Ajay Sharma Solutions

Q.No.

1) A)
Cash Flow Statement
2008-09 2009-10 2010-11 2011-12
Opening Balance 445687 146807 71727 452677
Inflows
Ajay's income 720000 828000 952200 1095030
Sunanda's income 900000 1080000 1296000 1555200
Farm House 300000 315000 330750 347288
Justice Sharma 300000 300000 300000 300000
Total 2665687 2669807 2950677 3750195
Outflows
Household Expenses 720000 792000 871200 958320
Kids School Fee 72000 79200 87120 95832
Ajay Car installment 284280 284280 284280 23690
Sunanda Car Inst 249600 249600 62400 0
Sunanda Clinic TL 336000 336000 336000 336000
PO Rd A/Cs 600000 600000 600000 600000
Ajay LIP 87000 87000 87000 87000
Sunanda-ULIP 120000 120000 120000 120000
Sunanda-Pension 50000 50000 50000 50000
2518880 2598080 2498000 2270842

Closing Balance= 146807 71727 452677 1479353

2) B)

3) B)
First 15 years net of expenses CAGR= 10%
Next 10 years net of expenses CAGR= 12%
Annual Contribution= 120000
Mode= Begin
FV after 15 years= 4193968
PV= Nil
R= 10%
N= 15
Pmt= -120000
Mode= 1 (begin)
 FV after 25 years= 15384377
PV= 4193968
R= 12%
N= 10
Pmt= -120000
Mode= 1 (begin)

4) A)
Policy Sum Assured/Face Value= 2500000
Reversionary Bonus=55*2500*25= 3437500 55*2500*25
Final Additional Bonus=550/1000= 1375000 2500000*0.55

Total MV= 7312500

5) C)

6) B)
Current Household Expenses= 60000 per month
Required Level= 75%
45000 60000*75%
After 25 Years@10% inflation per annum= 487562 per month 45000*1.1^25
5850741 p.a 487562*12

PV after 25 years= -51,994,801 PV(6%,12,5850741,0,1)

PV= ??
pmt= 5850741
n= 12
Mode= 1 begin
r= 6.00% p.a
PV of Travel Expenses Requirement= -8,886,875 PV(6%,12,1000000,0,1)
PV= ??
Pmt= 1000000
n= 12
Mode= 1 begin
r= 6.00% p.a

Total= -60,881,676

7) A)
8) C)
Rate of interest on Bank FDR= 10.50% compounding half yearly
Effective Rate of Return= 10.78% pa
Inflation= 10.00% pa
Real Rate of Return= 0.71% pa (1.1078/1.1)-1

9) B)
Upfront Investment= -8500
After 5 years investor can take= 12600 Yield to Put= 12600/8500= 8.19% RATE(5,0,-8500,12600,0,0)
After 10 years company can offer= 19400 Yield to Call= 19400/8500= 8.60% RATE(10,0,-8500,19400,0,0)

10) B)

11) D)

12) D)

13) A)
Original Investment= (10+790)*500= 400000
Current Market Value= 723000
Period= 7 years
IRR= 8.82% RATE(7,0,-400000,723000,1)

14) B)
Required rate after inflation= (Inflation/(1-Tax Rate)= 0.151492198 0.1/(1-0.3399)
or 15.15%
15) B)
WDV of the machinery= 208000
Compensation received from the insurance company= 300000
Capital Gain= 92000 300000-208000

