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Business Finance Assignment No. 2 Solution and Discussion Spring 2014 of Virtual University (VU)

 Business Finance Assignment No. 2 Solution and Discussion Spring 2014 of Virtual University (VU)

• Calculate net cash flows by incorporating the effects of tax and depreciation.

• Evaluate any proposed project by using different capital budgeting techniques.

• Derive inferences regarding the acceptance/rejections of the project.

The Case:

Mr. Waseem wants to start “Printing on Packages” business. He wants to start this business with

4 printing machines. He estimates that the required investment for the business is Rs. 40 Million.

He projects that revenue (before tax and depreciation) from the business will be Rs.8 Million for

the first year and it will keep on growing at a rate of 5.5% annually till the 10th year.

Some other information regarding the project is as follows:

• Annual depreciation will be Rs. 4 Million under the straight line method.

• Cost of capital is 10% while the rate of tax is 33%.

Suppose you are running a financial consultancy firm, Mr. Waseem wants to get his project

evaluated by your firm. You have to suggest Mr. Waseem about the feasibility of the project after

performing different techniques of financial analysis to start a new project.

Requirement:

Keeping your task into consideration, provide answers to the following:

1. Calculate net cash flows for 10 years. (10 Marks)

2. Evaluate the project by using the following capital budgeting techniques:

a. Payback Period (The desired payback period is 4.5 years) (04 Marks)

b. Net Present Value (10 Marks)

c. Profitability Index (03 Marks)3. Is there any contradiction among the results of above used techniques? What would be

your final recommendation regarding the acceptance/rejection of the project? Support

your recommendation with financial rationale. (03 Marks)

Special Note: Complete calculations are required for Part (1) and Part (2). Incomplete

calculations will result in loss of marks.

SOLUTION GUIDELINES:

Please read the following instructions carefully before preparing the assignment solution:

• Do prepare the solution after completely reading and understanding the questions.

• Put your genuine efforts in order to understand the concepts thoroughly.

• Provide complete calculations first two parts of the question.

 

Solution:

year
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
Revenue
8,000,000
8,440,000
8,904,200
9,393,931
9,910,597
10,455,68
11,030,742
11,637,433
12,277,492
12,952,754
Less Deprecation
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
EBIT
4,000,000
4,440,000
4,904,200
5,393,931
5,910,597
6,455,68
7,030,742
7,637,43
8,277,492
8,952,754
Taxes @ 33%
1,320,000
1,465,200
1,618,386
1,779,997
1,950,497
2,130,374
2,320,145
2,520,353
2,731,572
2,954,409
Earnings after Taxes
2,680,000
2,974,800
3,285,814
3,613,934
3,960,100
4,325,306
4,710,597
5,117,080
5,545,920
5,998,345
Add back Deprecation
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
4,000,000
Net Cash flow
6,680,000
6,974,800
7,285,814
7,613,934
7,960,100
8,325,306
8,710,597
9,117,080
9,545,920
9,998,345

2. Evaluate the project by using the following capital budgeting techniques:

a. Payback Period (The desired payback period is 4.5 years) (04 Marks)

Solution:

Payback Period

1st year
2nd year
3rd year
4th year
5th year
6th year

Initial investment
40,000,000

Cash flows
(40,000,000)
6,680,000
6,974,800
7,285,814
7,613,934
7,960,100
8,325,306
Cumulative cash

flows

(33,320,000)
(26,345,200)
(19,059,386)
(11,445,452
(3,485,352)
4,839,954

Calculation:

Investment return in 5.42 Years 5.42 Years

Days 153 5 Months

b. Net Present Value (10 Marks)

Solution:

 

Year 1
1/(1+0.1)^1
0.9091
6680000
6072727
Year 2
1/(1+0.1)^2
0.8264
6974800
5764298
Year 3
1/(1+0.1)^3
0.7513
7285814
5473940
Year 4
1/(1+0.1)^4
0.6830
7613934
5200419
Year 5
1/(1+0.1)^5
0.6290
7960100
4942596
Year 6
1/(1+0.1)^6
0.5645
8325306
4699418
Year 7
1/(1+0.1)^7
0.5132
8710597
4469914
Year 8
1/(1+0.1)^8
0.4665
9117080
4253185
Year 9
1/(1+0.1)^9
0.4241
9545920
4048402
Year 10
1/(1+0.1)^10
0.3855
9998345
3854795

