Mgt411 Assignment No. 1

Schedule

Opening Date and Time April 15 , 2011 At 12:01 A.M. (Mid-Night)

Due Date and Time April 20 , 2011 At 11:59 P.M. (Mid-Night)

Only in the case of Assignment,after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. 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.

Question # 1: 

(Marks: 08)

Mr Ahmad, the director of Supreme Textile Limited, is deciding to install a new plant for fiber spinning. Mr Ahmad has a choice to install a plant that will transform the raw cotton into yarn, project costs Rs 2,000,000/- and will generate revenue of Rs 550,000 for the next five years. Assume the company’s discount rate/cost of borrowing is 9%. Calculate IRR for above project by using trial and error method.

Question # 2: 

(Marks: 08)

Find the present value of a coupon bond, having face value Rs 1000/-, coupon rate of 12.5% per annum with 7 years maturity. During current economic conditions the investor’s required rate of return is 5%.

Requirement: Calculate Present value of Coupon Bond.

Question # 3 (Marks: 04)

Prevailing interest rate in the country is 14%, if expected inflation rate is 11% calculate the real interest rate by using fisher equation.