Solutions : Ms. Claira Martis Case Study

16) B)
17) C)
Loan Amount 5000000
Tenure 15 years 180 months
Rate of interest 0.09 p.a. Monthly rate 0.0075 0.09/12
(comp. monthly)
EMI (50713) PMT(0.0075,180,5000000,0,0)
EMI portion Mr. Martis -35499 50713*0.7
EMI portion Ms. Claira -15214 50713*0.3 O/s on Prin O/s Inter comp Prin comp
1/3/2006 5,000,000
20% higher EMI - Ms. Claira -18257 15214*1.2 EMI-1 1/4/2006 4,986,787 37,500 13,213
EMI sustainable from Ms. Claira's salary acount EMI-2 1/5/2006 4,973,475 37,401 13,312
EMI-3 1/6/2006 4,960,063 37,301 13,412
Installments paid till 1st December 2008 EMI-4 1/7/2006 4,946,550 37,200 13,513
33 EMI-5 1/8/2006 4,932,937 37,099 13,614
Total installments till 1st March 2019 EMI-6 1/9/2006 4,919,221 36,997 13,716
156 EMI-7 1/10/2006 4,905,402 36,894 13,819
Hence, the remaining EMI months EMI-8 1/11/2006 4,891,479 36,791 13,922
123 EMI-9 1/12/2006 4,877,452 36,686 14,027
Rate of interst remains same at 9% p.a. (comp. monthly) EMI-10 1/1/2007 4,863,320 36,581 14,132
EMI-11 1/2/2007 4,849,082 36,475 14,238
Hence, the PV sustainable with revised EMI and period EMI-12 1/3/2007 4,834,737 36,368 14,345
PV(0.0075,123,-
1463234 18257,0,0) EMI-13 1/4/2007 4,820,285 36,261 14,452
EMI-14 1/5/2007 4,805,724 36,152 14,561
EMI-15 1/6/2007 4,791,054 36,043 14,670
This should be the loan outstanding as on 1st Dec 2008 EMI-16 1/7/2007 4,776,274 35,933 14,780
Loan outstanding after EMI of 1st Dec 2009 EMI-17 1/8/2007 4,761,383 35,822 14,891
4507354 EMI-18 1/9/2007 4,746,380 35,710 15,003
Therefore, loan to be prepaid EMI-19 1/10/2007 4,731,265 35,598 15,115
3044120 4507354-1463234 EMI-20 1/11/2007 4,716,037 35,484 15,229
EMI-21 1/12/2007 4,700,694 35,370 15,343
EMI-22 1/1/2008 4,685,236 35,255 15,458
EMI-23 1/2/2008 4,669,662 35,139 15,574
EMI-24 1/3/2008 4,653,972 35,022 15,691
EMI-25 1/4/2008 4,638,164 34,905 15,808
EMI-26 1/5/2008 4,622,237 34,786 15,927
EMI-27 1/6/2008 4,606,191 34,667 16,046
EMI-28 1/7/2008 4,590,024 34,546 16,167
EMI-29 1/8/2008 4,573,736 34,425 16,288
EMI-30 1/9/2008 4,557,326 34,303 16,410
EMI-31 1/10/2008 4,540,793 34,180 16,533
EMI-32 1/11/2008 4,524,136 34,056 16,657
EMI-33 1/12/2008 4,507,354 33,931 16,782
EMI-34 1/1/2009 4,490,446 33,805 16,908
EMI-35 1/2/2009 4,473,412 33,678 17,035
EMI-36 1/3/2009 4,456,249 33,551 17,162
EMI-37 1/4/2009 4,438,958 33,422 17,291
EMI-38 1/5/2009 4,421,537 33,292 17,421
EMI-39 1/6/2009 4,403,986 33,162 17,551
EMI-40 1/7/2009 4,386,303 33,030 17,683
EMI-41 1/8/2009 4,368,487 32,897 17,816
EMI-42 1/9/2009 4,350,538 32,764 17,949
EMI-43 1/10/2009 4,332,454 32,629 18,084
EMI-44 1/11/2009 4,314,234 32,493 18,220
EMI-45 1/12/2009 4,295,878 32,357 18,356
EMI-46 1/1/2010 4,277,384 32,219 18,494
