Mid Semester Assignment

Course Code: FIN - 254

Section: 08

Prepared By:

Name ID
Fahim Faisal 1620560030

Submitted to:

Ms. Humaira Haque

Department of Accounting and Finance

North South University,

Dhaka

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Date of Submission: 20th April, 2021
 Answer to the question No. 1

a) FV= 1000(1 + 0.08)3 [FV=PV(1+R)^N]

FV= 1259.712

b) Number of periods = 3 years × 4=12

Quarterly rate = 8%⁄4%= 2%

FV = {1000(1 + 0.02)12 }
FV = 1268.24

c) Account balance on Jan 1st 2021 = {$333.33 × (1 + 0.08)3 } + {$333.33 × (1 + 0.08)2 }+

{$333.34 × (1+0.08)}
= $420 + $389 + $360
= $1,169

d) Account balance on Jan 1st 2018 = {$333.33 × (1 + 0.08)4 } + {$333.33 × (1 + 0.08)3 }

+ {$333.34 × (1 + 0.08)2 }
= $453.50 + $420 + $389
= $1,262.50

e) 2019 = 1000 × 8%

= 80

2020 = 1000 + 80

= 1080 × 8%

= 86.4

2021 = 1080 + 86.4

= 1166.4 × 8%

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 = 93.312

Total amount = (1000+80+86.4+93.312)

= $1259.712

Answer to the question No. 2

CF = (𝑃𝑉 × 𝑟) ÷ {1 − 1⁄(1 + 𝑟)𝑛 }

= (25000 × 0.1) ÷ {1 − 1⁄(1 + 0.1)3 }

= 10,052.87

Answer to the question No. 3

CF = 4100, N = 17, R = 0.097

(1 + 𝑅)𝑁 − 1⁄
FV = CF × { 𝑅}
(1 + 0.097)17 − 1⁄
= 4100 × { 0.097}
= 4100 × 39.48
= 161868
Again,
CF = 6900, N = 11, R = 0.097
(1 + 𝑅)𝑁 − 1⁄
FV = CF × { 𝑅}
(1 + 0.097)11 − 1⁄
= 6900 × { 0.097}
= 6900 × 18.25
= 125925
Again,
(1 + 𝑅)𝑁 − 1⁄
FV = CF × { 𝑅}

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 (1 + 0.097)16 − 1⁄
= 14500 × { 0.097}
= 14500 × 35.05
= 508225
The sum of the investments = 161868 + 125925 + 508225 = 796,018

The price is $1000000 which is more than $796,018. So, I won’t be able to fulfil the price with 3
investments.

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 Answer to the question No. 4
a)

Details $ $
Cash Flow from Operating 2020
Activities
Net Income (160,176)
Add: Depreciation 116,960
Increase in Account (280,960)
Receivable
(Cash Outflow)
Increase in inventory (572,160)
(Cash Outflow)
Increase in Account payable 378,560
(Cash Inflow)
Increase in accruals 353,600
Cash Inflow from Operating (164,176)
Activities
Cash Flow from Investing
Activities
Purchase Plant and Equipment (711,950)
(Cash Outflow)
Cash Outflow from Investing (711,950)
Activities
Cash Flow from Financing
Activities
Increase in notes payable 436,808
(Cash inflow)

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Increase in long-term debt 400,000
(Cash inflow)
Increase in Dividends (11,000)
(Cash Outflow)
Cash inflow from Financing 825,808
Activities
Decrease in Cash and (50,318)
equivalents
Opening Cash 57,600

Closing Cash 7,282

b) FCF = Operating cash flow – Capital expenditure – Dividend paid

= 164,176 – 711,950 – 11,000
= –$558,774

c) Gross profit margin of 2020 = (Gross profit⁄Sales) × 100

= 506000/6034000 ×100 = 8.39%
Debt Ratio of 2020 = (Total liabilities⁄Total assets) × 100

= (2374000⁄2866592) × 100 = 82.82%

Return on common equity of 2020 = Net income⁄Common equity

= 160176⁄492592 = −32.52%

Total asset turnover ratio = Sales⁄Average total assets

=6034000⁄(2866592 + 1468800) ÷ 2 = 2.78%

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 Answer to the question No. 5

 Interest Income = 4,650,000

Tax on interest income = 4,650,000 × 40% = 1,860,000

 Capital gain realized = 50,000

Tax on capital gain = 50,000 × 40% = 20,000

 Dividend income = 65,000

Dividend income is exempt from tax so no tax is payable

Answer to the question No. 6

PV = Amount invested = $77,000

N1 = 40 years

N2 = 40-10 = 30 years

r = Annual Interest rate = 12%

Amount in 40 years of invested today = PV × (1 + 𝑟)^𝑁1

= $77,000 × (1 + 12%)40

= $77,000 × 93.05097044

= $7,164,924.724

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Amount in 40 years if invested after 10 years = PV × (1 + 𝑟)𝑁1

= $77,000 × (1 + 12%)30

= $77,000 × 29.95992212

= $2,306,914.003

Amount in 40 years of invested today is $7,164,924.72

Amount in 40 years of invested after 10 years is $2,306,914.00

It is better to invest today

Then,

Amount to be invested after 10 years = Amount in 40 years if invested today / (1 + 𝑟)𝑁2

= $7,164,924.72 / (1 + 12%)30

= $7,164,924.72 / 29.95992212

= $239,150.312

Therefore, Amount to be invested after 10 years to have the same amount as invested today is
$239,150.31