Amity BBA Assignment A
Q1. At the end of five years, how much is the initial deposit of Rs 25,000 worth if the compounding annual rate is 10%. Also compute the worth of the initial deposit if the interest is compounded semiannually and quarterly.
Q2. Ramesh requires Rs 100,000 at the end of 5 years so he decides to keep certain equal amount out of his income at the end of each year in his bank account. The bank pays an interest of 8% per annum. How much should Ramesh save each year?
Q3. Star hotels ltd have two investment proposals that are as follows.
Period Cost Net Cash Flow
0 9000 Rs. 0
1 Rs. 1000
2 Rs. 1000
3 Rs. 1000
Period Cost Net Cash Flow
0 12000 Rs. 0
1 Rs. 5000
2 Rs. 5000
3 Rs. 8000
Compare both the projects on the basis of its payback period, Net present value and its profitability index using discount rate of 15%.
Q4. A company is planning to buy a new machine for Rs 2, 00,000 with life for 2 yrs. The cost of capital is 12 %. The cash flow after tax generated from the machine for 2 yrs are:
Year Cash flow after tax Probability
1 Rs 1,00,000 0.4
1 Rs 1,20,000 0.6
2 Rs 80,000 0.5
2 Rs 1,20,000 0.5
The cost of capital is 12% and risk free rate is 5%. Using the decision tree approach find out whether the investment should be made or not?
5 . Answer any three questions out of the following
a) What is operating cycle? How important is it for the management of working capital?
b) Distinguish between ( i) Gross and net working capital
ii) Permanent and temporary working capital
c) How do working capital management policies impact a firm’s risk and profitability ?
d) The balance sheet of X ltd as om 31 March 2010 is
Liabilities ( Rs) Assets (Rs)
Current Liabilities 1,00,000 Current assets 1,50,000
Long Term Liabilities 2,50,000 Fixed assts 2,00,000
Total 3,50,000 Total 3,50,000
Calculate the current ratio for the firm.
e) From the data provided below calculate the operating cycle.
Credit sales Rs 5,00,000
Cost of goods sold Rs 2,50,000
Purchases Rs 1,20,000
Average raw material stock Rs 60,000
Average work in progress Rs 55,000
Average finished goods stock Rs 92,000
Average creditors Rs 60,000
Average debtors Rs 1,50,000
Q6. The balance sheet and income statement of R Electricals is given below.
Equity Rs 4,50,000 18%
Preference shares Rs 1,00,000 11%
Debentures Rs 3,00,000 8%
Retained earnings Rs 1,50,000 18%
Net sales ( all credit) Rs 12,680
Cost of goods sold Rs 8,930
Gross profit Rs 3,750
Selling, general and administration expenses Rs 2,230
Interest Expense Rs 460
Profit before taxes Rs 1060
Taxes Rs 390
Profit after taxes Rs 670
Q7. Calculate the weighted average cost of capital from the following information provided
Q8. From the data given below find out the price of the share according to the Gordon’s model when dividend payout is 25% and 50%.
Earnings per share = Rs 8
Rate of return on investment = 16%
Return expected by share holders = 12%
Amity BBA Assignment B
Mergers and acquisitions in banking sector have become familiar in the majority of all the countries in the world. A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale. With the help of mergers and acquisitions in the banking sector, the banks can achieve significant growth in their operations and minimize their expenses to a considerable extent. Another important advantage behind this kind of merger is that in this process, competition is reduced because merger eliminates competitors from the banking industry. Mergers and acquisitions in banking sector are forms of horizontal merger because the merging entities are involved in the same kind of business or commercial activities. Sometimes, non-banking financial institutions are also merged with other banks if they provide similar type of services. Through mergers and acquisitions in the banking sector, the banks look for strategic benefits in the banking sector. They also try to enhance their customer base.
In the context of mergers and acquisitions in the banking sector, it can be reckoned that size does matter and growth in size can be achieved through mergers and acquisitions quite easily. Growth achieved by taking assistance of the mergers and acquisitions in the banking sector may be described as inorganic growth. Both government banks and private sector banks are adopting policies for mergers and acquisitions.
In many countries, global or multinational banks are extending their operations through mergers and acquisitions with the regional banks in those countries. These mergers and acquisitions are named as cross-border mergers and acquisitions in the banking sector or international mergers and acquisitions in the banking sector. By doing this, global banking corporations are able to place themselves into a dominant position in the banking sector, achieve economies of scale, as well as garner market share.
Mergers and acquisitions in the banking sector have the capacity to ensure efficiency, profitability and synergy. They also help to form and grow shareholder value. In some cases, financially distressed banks are also subject to takeovers or mergers in the banking sector and this kind of merger may result in monopoly and job cuts.