EMI-47 1/2/2010 4,258,751 32,080 18,633
EMI-48 1/3/2010 4,239,979 31,941 18,772
EMI-49 1/4/2010 4,221,066 31,800 18,913
EMI-50 1/5/2010 4,202,011 31,658 19,055
EMI-51 1/6/2010 4,182,813 31,515 19,198
EMI-52 1/7/2010 4,163,471 31,371 19,342
EMI-53 1/8/2010 4,143,984 31,226 19,487
EMI-54 1/9/2010 4,124,351 31,080 19,633
EMI-55 1/10/2010 4,104,570 30,933 19,780
EMI-56 1/11/2010 4,084,642 30,784 19,929
EMI-57 1/12/2010 4,064,563 30,635 20,078
EMI-58 1/1/2011 4,044,335 30,484 20,229
EMI-59 1/2/2011 4,023,954 30,333 20,380
EMI-60 1/3/2011 4,003,421 30,180 20,533
EMI-61 1/4/2011 3,982,734 30,026 20,687
EMI-62 1/5/2011 3,961,891 29,871 20,842
EMI-63 1/6/2011 3,940,892 29,714 20,999
EMI-64 1/7/2011 3,919,736 29,557 21,156
EMI-65 1/8/2011 3,898,421 29,398 21,315
EMI-66 1/9/2011 3,876,946 29,238 21,475
EMI-67 1/10/2011 3,855,310 29,077 21,636
EMI-68 1/11/2011 3,833,512 28,915 21,798
EMI-69 1/12/2011 3,811,550 28,751 21,962
EMI-70 1/1/2012 3,789,424 28,587 22,126
EMI-71 1/2/2012 3,767,132 28,421 22,292
EMI-72 1/3/2012 3,744,672 28,253 22,460
EMI-73 1/4/2012 3,722,044 28,085 22,628
EMI-74 1/5/2012 3,699,247 27,915 22,798
EMI-75 1/6/2012 3,676,278 27,744 22,969
EMI-76 1/7/2012 3,653,137 27,572 23,141
EMI-77 1/8/2012 3,629,822 27,399 23,314
EMI-78 1/9/2012 3,606,333 27,224 23,489
EMI-79 1/10/2012 3,582,668 27,047 23,666
EMI-80 1/11/2012 3,558,825 26,870 23,843
EMI-81 1/12/2012 3,534,803 26,691 24,022
EMI-82 1/1/2013 3,510,601 26,511 24,202
EMI-83 1/2/2013 3,486,217 26,330 24,383
EMI-84 1/3/2013 3,461,651 26,147 24,566
EMI-85 1/4/2013 3,436,900 25,962 24,751
EMI-86 1/5/2013 3,411,964 25,777 24,936
EMI-87 1/6/2013 3,386,841 25,590 25,123
EMI-88 1/7/2013 3,361,529 25,401 25,312
EMI-89 1/8/2013 3,336,028 25,211 25,502
EMI-90 1/9/2013 3,310,335 25,020 25,693
EMI-91 1/10/2013 3,284,449 24,828 25,885
EMI-92 1/11/2013 3,258,370 24,633 26,080
EMI-93 1/12/2013 3,232,094 24,438 26,275
EMI-94 1/1/2014 3,205,622 24,241 26,472
EMI-95 1/2/2014 3,178,951 24,042 26,671
EMI-96 1/3/2014 3,152,081 23,842 26,871
EMI-97 1/4/2014 3,125,008 23,641 27,072
EMI-98 1/5/2014 3,097,733 23,438 27,275
EMI-99 1/6/2014 3,070,253 23,233 27,480
EMI-100 1/7/2014 3,042,567 23,027 27,686
EMI-101 1/8/2014 3,014,673 22,819 27,894
EMI-102 1/9/2014 2,986,570 22,610 28,103
EMI-103 1/10/2014 2,958,256 22,399 28,314
EMI-104 1/11/2014 2,929,730 22,187 28,526
EMI-105 1/12/2014 2,900,990 21,973 28,740
EMI-106 1/1/2015 2,872,034 21,757 28,956
EMI-107 1/2/2015 2,842,862 21,540 29,173
EMI-108 1/3/2015 2,813,470 21,321 29,392
EMI-109 1/4/2015 2,783,858 21,101 29,612
EMI-110 1/5/2015 2,754,024 20,879 29,834
EMI-111 1/6/2015 2,723,966 20,655 30,058
EMI-112 1/7/2015 2,693,683 20,430 30,283
EMI-113 1/8/2015 2,663,173 20,203 30,510
