Acc501 Assignment No. 1 solution

Virtual University Of Pakistan

ACC501 1 Spring Semester 2011

“Business Finance (ACC501)”

Assignment No. 01 Total Marks: 15

Question # 01
JJ Corporation’s last year Return on Equity (ROE) was only 2.5 percent. Management wants to improve Return on Equity (ROE), for this purpose they has developed a new plan and made following amendments:

For new plan total debt ratio is of 55 percent, it will result in interest expense of Rs. 300,000 per year. Projected EBIT of Rs. 1,000,000 on sales of Rs. 15,000,000 and it expects to have a total assets turnover ratio of 2. Under these conditions, the tax rate will be 30 percent.

Required:
1. What will be the effect of new plan on company’s ROE?
2. Either management should consider new plan or not?
NOTE: Show complete working for this in proper format

Question # 02
A textile company has Rs. 650,000 of debt outstanding and pays interest 65,000 annually on debt. Its annual sales are Rs. 3 million its tax rate is 35percent and its net profit margin on sales is 6 percent. Textile Company has applied for loan from bank. There is a conditionfrom bank for loan sanction, company has to maintain TIE ratio at least 4times, and otherwise bank will reject loan request.

Required:
1. Calculate Time Interest Earned Ratio (TIE).
2. By keeping in view your result, what do you think that bank will sanction loan on the basis of given condition of Time Interest Earned Ratio (TIE)?

Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 12 and reading handouts as well as
recommended text book).

Assignment Schedule

Opening Date and Time 18th April , 2011 At 12:01 A.M. (Mid-Night)

Due Date and Time 21st April , 2011 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.

Deadline:
• Make sure that you upload the solution file before the due date. No assignment will be accepted through e-mail once the solution has been uploaded by the instructor.

Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised t compose your document in MS-Word 2003.
• Use black and blue font colors only.

Solution guidelines:
• For acquiring the relevant knowledge don’t rely only on handouts but watch the video lectures and use other reference books also.

Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…
::::::::::::::::::::::::::::


Solution:


Calculating the ROE using Du Pont model:
From Debt ratio:
Debt ratio = 0.55
Therefore, the company has $0.55 in debt for every $1 in assets. Therefore, there is $0.45 in equity (1-$0.55) for every $0.55 in debt.
Debt-equity ratio = Total debt / Total equity
= $0.55 / $0.45
= 1.2
Equity multiplier = 1 + Debt-equtiy ratio
= 1 + 1.2
= 2.2
ROE = (Net income / Sales ) * (Sales / Assets) * (Assets / Total equity)
= Profit margin * Total asset turnover ratio * Equity multiplier

But Net income is calculated as:
EBIT $1,000,000
(-) Interest $300,000
-----------------------------------
EBT $700,000
(-) Taxes 30% $210,000
---------------------------------
Net income $490,000
------------------------------
ROE = ($490,000 / $15,000,000) * 2.0 * 2.2
= 0.03267 * 2.0 * 2.2
= 0.1437 or 14.37%
The company's ROE will increase by 11.87%
b) The company should take up the new plan as it is giving the higher ROE.

Eco403 GDB Solution

Ali, a Pakistani resident, purchased a car worth Rs. 3, 00,000 that was produced entirely in China. Does this transaction affect Pakistan’s GDP? Justify your answer.

Note: Your answer must be within the range of 50-100 words.

Solution:

Yes this transaction will cause a decrease in Pakistan’s GDP.
GDP = C + I + G + NX
And
NX = Total Export – Total Import
This transaction will decrease the Net export which will also decrease the GDP.

::::::::::::::::::::::::::::::

GDP of a country is always equal to the = Consumption(C) + Investment(I) + Government purchases(G) + Net Export (NX)

in our question it has been said that car was manufactured by China. it means that it was imported from china.
formula for Net Export is = tolal export - total import
so, if we will import anything than it will decrease our net exports...
due to a decrease in net export will cause a decrease in GDP,,

Fin630 Assignment No. 1 solution

Spring Semester 2011

“Financial Analysis & Portfolio Management (Fin 630)”

Assignment No. 01 Total Marks: 20

Question #01
Ellite Corporation has total assets of Rs. 6,000,000 of which Rs. 1,000,000 is inventory, Rs. 500, 000 is cash, Rs. 1,000, 000 is account receivable, Rs. 500, 000 is marketable securities and the balance is fixed assets. Ellite Corporation has total liabilities of Rs. 2,500, 000 of which current liabilities are Rs. 15, 00,000.


1. Calculate the current and quick ratio for Ellite Corporation.
2. If Ellite Corporation takes 250,000 from cash and pays off Rs. 250,000 of current liabilities, what happens to its current ratio and quick ratio?
3. If Ellite Corporation sells the inventory of Rs. 10, 00, 000 and places the proceeds from the sale of inventory in marketable securities, what happens to its current ratio and quick ratio?


