ACC501 Assignment 1 Solution fall 2017

Acc501 ASSIGNMENT 1 SOLUTION FALL 2017

Dear VU (Virtual University of Pakistan) Students, here you read and download ACC501 (BUSINESS FINANCE) Assignment No.1 SolutionFall–2017. Assignment Total Marks 30. You can download easily Assignment Solution click the download button and get Assignment Solution. Assignment Open Date 16th January 2018 and Assignment Closing Date 22th January 2018. You can also like for latest update our Facebook page, YouTube channel and follow on Google+.

important instructions

Deadline:

• Make sure to upload the solution file before the due date on VULMS.
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Note related to load shedding: Please be proactive

Dear students!

• As you know that Post Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.

Learning Objectives:

After attempting this assignment, you will be able to:

• Understand the different capital budgeting techniques.
• Calculate projected net cash flows by considering the effect of depreciation and taxes.
• Evaluate any proposed project by using different capital budgeting techniques.
• Derive inferences after critical analysis regarding the acceptance/rejections of the project.

The Case:

Mr. Imran wants to establish a business of manufacturing spare parts of 70cc motorcycle. He estimates a start-up cost of business with heavy machinery of worth Rs. 30 million. He further projects that the 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 4% annually up to year 6. Some other information regarding the project is as follows:

The machinery is fully depreciated under the straight-line method till the end of year 6.

Cost of capital is 8% while the tax rate is 40%.

As per an estimate, the machinery dismantling and the site restoration would require an outlay of Rs. 5 million; while the machinery would not be able to fetch any sale price.

Being a financial consultant of Mr. Imran, you have to conduct a feasibility analysis for his project. You have to suggest Mr. Imran about the viability of the project after performing different Capital Budgeting techniques.

Requirement:

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

• Calculate projected net cash flows for 6 years.  (10 Marks)

Evaluate the project by using the following capital budgeting techniques:

• Payback Period (The desired payback period is 4 years)     (04 Marks)
• Net Present Value        (8 Marks)
• Profitability Index        (03 Marks)

Comments if there is any difference in the results among the above used techniques? Would you recommend Mr. Imran to start his business based upon your analysis? (05 Marks)

Special Note:

• Complete calculations are required for Part (1) and Part (2). Incomplete calculations will result in loss of marks.

Important:

24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. 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

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You can Also Download Midterm Solved Past Papers referenceby Moaaz and Waqar Sidhu, Final term Solved Past Papers reference by Moaaz and WaqarSidhu, GDB Solutions, Assignment Solutions, and Solved Quizzes files, PPTSlides, Handouts, Final term Short Notes, Mid Term Short Notes and NTS Guidelines.