Calculation:

6072727+5764298+5473940+5200419+4942596+4699418+4469914+4253185+4048402+3854795 = 48779694

Investment value = 40,000,000

NPV = 48779694 – 40,000,000 = 8779694 = 8.78million

ENG101 – English Comprehension Assignment No. 3 Solution and Discussion Spring 2014 of Virtual University (VU)

ENG101 – English Comprehension Assignment No. 3 Solution and Discussion Spring 2014 of Virtual University (VU)

Q1. Read the text and complete the following table with the help of information

given in the text. (10Marks)

 

Sir Isaac Newton was born on December 25, 1642 in Wools Thorpe, near Grantham in

Lincolnshire, England. He was born in the same year that Galileo died. Newton is probably the most important scientist in the history. Newton published his work in two books. Principia is one of those books. Newton studied at Trinity College, Cambridge, from 1661 to 1696. In this period, he produced most of his important works. Then, in 1696, he moved to London, where he lived until his death on March 20, 1727.

 

Ludwig van Beethoven was a German composer and a musician of classical music. He was born in Bonn, Germany in 1770. Beethoven’s father was a musician. He gave the young Beethoven his first music lessons. Beethoven composed Symphonies, a kind of western classical music, which became popular all over the world. Especially his fifth, sixth, and ninth symphonies are fabulously great! Beethoven had a complicated life. When he was 28, he started to go deaf. Beethoven was often in poor health, and in 1826 it suddenly got worse. His death the following year was probably the result of liver disease.

 

ISL201 – Islamic Studies Assignment No. 2 Solution and Discussion Spring 2014 of Virtual University (VU)

ISL201 – Islamic Studies Assignment No. 2 Solution and Discussion Spring 2014 of Virtual University (VU)

Q1: Why Muslim scientists give much attention to medicine and public health care? 5
Marks
Q2: How did the Holy Prophet Muhammad (PBUH) treat Abu Sufyan at the victory of
Makkah? 5 Marks
Q3: One Muslim has right over his Muslim brother. Describe five rights of one Muslim
over another in the light of Hadith. 5 Marks

 

in islam, the human body is a source of appreciation, as it is created by Almighty Allah (God). How it functions, how to keep it clean and safe, how to prevent diseases from attacking it or cure those diseases, have been important issues for Muslims.
Ibn Sina (d. 1037), better known to the West as Avicenna, was perhaps the greatest physician until the modern era. His famous book, Al-Qanun fi al-Tibb, remained a standard textbook even in Europe, for over 700 years. Ibn Sina’s work is still studied and built upon in the East.
Prophet Muhammad himself urged people to “take medicines for your diseases”, as people at that time were reluctant to do so. He also said,
“God created no illness, except that He has established for it a cure, except for old age. When the antidote is applied, the patient will recover with the permission of God.”

This was strong motivation to encourage Muslim scientists to explore, develop, and apply empirical laws. Much attention was given to medicine and public health care. The first hospital was built in Baghdad in 706 AC. The Muslims also used camel caravans as mobile hospitals, which moved from place to place.
Since the religion did not forbid it, Muslim scholars used human cadavers to study anatomy and physiology and to help their students understand how the body functions. This empirical study enabled surgery to develop very quickly.
Al-Razi, known in the West as Rhazes, the famous physician and scientist, (d. 932) was one of the greatest physicians in the world in the Middle Ages. He stressed empirical observation and clinical medicine and was unrivalled as a diagnostician. He also wrote a treatise on hygiene in hospitals. Kahaf Abul-Qasim Al-Sahabi was a very famous surgeon in the eleventh century, known in Europe for his work, Concessio (Kitab al-Tasrif).
Other significant contributions were made in pharmacology, such as Ibn Sina’s Kitab al-Shifa’ (Book of Healing), and in public health. Every major city in the Islamic world had a number of excellent hospitals, some of them teaching hospitals, and many of them were specialized for particular diseases, including mental and emotional. The Ottomans were particularly noted for their building of hospitals and for the high level of hygiene practiced in them.

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