the question of financial management is on doc file i need useful solutions to get . so provide me solutions

Set A 1. The Narayani Corporation manufactures only one product : Flour packed in bags. The single raw material used in making flour is the wheat. For each bag, 12 kgs wheat are required. Assume that the company manufactures 150,000 bags per year, that demand for flour is perfectly steady throughout the year, that it costs Rs 200 each time wheat is ordered, and carrying costs are Rs 8 per kg per year. Delievery time required is 4 days. Assume that the firm operates 300 days a year. a. Determine the economic order quantity of wheat and explain why is it important? b. What are average annual total inventory costs for the firm ( total carrying cost plus total ordering costs)? c. How many times per year would inventory be ordered? d. What is the reorder level of wheat? 2. Your Company is planning to borrow Rs. 1,000,000 on a 5-year, 15 percent, annual payments, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? What fraction of the payment made at the end of second year represents repayment of interest? 3. The estimated after tax cash flows for two mutually exclusive projects are as follows: Year Project A Project B 0 (Rs 250,000) (Rs 250,000) 1 200,000 0 2 90,000 1,80,000 3 10,000 1,00,000 4 10,000 90,000 5 5,000 20,000 The company's required rate of return is 14 percent. a. Calculate IRR of the both projects. b. Calculate NPV of the both projects. c. Which project is better? 4.Consider the probability distribution of alternative rates of return associated with stock P and stock Q given in the following table. State of Economy Probability Return on Stock P Return on Stock Q 1 0.1 0.15 -0.10 2 0.3 0.17 0.15 3 0.3 0.08 0.22 4 0.3 -0.02 -0.03 a. Calculate the expected return and standard deviation of stock P and stock Q. b. What are the covariance and correlation coefficient between stock P and stock Q? c. If you form a portfolio of stock P and stock Q comprising 80 percent wealth in stock P and the rest in stock Q, calculate the return and risk (standard deviation) of your portfolio. d. Which investment would you prefer? Stock P or Q or the portfolio? Why? 5.Consider the following industry average and financial statements for Sagarmatha Automobile Corporation. Accounts payable Rs. 60,000 Cash Rs. 60,000 Notes payable 60,000 Marketable Securities 44,000 Other current liabilities 28,000 Accounts receivable 88,000 Long-term debt 32,000 Inventories 212,000 Common stock 252,000 Fixed assets 300,000 Retained Earnings 168,000 Accumulated depreciation (104,000) Total Rs 600,000 Total Rs 600,000 Income Statement for the year ended December 31, 2016 Sales revenue Rs 10,60,000 Less: Cost of goods sold 880,000 Gross profit Rs. 180,000 Less: Operating expenses 114,000 Net income before interest and taxes Rs. 66,000 Less: Interest 6,000 Net income before tax Rs. 60,000 Less: Tax @ 50% 30,000 Net income Rs 30,000 Industry Average Ratios Current ratio = 2times Fixed assets turnover = 6 times Debt ratio = 30% Total assets turnover = 3 times Times interest earned = 7 times Profit Margin = 3% Inventory turnover = 10 times Return on assets = 9% DSO = 24 days Return on equity = 12.9% a. Calculate all those necessary ratios to make a comparison to industry average ratios. b. Construct a Du-Point equation for the firm, and compare the company's ratios to the composite ratios for the industry as a whole. c. Do the balance sheet accounts or income statement figures seem to be primarily responsible for low profit? d. Which specific accounts seem to be most out of line in relation to other firms in the industry? 6. The Desreumax Company has two bond issues outstanding. Both bonds pay Rs.100 annual interest plus Rs. 1,000 at maturity. Bond L has a maturity of 15 years and bond S a maturity of 1 year. a. What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 percent, and (3) 12 percent? Assume that there is only one more interest payment to be made on Bond S. b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1-year)? 7. How dividend policy affects financing decision of a firm? Explain. Set B 1. Past five years' rate of return from two stocks A and B are as follows: Year Return on Stock A Return on Stock B 2007 10% 15% 2008 30 -10 2009 -10 25 2010 5 20 2011 10 15 a. Calculate: i. The average return on stock A and stock B . ii. The standard deviation of return on stock A and stock B. iii. The covariance between the return of stock A and stock B. b. Suppose an investor fromas a portfolio of the two stocks investing 50 percent of his/her funds in each stock. Calculate: i. The return of the portfolio. ii. The portfolio variance and standard deviation. 2. Your client is 40 years old and wants to begin saving for retirement. You advise the client to put Rs.5, 000 a year into the stock market. You estimate that the market's return will be, on average, 12 percent a year. Assume the investment will be made at the end of the year. a. If the client follows your advice, how much money will she have by age 65? b. How much will she have by age 70? 3. The Kathmandu Brick Company's expected dividend per share is Rs 20 and it is expected to grow at a constant rate of 5 percent. Current price per share is Rs 200. Its before-tax cost of debt is 10 percent, and its marginal tax rate of 40 percent. The stock sells at book value. Using the following balance sheet, calculate Kathmandu's after-tax weighted average cost of capital: Asset Amount Liabilities and Equity Amount Cash Rs 10,000 Long-term debt Rs 40,000 Accounts receivable 15,000 Equity 60,000 Inventories 25,000 Plant and equipment, net 50,000 Total assets Rs 100,000 Total Liabilities Rs 100,000 4. You are a financial analyst for the Hi-Tech Computer Inc. The director of capital budgeting has asked you to analyze two proposed capital investments: Project X and Project Y. Each project has a cost of Rs 10,000,000, and the cost of capital for each project is 12 percent. The expected net cash flows are as follows: Year Expected Net Cash Flows (in'100) Project X Project Y 0 (Rs 10,000) (Rs 10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 a. Calculate each project's payback period, net present value, internal rate of return and modified internal rate of return. b. Which project or projects should be accepted if they are independent? c. Which project should be accepted if they are mutually exclusive? d. How might a change in the cost of capital produce a conflict between the NPV and IRR ranking of these two projects? Would this conflict exist if cost of capital were 5 percent? e. Why does the conflict exist? 5. The Tasty Bakery buys and then sells as bread 2.6 million kg annually. The wheat must be purchased in multiples of 100 kg. Ordering cost, which includes grain elevator removal charge of Rs3,500 is Rs 5,000 per order. Annual carrying costs are 20 percent of the purchase price of Rs 5 per kg. The company maintains a safety stock of 200,000 kg. The delivery time is 6 weeks. a. What is the economic order quantity? b. Calculate the cost of quantity ordered. c. At what inventory level should a reorder be placed to prevent withdrawal of the safety stock? d. The wheat suppliers offered 1 percent discount on total value of wheat purchased if TB buys its total requirement in 4 times a year. Should TB take discount? 6. Using the following information, complete the balance sheet that follows: (Assume 360-day year in your calculation) Long-term debt to net worth 0.5 to 1 Total assets turnover 2.5 times Average collection period 18 days Inventory turnover 9 times Gross profit margin 10% Acid-test ratio 1 to 1 Balance Sheet Cash Notes payable Rs 100,000 Accounts receivable Long-term debt Inventory Common stock 100,000 Plant and Equipment Retained Earnings 100,000 Total assets Total liabilities & equity - 7. What are dividend the basis for the valuation of common stock