Deregulation in the financial market, market liberalization, economic reforms, and a number of other factors have played an important function behind the growth of mergers and acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be overcome through appropriate measures.
Mergers and acquisitions in banking sector are controlled or regulated by the apex financial authority of a particular country. For example, the mergers and acquisitions in the banking sector of India are overseen by the Reserve Bank of India (RBI).Indian competition law grants a maximum time period of 210 days for the determination of the combination, which comprises acquisitions, mergers, amalgamations and the like. One needs to take note of the fact that this stated time frame is clearly distinct from the minimum compulsory wait period for applicants.
As per the law, the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of the Commission’s order, whichever occurs earlier.
The threshold limits for firms entering business combinations are substantially high under the Indian law. The threshold limits are set either in terms of the asset value or in terms the firm’s turnover. Indian threshold limits are greater than those for the EU. They are twice as high when compared with UK.
The Indian law also provides for the modern day phenomenon of merger and acquisitions, which are cross border in nature. As per the law domestic nexus is a pre-requisite for notification on this type of combinations.
It can be noted that Competition Act, 2002 has undergone a recent amendment. This has replaced the voluntary notification regime with a mandatory regime. Of the total number of 106 countries, which possess competition laws only 9 are thought to be credited with a voluntary notification regime. Voluntary notification regimes are generally associated with business uncertainties. Post-combination, if firms are seen to be involved in anti-competitive practices de-merger shows the way out.
Indian Income Tax Act has provision for tax concessions for mergers/demergers between two Indian companies. These mergers/demergers need to satisfy the conditions pertaining to section 2(19AA) and section 2(1B) of the Indian Income Tax Act as per the applicable situation.
In case of an Indian merger when transfer of shares occurs for a company they are entitled to a specific exemption from the capital gains tax under the “Indian I-T tax Act”. These companies can either be of Indian origin or foreign ones.
A different set of rules is however applicable for the ‘foreign company mergers’. It is a situation where an Indian company owns the new company formed out of the merger of two foreign companies.
It can be noted that for foreign company mergers the share allotment in the merged foreign company in place of shares surrendered by the amalgamating foreign company would be termed as a transfer, which would be taxable under the Indian tax law.
Also as per conditions set under section 5(1), the ‘Indian I-T Act’ states that, global income accruing to an Indian company would also be included under the head of ‘scope of income’ for the Indian company.
Q1. Discuss the reasons they encourage mergers in the banking sector?
Q2. Discuss the legal implications of merger in India?
Amity BBA Assignment C
1. Compounding technique shows—
2. An infinite series of periodic cash flows growing at a constant rate is
3. Working capital represents—
4. An example of liquidity ratio is—
5. Discounting techniques in capital budgeting include—
6. Net Profit Ratio Signifies—
7. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What are the Current Assets?
8. Financial Planning deals with—
9. Capital Budgeting is a part of—
10. A proposal is not a Capital Budgeting proposal if it—
11. Two mutually exclusive projects with different economic lives can be compared on the basis of—
12. Risk in Capital budgeting implies that the decision-maker knows ___________of the cash flows.
13. Cost of Capital refers to—
14. Which of the following cost of capital require tax adjustment?
15. Which is the most expensive source of funds?
16. In case the firm is all-equity financed, WACC would be equal to—
17. Which of the following is true?
18. Advantage of Debt financing is—
19. Cost of Equity Share Capital is more than cost of debt because—
20. Which of the following is true for Net Income Approach?
21. NOI Approach advocates that the degree of debt financ¬ing is—
22. Dividend Payout Ratio is—
23. Which of the following is not the responsibility of financial management?
24. Which of the following are not among the daily activities of financial management?
25. The mix of debt and equity in a firm is referred to as the firm’s—
26. (1 + i)n stands for—
27. Net working capital refers to—
28. Retained earnings are—
29. The restructuring of a corporation should be undertaken if—
30. ____ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.
31. What is the most appropriate goal of the firm?
32. A company can improve (lower) its debt-to-total asset ratio by doing which of the following?
33. The DuPont Approach breaks down the earning power on shareholders’ book value (ROE) as follows– ROE = __________.
34. Which group of ratios measures how effectively the firm is using its assets?
35. Which of the following is not a cash outflow for the firm?
36. The accounting statement of cash flows reports a firm’s cash flows segregated into what categorical order?
37. Which of the following is a basic principle of finance as it relates to the management of working capital?
38. The amount of current assets required to meet a firm’s long-term minimum needs is referred to as __________ working capital
39. The overall (weighted average) cost of capital is composed of a weighted average of_____.
40. What is the most likely reason that a firm (who is highly profitable) might consider acquiring a firm that has had large recent losses and will continue to have losses into the near future?
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