EMI-114 1/9/2015 2,632,433 19,974 30,739
EMI-115 1/10/2015 2,601,464 19,743 30,970
EMI-116 1/11/2015 2,570,262 19,511 31,202
EMI-117 1/12/2015 2,538,826 19,277 31,436
EMI-118 1/1/2016 2,507,154 19,041 31,672
EMI-119 1/2/2016 2,475,245 18,804 31,909
EMI-120 1/3/2016 2,443,096 18,564 32,149
EMI-121 1/4/2016 2,410,706 18,323 32,390
EMI-122 1/5/2016 2,378,073 18,080 32,633
EMI-123 1/6/2016 2,345,196 17,836 32,877
EMI-124 1/7/2016 2,312,072 17,589 33,124
EMI-125 1/8/2016 2,278,699 17,341 33,372
EMI-126 1/9/2016 2,245,077 17,090 33,623
EMI-127 1/10/2016 2,211,202 16,838 33,875
EMI-128 1/11/2016 2,177,073 16,584 34,129
EMI-129 1/12/2016 2,142,688 16,328 34,385
EMI-130 1/1/2017 2,108,045 16,070 34,643
EMI-131 1/2/2017 2,073,142 15,810 34,903
EMI-132 1/3/2017 2,037,978 15,549 35,164
EMI-133 1/4/2017 2,002,550 15,285 35,428
EMI-134 1/5/2017 1,966,856 15,019 35,694
EMI-135 1/6/2017 1,930,894 14,751 35,962
EMI-136 1/7/2017 1,894,663 14,482 36,231
EMI-137 1/8/2017 1,858,160 14,210 36,503
EMI-138 1/9/2017 1,821,383 13,936 36,777
EMI-139 1/10/2017 1,784,331 13,660 37,053
EMI-140 1/11/2017 1,747,000 13,382 37,331
EMI-141 1/12/2017 1,709,389 13,102 37,611
EMI-142 1/1/2018 1,671,497 12,820 37,893
EMI-143 1/2/2018 1,633,320 12,536 38,177
EMI-144 1/3/2018 1,594,857 12,250 38,463
EMI-145 1/4/2018 1,556,105 11,961 38,752
EMI-146 1/5/2018 1,517,063 11,671 39,042
EMI-147 1/6/2018 1,477,728 11,378 39,335
EMI-148 1/7/2018 1,438,098 11,083 39,630
EMI-149 1/8/2018 1,398,171 10,786 39,927
 EMI-150 1/9/2018 1,357,944 10,486 40,227
EMI-151 1/10/2018 1,317,416 10,185 40,528
EMI-152 1/11/2018 1,276,583 9,881 40,832
EMI-153 1/12/2018 1,235,445 9,574 41,139
EMI-154 1/1/2019 1,193,998 9,266 41,447
EMI-155 1/2/2019 1,152,240 8,955 41,758
EMI-156 1/3/2019 1,110,168 8,642 42,071
EMI-157 1/4/2019 1,067,782 8,326 42,387
EMI-158 1/5/2019 1,025,077 8,008 42,705
EMI-159 1/6/2019 982,052 7,688 43,025
EMI-160 1/7/2019 938,704 7,365 43,348
EMI-161 1/8/2019 895,032 7,040 43,673
EMI-162 1/9/2019 851,032 6,713 44,000
EMI-163 1/10/2019 806,701 6,383 44,330
EMI-164 1/11/2019 762,039 6,050 44,663
EMI-165 1/12/2019 717,041 5,715 44,998
EMI-166 1/1/2020 671,706 5,378 45,335
EMI-167 1/2/2020 626,030 5,038 45,675
EMI-168 1/3/2020 580,013 4,695 46,018
EMI-169 1/4/2020 533,650 4,350 46,363
EMI-170 1/5/2020 486,939 4,002 46,711
EMI-171 1/6/2020 439,878 3,652 47,061
EMI-172 1/7/2020 392,464 3,299 47,414
EMI-173 1/8/2020 344,695 2,943 47,770
EMI-174 1/9/2020 296,567 2,585 48,128
EMI-175 1/10/2020 248,078 2,224 48,489
EMI-176 1/11/2020 199,226 1,861 48,852
EMI-177 1/12/2020 150,007 1,494 49,219
EMI-178 1/1/2021 100,419 1,125 49,588
EMI-179 1/2/2021 50,459 753 49,960
EMI-180 1/3/2021 0 378 50,460
4,128,465 5,000,000

