= 1.19 or 1.20

IF CL increased by 5 % = ( 5,25,000 X 5%) = 26,250

Now, New CL is = (5,25000 + 26,250) = 5,51,250

Q/R = CA-Inventory/CL

= 10,00,000 - 3,75,000/ 5,51,250

= 1.13

So, if CL increased by 5% it affects the QR because it decreases the level of QR.

Solution to the Problem no 06

Given That,

FV = 1000

n = 2n

= 2 x 20 = 40

cr = 0.08

C = F x cr

= 1000 x 0.08

= 80/2

= 40
 IF KD = 0.08/2 = 0.04 If KD = .10/2 = 0.05 If KD = .06/2 = 0.03

Vb = C x {(1+ KD) n – 1} ÷ {KD Vb = C x {(1+ KD)n – 1} ÷ Vb = C x {(1+ KD)n – 1} ÷

X (1+KD) n} + F/(1+KD) n {KD X (1+KD)n} + F/(1+KD)n {KD X (1+KD)n} +
= 40 X {(1+0.05)40 – 1} ÷ F/(1+KD)n
40
= 40 X {(1+0.04) – 1} ÷ {0.04 {0.04 X (1+0.05)40} + = 40 X {(1+0.03)40 – 1} ÷
X (1+0.04)40} + 1000/(1+0.04)40 1000/(1+0.05)40 {0.03 X (1+0.03)40} +
= 686.36 + 142.05 1000/(1+0.03)40
= 791.71 + 208.21 = 828.41 = 924.21 + 306.56
= 999.92 = 1230.77

Solution to the Problem no 07

Given that,

G = 5% or 0.05

D1 = D2/1+g = 20/1.05 = 19.05

KS = 14% or 0.14

P = D1/KS-g = 19.05/.14-.05 = 19.05/.09 = 211.67

Now, PV = 211.67 / (1+KS)

= 211.67 / (1.14)

= 185.68

Answer: 185.68.
 Solution to the Problem no 08
Given that,

D0 = 2.25,

I1 = 32% or .32,

I2 = 7% or 0.07

KS = 15% or .15

D1 = D0 (1+G)

= 2.25 (1+0.032)

= 2.97

D2 = 2.97 (1+0.032)

= 3.07

D3 = 3.07 (1+0.032)

= 3.17

The value of the share at years=3

P3 = D3 x (1+g2)/ks-g2 = 3.17 (1.07) / .15-0.07 = 8.40/0.08 = 42.5

P0 = {D1/(1+KS)} + D2/(1+KS)2 + D3+P3/(1+KS)3}

= {2.97/ (1.15)} + 3.07/ (1.15)2 + 3.17+42.5/ (1.15)3}

= (2.58+2.32+45.67)

= 50.57

Answer: 50.57.