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# FIN622 Assignment No. 01 Solution & Discussion Due Date:03-12-2014

FIN622 Assignment No. 01 Solution & Discussion Due Date:03-12-2014

Assignment Question:
MRS Enterprises wants to evaluate a new project having 6 years expected life, with the
following information:
New fixed capital investment is Rs. 2, 000,000 and initial investment in net working capital is
Rs. 200,000. At the end of each year, additional net working capital will be required to have
cumulative investment in net working capital equal to one sixth of next year forecasted sales.
New project is depreciated at the rate of 20 % in 1
st year, 32% in 2
nd year, 19.2% in 3rd year,
11.52% in 4
th
year, 11.52 % in 5th year, and 5.76% in 6
th year.
Sales are Rs. 1,200,000 in first year. They grow at a 25% annual rate for the next two years
then grow at a 10% annual rate for the last three years.
Marginal fixed expenses are Rs.150, 000 for first three years and Rs. 130,000 for last three
years.
Marginal variable expenses are 40 % of sales in 1st year, 39 % of sales in 2nd year, and 38% in
each of the remaining years.
MRS Enterprises will sell its fixed capital investments for Rs. 150,000 when the project
terminates and recapture its cumulative investment in net working capital. Income taxes will
be paid on any gains.
Marginal tax rate is 30%. And, the project’s required rate of return is 18 percent.
Required:
a) You as a financial manager are required to calculate the following;
1. Net Present Value (NPV)
2. Internal Rate of Return (IRR)
3. Accounting Rate of Return (ARR)
Based on the values of each of the above, make decision regarding the acceptance of the
project.
b) Which capital budgeting technique is best in your opinion? Justify your answer with some
logical comments.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 and calculations
thoroughly. Provide complete calculations for all parts of the questions.
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.

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### Replies to This Discussion

any one have plz share assignment solution

plx share complete assignment ..........

file open nhi ho rahi...

plz upload full and final solution

use MS OFC 2007 to open file...

and thanks Roseena ji... ALLAH jaza de apko

by Roseena file
Sales fixes exp variable exp depreciation Pretax income tax(30%) net income discounted CF
1st Year 1200000 150000 480000.0 400000 170000.0 51000 119000.0 100847.4576
2nd Year 1500000 150000 585000.0 640000 125000.0 37500 87500.0 62841.1376 NPV= 523653.0154
3rd Year 1875000 150000 712500.0 384000 628500.0 188550 439950.0 267767.1524
4th Year 2062500 130000 783750.0 230400 918350.0 275505 642845.0 331572.2994
5th year 2268750 130000 862125.0 230400 1046225.0 313867.5 732357.5 320120.2128
6th year 2495625 130000 948337.5 115200 1302087.5 390626.25 911461.3 337633.9937
Amount on terminatoin 150000 55564.73088
total 1476346.985
total of dep 2000000 total net income 2933113.8 Avg Net Income 488852.2917
fixed investment 2000000 =1/(1.18)' 1.18 Avg Book Value 1000000
=1/(1.18)' 1.3924 AAR 0.488852292
=1/(1.18)' 1.643032
IRR =1/(1.18)' 1.93877776
-2000000 =1/(1.18)' 2.287757757
119000.0 =1/(1.18)' 2.699554153
87500.0
439950.0
642845.0
732357.5
911461.3
IRR 9%

plz upload in doc. file. open nhi ho rhi

oh GOD plz help us

chk now guys....

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