Question #02
Currently Alpha Corporation’s shares are selling at $60 per share and company is paying dividend of $5 per share. Dividends are expected to grow at an annual rate of 3% for foreseeable future. Required rate of return for investors is 12% At the same time, Heller Corporation’s shares are selling at $58 per share and company is paying dividend of $4 per share. Dividends are expected to grow at an annual rate of 5% for foreseeable future. Required rate of return for investors is 12%


a) Calculate the current value of each stock on the basis of Dividend Discount Model.
b) On the basis of above calculation, determine either each stock is overvalued or undervalued.


Note:
Show complete working (formula and calculations) for each part of question.
2
Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 12 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from www.youtube.com/vu.
Assignment Schedule
Opening Date and Time 19th April , 2011 At 12:01 A.M. (Mid-Night)
Due Date and Time 22nd April , 2011 At 11:59 P.M. (Mid-Night)
Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned
due date is usually available to overcome uploading difficulties which may be faced by the
students on last date. This extra time should only be used to meet the emergencies and above
mentioned due dates should always be treated as final to avoid any inconvenience.
Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.
Deadline:
• Make sure that you upload the solution file before the due date. No
assignment will be accepted through e-mail once the solution has been
uploaded by the instructor.
Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised t compose your document in MS-Word 2003.
• Use black and blue font colors only.
Solution guidelines:
• For acquiring the relevant knowledge don’t rely only on handouts but
watch the video lectures and use other reference books also.
• Show complete working (formula and calculations) for each part of
question.
• Marks will be deducted if complete working is not provided.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…
:::::::::::::::::::::::::::


Solution:

Question # 1

(1)
Current Ratio = 3,000,000 / 1,500,000 = 2
Quick ratio = 2,000,000 / 1,500,000 = 1.34

(2)
Current Ratio = 2.2
Quick Ratio = 1.4

(3)
Current Ratio = 2
Quick Ratio = 2

Question # 2

(1)
Dividend Discount Model = P0 = 5 ( 1+ 3% ) / (12% - 3%)
= 57.22

Dividend Discount Model = P0 = 4 ( 1 + 5% ) / (12% - 5%)
= 60

(2)

Stock of Alpha Corps is overstated by 60 - 57.22 = Rs. 2.78
Stock of Heller Corps is understated by 58 - 60 = Rs. 2

_________________


Question #01
Ellite Corporation has total assets of Rs. 6,000,000 of which Rs. 1,000,000 is
inventory, Rs. 500, 000 is cash, Rs. 1,000, 000 is account receivable, Rs. 500, 000 is
marketable securities and the balance is fixed assets. Ellite Corporation has total
liabilities of Rs. 2,500, 000 of which current liabilities are Rs. 15, 00,000.

1. Calculate the current and quick ratio for Ellite Corporation.
Current Ratio: current asset/ current liabilities
Current asset: 1,000,000 + 500, 000 + 1,000, 000 + 500, 000 = 3000000
Current Ratio = 3000000 / 15, 00,000 = 2
Quick ratio: Current assets- Inventories/ Current Liabilities
= 2000000 / 1500000 = 1.33

2. If Ellite Corporation takes 250,000 from cash and pays off Rs. 250,000 of current
liabilities, what happens to its current ratio and quick ratio?
Cash = 250000
Current asset = 1,000,000 + 250, 000 + 1,000, 000 + 500, 000 = 2750000
Current liabilities =1500000-250000 = 1250000
Current Ratio = 2.2
Quick ratio: Current assets- Inventories/ Current Liabilities
Quick ratio: 1750000/1250000 = 1.4
Answer: both increases

3. If Ellite Corporation sells the inventory of Rs. 10, 00, 000 and places the proceeds
from the sale of inventory in marketable securities, what happens to its current ratio
and quick ratio?
Current Ratio: current asset/ current liabilities
Current asset: 500, 000 + 2,000, 000 + 500, 000 = 3000000
Current Ratio = 3000000 / 15, 00,000 = 2
Quick ratio: Current assets- Inventories/ Current Liabilities
= 3000000-0 / 1500000 = 2
Answer : current ratio remain same and quick ration increase

Question #02
Currently Alpha Corporation’s shares are selling at $60 per share and company is
paying dividend of $5 per share. Dividends are expected to grow at an annual rate of
3% for foreseeable future. Required rate of return for investors is 12%
At the same time, Heller Corporation’s shares are selling at $58 per share and
company is paying dividend of $4 per share. Dividends are expected to grow at an
annual rate of 5% for foreseeable future. Required rate of return for investors is
12%
a) Calculate the current value of each stock on the basis of Dividend Discount
Model.