18) A)

19) B)

20) D)
Loan amount = 3250000 50000*65
Rate of interest= 6% p.a. compounded monthly
 Tenure = 120 months
Laon Taken on 1-Apr-09
Repayments to begin after 42 months for 120-42 , i.e. 78 months 120-42
1-Oct-12
Loan amount as on 1st October, 2012
4007356 3250000*(1+(6%/12))^42
Hence EMI for 78 months from 1-Oct 2012 to 1-Mar-2019
62171 PMT(6%/12,78,4007356,0,0)

21) A)
Ms. Claira's expected monthly basic salary in March 2010 = 31000
Ms. Claira's total annual emoluments in FY 2009-2010 = 562500 31000*450000/24800
This is going to increase @ 10% p.a. compound
for the next 9 years (upto Mar 2019)
Ms. Claira's last drawn salary in March 2019 = 1326346 562500*(1.1)^9

50% of last expected annual emoluments = 663173 1326346/2

Expected rate of annuity 0.07 p.a.

Inflation consideration 0.05 p.a.
Inflation adjusted rate of return 0.0190 p.a. (0.07-0.05)/(1+0.05)

PV of Annuity for 20 years 10944152 663173*(1-((1+0.019)^(-20)))/0.019

22) A)

EL Balance 31st March 2008 88 days

SL Balance 31st March 2008 42 days

Outstanding service since April 2008 11 years

EL to be accrued (@ 12 days per year) 132 days 11*12

EL to be utilized 66 days .132/2.

Balance EL expected on retirement 154 days 88+(132-66)

5.133 months .154/30.

SL to be accrued (@ 6 days per year) 66 days 11*6

SL to be utilized 33 days
 Balance SL expected on retirement 75 days 42+(66-33)
2.50 months .75/30.

Total EL + SL counting for encashment 6.383 months .5.133+2.5/2.

Last Basic salary (monthly) drawn 73096 .31000*1.1^9.

Leave Encashment expected 466599 73096*6.383

23) B)

Total service proceeds of Mr. Martis 5297814 2758693+415387+623734+1500000

Deep discount bonds of M/s TUV Ltd. - sale value 1525000 610*2500
Interest received from bonds of M/s ABC Ltd. (on 1-Jan2009) 59409 1000*1000*0.09*0.6601
Interest received from bonds of M/s ABC Ltd. (on 1-Jan2009) 330050 50000*100*0.1*0.6601

Total starting corpus 7212273

Expected start date 1st January 2009

As the cashflows and requirements are in January every year

We may compile the net cashflow in January every year for individual years
Cashflow Total cashflow
1-Jan-10 (+) Interest Bonds M/s. XYZ 330050 389459
(+) Interest Bonds M/s. ABC 59409
1-Jan-11 (+) Interest Bonds M/s. XYZ 330050 1639459
(+) 25% redemp Bonds XYZ 1250000
(+) Interest Bonds M/s. ABC 59409
1-Jan-12 (+) Interest Bonds M/s. XYZ 247538 1306947
(+) Interest Bonds M/s. ABC 59409
(+) Redemp bonds ABC 1000000
1-Jan-13 (+) Interest Bonds M/s. XYZ 247538 247538
1-Jan-14 (+) Interest Bonds M/s. XYZ 247538 -742636
(+) 35% redemp Bonds XYZ 1750000
(-) Justin's studies 2740173
1-Jan-15 (+) Interest Bonds M/s. XYZ 31685 -2886600
(-) Clifford's marriage 2918285
1-Jan-16 (+) Interest Bonds M/s. XYZ 132020 132020
1-Jan-17 (+) Interest Bonds M/s. XYZ 132020 132020
1-Jan-18 (+) Interest Bonds M/s. XYZ 132020 132020
 1-Jan-19 (+) Final Redemp. XYZ 2000000 -16771375
(-) Clifford's venture 18771375
1-Jan-21 (-) Juntin's marriage 3000000 -3000000
These cash flows can be rewritten in the following way
1-Jan-09 7212273
1-Jan-10 389459
1-Jan-11 1639459
1-Jan-12 1306947
1-Jan-13 247538
1-Jan-14 -742636
1-Jan-15 -2886600
1-Jan-16 132020
1-Jan-17 132020
1-Jan-18 132020
1-Jan-19 -16771375
1-Jan-20 0
1-Jan-21 -3000000

The IRR of these cashflows gives us the required rate of return

to be targeted in any investment vehicle
IRR = 9.03%

24) B)

25) C)

26) D)

27) D)

28) B)

29) C)

Dividend paid to the investor 81060

Amount invested 3500000 350000*10

Rate of return 0.02316 81060/3500000

This return is after payment of dividend distribution tax @ 14.1625 %
 Hence pre-tax return 0.026981215 0.02316/(1-0.141625)

Hence the annualized return generated by the scheme

0.107924858 10.79%
0.026981215*4

30) A)

31) B)

32) C)
Expected shortfall to be met from
additional investment 6000000

This is future value of a 120 monthly installments

invested in an equity mutual fund yielding 13% p.a.

Rate per annum 0.13

Rate effective monthly 0.010236844 (1+0.13)^(1/12)-1
1.0236844% RATE(12,0,-100,113,1)
Such installment is given by 25390 (6000000*0.010236844/(1+0.010236844))/(((1+0.010236844)^120)-1)