Institute of Chartered Financial Analysts of India (ICFAI) University 2008 Certification Certified Financial Planner Portfolio management - Question Paper

Closing balance 1255.16 990.38 786.89 629.87 508.14
Interest on term loan
(Rs. in lakh)
Years Half-years Opening balance Interest
(semi-annual)
Annual
interest Repayment Closing
balance
1 first 550.00 31.63
63.26
0.00 550.00
2nd 550.00 31.63 0.00 550.00
2 first 550.00 31.63
63.26
0.00 550.00
2nd 550.00 31.63 0.00 550.00
3 first 550.00 31.63
63.26
0.00 550.00
2nd 550.00 31.63 110.00 440.00
4 first 440.00 25.30
44.28
110.00 330.00
2nd 330.00 18.98 110.00 220.00
5 first 220.00 12.65
18.98
110.00 110.00
2nd 110.00 6.33 110.00 0.00
Working capital Requirement
(Rs. in lakh)
Month one two three four 5
Raw material 1.0
181.48 215.12 251.08 260.54 270.41
Work-in-process 0.5
94.50 112.03 133.05 137.83 142.82
Finished goods
353.79 417.73 492.94 511.98 531.95
Receivables 1.5
652.05 771.28 898.06 929.49 962.03
Cash requirement 27.19 31.68 38.78 40.39 42.11
Total 1309.01 1547.84 1813.91 1880.23 1949.32
Working capital margin 316.80 316.80 316.80 316.80 316.80
Bank borrowings 992.21 1231.04 1497.11 1563.43 1632.52
Interest @ 8.5% 84.34 104.64 127.25 132.89 138.76
calculation of Tax:
(Rs. in lakh)
Year one two three four 5
Profit before tax
2038.69 2460.68 2850.66 2963.14 3083.02
Add: Depreciation (SLM) 146.57 146.57 146.57 146.57 146.57
Less: Depreciation (WDV) 345.78 264.78 203.49 157.02 121.74
Taxable income
1839.48 2342.47 2793.74 2952.69 3107.85
Tax @ 35%
643.82 819.87 977.81 1033.44
http://206.223.65.215/suggested/MSF2E4-0708.htm (8 of 14) [31-Jul-2008 8:47:04 PM]
Suggested Answers with Examiner's Feedback
1087.75
2.Cash flows from long term funds point of view:
(Rs. in lakh)
1 two three four 5
Initial cash flow (2250.50)
Operating cash flow
(+) PAT
1394.87 1640.81 1872.85 1929.70 1995.27
(+) Interest on term loan (1-T)
41.12 41.12 41.12 28.78 12.34
(+) Depreciation
146.57 146.57 146.57 146.57 146.57
(+) Preliminary expenses w/off
53.24 53.24 53.24 53.24 53.24
(-) Increase in w.c. margin 0.00 0.00 0.00 0.00 0.00
Terminal cash flow
(+) net savage value of fixed
assets and current assets (850 +
316.80)
1166.80
Cash flow
(2250.50)
1635.80 1881.74 2113.78 2158.29 3374.22
< TOP >
3.a. Cost of equity = seven + 0.8× (8) = 13.4%
Cost of debt = 11.5%
Tax rate = 35%
\ Weighted avg. cost of capital
= 11.95%
Terminal value of intermediate cash flows @ 7%
= 1635.80 x (1.07)4 + 1881.74 x (1.07)3 + 2113.78 x (1.07)2 + 2158.29 x (1.07) + 3374.22

Earning:   Approval pending.