Alpha Corporation
Dividend Discount Model = P0 = 5 (1+ 3%) / (12% - 3%)
= 57.22
Heller Corporation
Dividend Discount Model = P0 = 4 (1 + 5%) / (12% - 5%)
= 60
b) On the basis of above calculation, determine either each stock is overvalued or
undervalued.
Stock of Alpha Corporation is overstated by 60 - 57.22 = Rs. 2.78
Stock of Heller Corporation is understated by 58 - 60 = Rs. 2

Eng301 Assignment Solution

Assignment 1 (Spring 2011)

Business Communication-ENG301

Total Marks: 15

Q1. “External communication is marketing of a business organization.” MARKS 10

Answer # 01

External Communication

Communication that takes place outside the organization is called external communication. The right letter, proposal, report, telephone call, or personal conversation can win back an angry customer, create a desire for a firm’s product or services, encourage collections, motivate performance, and in general, create goodwill. Yes it is marketing of a business organization.  Things like establishing a brand, marketing your products and services, advertising, working on things like public relations, media management and even businesses dealings with customers or other firms fall in the category of external communication. it ultimately contributes to the growth of your business. Thus, business communication is an integral aspect that will help you go ahead and establish yourself.

Q2. Select the appropriate answer from the given options. MARKS 5

1. The word ___________means the act or process of giving or exchanging of information, signals, or messages as by talk, gestures, or writing.

a. Talking

b. Speech

c. Communication

d. Writing

2. An exchange of information within an organization is called ___________. It takes place at different levels

a. External Communication

b. Internal Communication

c. General Communication

d. Informal Communication

3. Another name for electronic theory of communication is _____________.

a. Scientific Theory

b. Arithmetic Theory

c. Mathematical Theory

d. Hypothetical Theory

4. _________________ is of the social and behavioral scientists. It says that we must consider the situation, the social context in which we will work.

a. Sociolinguistic Theory

b. Psycholinguistic Theory

c. Social Environment Theory

d. Situational Theory

5. _________________ states that Communication is not linear, but circular; not just sending a message to be received, but producing a response; not static, but dynamic.

a. Rhetorical Theory

b. Social Environment Theory

c. Electronic Theory

d. Behavioral Theory

ENG101 Assignment No:01 solution

Q1: Choose the best meaning for each highlighted word. 4
1. Joseph wanted to adopt a healthy lifestyle, so he resolved to abstain from high-fat, fast food and sugar-laden sodas.

[list]
[*]Agree to unwillingly
[*]Give up voluntarily
[*]Accept without question
[*]Stain one’s reputation
2: The coach observed his team’s bizarre behavior and concluded that the players were suffering from dehydration.

[list]
[*]Unusual
[*]A flea market and bake sale
[*]Appropriate
[*]Ordinary
3: The Senate hearing committee demanded the corporation’s officers to provide credible documents to explain their unusual accounting procedures.

[list]
[*]Practical
[*]Praiseworthy
[*]Believable
[*]Worthless
4: Usman knew that the reading class would improve his vocabulary and comprehension, thus increasing his chances of success in subsequent college courses.

[list]
[*]Following
[*]First
[*]Out of order
[*]Less important

Q2: Read the following paragraph and find out the Main Idea and Supporting
Details. Suggest a suitable Topic as well. 6

1. A common man never wants a war and is not even in favour of borders and boundaries.2.He is against prejudices and wants an integrated world. 3.Uncountable marriages among unlike and diverse nationalities and the reactions of people all over the world against US invasion on Afghanistan and Iraq are the symbols of same peace loving, cosmopolitan emotions and mentalities all over the world. 4. But there are groups of a few people present in every country who claim to be sincere with their nations. 5. These so called sincere include passionate political and military leaders. 6. To satisfy their motives they sow the seeds of hatred in the hearts of their nations and then after giving birth to an issue, and by making it crucial and complex, they indulge innocent people in that. 7. Media has provided them an easy way to mislead their people. 8. By using the media machinery they mould the minds of their nation according to their own wish.



Topic:1) peace

2) patriotism

Sentence 1: Every inhabitant wants peace & prosperity in thier country.

Sentence 2: He wants incorporated wolrd which based on justice & equality.

Sentence 3: Different people that belong to different countries ( multi national) wants to treat every
human with peace, love, ethic no matter of state & they are against US offensivness.
They have different mentality power.


Sentence 4: there is also present a few leaders that represent thier self as patriotic people but in reality
they are not patriotic & honest with thier country.


Sentence 5: Mostly people that represent their self as patriotic are zealous political and military
leaders


Sentence 6: The aim of that kind of leaders is just too born hate in the hearts of patriotic people &
they spoil innocent people.


Sentence 7: With the help of media they succeeded in their purpose of misleading innocent people.


Sentence 8: Those leaders always think about their own self; they take decisions that provide them
benefit. Media plays a very important role in this. Media now can change the mind of
citizen’s




Q4: Put the correct form of words given in brackets while using affixes. 5


[list=1]
[*]This word is very difficult to spell, and even worse, it's _______pronunciation___________.(Pronounce)
[*]He's lost his book again. I don't know where he has ______placed____________ it this time. (Place)
[*]He wants to be a _____________Mathematician_____when he grows up. (Mathematics)
[*]I think that you should ______considerable____________.It may not be the best thing to do. (Consider)
[*]She looked at her __________reflection________ in the mirror. (Reflect)