GA Assignment-2

Task 1
The total liabilities are higher than the shareholder’s equity. The investor
would think about whether to invest in the company or not because having too
much debt is too risky for a firm in the long run.
If the company’s total liabilities are too low compared to the shareholder’s
equity, the investor capital structure is not conducive enough to achieve
Company A’s Debt-to-equity ratio is 1.55 and company’s B Debt-to-equity ratio
is 1.75. company A is better than company B because Debt is less risky in
company B. The better is company A.

Task 2
Bothe company is paid low tax on the particular project and investment
decision. By taxing activities differentially, the government can encourage
certain activities and discourage others. Suppose our benchmark is an asset
whose returns are taxed fully each year to ordinary rates. That is tax is 2% both
companies are well deferred on any part of the economic gain that accrues
from holding the asset. A fully taxable bound that is default free the interest
rate on which is set to market rates each period.
Task 3
Company A
NPV=CASH OUTFLOW/(1+INTERST) ^N
S.NO Yearly dividend Percentage Returns
1st 250500000 0.930 ₹ 23,30,23,255.81

2nd 250500000 0.865 ₹ 21,67,65,819.00

3rd 190000000 0.804 ₹ 15,29,42,508.00

4th 190000000 0.748 ₹ 14,22,72,100.00

5th 190000000 0.696 ₹ 13,23,46,140.00

6th 190000000 0.647 ₹ 12,31,12,688.00

7th 190000000 0.602 ₹ 11,45,23,431.00

 GA Assignment-2

8th 190000000 0.560 ₹ 10,65,33,424.00

TOTAL ₹ 1,22,15,19,365.81

Calculate of Return of investment = 1,22,15,19,365.81/1200000000*100

=10179%

Company B

S.NO Yearly dividend Percentage Returns

1st 180000000 0.930 167400000

2nd 180000000 0.865 155700000

3rd 180000000 0.804 144720000

4th 750000000 0.748 134640000

5th 750000000 0.696 522000000

6th 750000000 0.647 485250000

7th 750000000 0.602 451500000

8th 750000000 0.560 420000000

TOTAL 2481210000

Calculate of Return of investment =2481210000/900000000*100

=275.69%

Compare the company better than company A is high returns so that are project A is accept.

Task 4

Project A of cash outflow is 120crore and the Payback period is 8 years and 5months.
 GA Assignment-2

Project B of cash outflow is 90crore and the payback period is 4 years and 8months.