Interest Rate 0.

05
Time 0 1 2 3 4 5 6
Cash Flow -1000
future value 1050 1102.5 1157.625 1215.506 1276.282 1340.096
years 5
INR 1,276.28
$1,280.08

($1,276.28)
 7 8 9 10

1407.1 1477.455 1551.328 1628.895

rate of interest deposited Time Rate of Interest 0.06
0.015 -1000 0 Future value p.a
1 1015
2 1030.225
3 1045.678375
4 1061.363551
5 1077.284004
6 1093.443264
7 1109.844913
8 1126.492587
9 1143.389975
10 1160.540825
11 1177.948937
12 1195.618171
13 1213.552444
14 1231.755731
15 1250.232067
16 1268.985548
17 1288.020331
18 1307.340636
19 1326.950745
20 1346.855007
21 1367.057832
22 1387.563699
23 1408.377155
24 1429.502812
compounded Quarterly
Interest Rate 0.05
time 0 1 2 3 4 5
cash outflowflow 500 1000 1500 2000 2500
future value 607.7531
607.7531 1157.625 1653.75 2100 2500

8019.128
 Present Value Function with PMT function

Price of Maruti Wagon R 900000 PV function with PMT

Down Payment 300000 600000 PV of Loan Amount
No. of years 5 nper
ROI 12% rate
EMI INR (13,346.67) pmt
Total Amount Paid
($13,346.67)

Interest Paid
Result
INR 600,000.00

$600,000.00

INR 800,800.12
($800,800.12)

INR 200,800.12
INR 200,800.12
 PV function with PMT and IPMT functions

Cost of Wagon R 900000 Annual Interest Rate 12%

Down Payment 300000 Monthly Interest Rate 0.01
Loan Amount $600,000.00 Years of Repayment 5
PMT or EMI or monthly payment ($13,346.67) Total Months 60
Period per Year 12

IPMT function
No. of Month Interest Paid
1 ($6,000.00) ($7,346.67) ($13,346.67)
2 ($5,926.53) ($7,420.14) ($13,346.67)
3 ($5,852.33) ($7,494.34) ($13,346.67)
4 ($5,777.39) ($7,569.28) ($13,346.67)
5 ($5,701.70) ($7,644.97) ($13,346.67)
6 ($5,625.25) ($7,721.42) ($13,346.67)
7 ($5,548.03) ($7,798.64) ($13,346.67)
8 ($5,470.05) ($7,876.62) ($13,346.67)
9 ($5,391.28) ($7,955.39) ($13,346.67)
10 ($5,311.73) ($8,034.94) ($13,346.67)
11 ($5,231.38) ($8,115.29) ($13,346.67)
12 ($5,150.22) ($8,196.45) ($13,346.67)
13 ($5,068.26) ($8,278.41) ($13,346.67)
14 ($4,985.47) ($8,361.19) ($13,346.67)
15 ($4,901.86) ($8,444.81) ($13,346.67)
16 ($4,817.41) ($8,529.25) ($13,346.67)
17 ($4,732.12) ($8,614.55) ($13,346.67)
18 ($4,645.98) ($8,700.69) ($13,346.67)
19 ($4,558.97) ($8,787.70) ($13,346.67)
20 ($4,471.09) ($8,875.58) ($13,346.67)
21 ($4,382.34) ($8,964.33) ($13,346.67)
22 ($4,292.69) ($9,053.98) ($13,346.67)
23 ($4,202.15) ($9,144.51) ($13,346.67)
24 ($4,110.71) ($9,235.96) ($13,346.67)
25 ($4,018.35) ($9,328.32) ($13,346.67)
26 ($3,925.07) ($9,421.60) ($13,346.67)
27 ($3,830.85) ($9,515.82) ($13,346.67)
28 ($3,735.69) ($9,610.98) ($13,346.67)
29 ($3,639.58) ($9,707.09) ($13,346.67)
30 ($3,542.51) ($9,804.16) ($13,346.67)
31 ($3,444.47) ($9,902.20) ($13,346.67)
32 ($3,345.45) ($10,001.22) ($13,346.67)
33 ($3,245.44) ($10,101.23) ($13,346.67)
34 ($3,144.42) ($10,202.25) ($13,346.67)
35 ($3,042.40) ($10,304.27) ($13,346.67)
 36 ($2,939.36) ($10,407.31) ($13,346.67)
37 ($2,835.28) ($10,511.38) ($13,346.67)
38 ($2,730.17) ($10,616.50) ($13,346.67)
39 ($2,624.01) ($10,722.66) ($13,346.67)
40 ($2,516.78) ($10,829.89) ($13,346.67)
41 ($2,408.48) ($10,938.19) ($13,346.67)
42 ($2,299.10) ($11,047.57) ($13,346.67)
43 ($2,188.62) ($11,158.05) ($13,346.67)
44 ($2,077.04) ($11,269.63) ($13,346.67)
45 ($1,964.35) ($11,382.32) ($13,346.67)
46 ($1,850.52) ($11,496.15) ($13,346.67)
47 ($1,735.56) ($11,611.11) ($13,346.67)
48 ($1,619.45) ($11,727.22) ($13,346.67)
49 ($1,502.18) ($11,844.49) ($13,346.67)
50 ($1,383.73) ($11,962.94) ($13,346.67)
51 ($1,264.10) ($12,082.56) ($13,346.67)
52 ($1,143.28) ($12,203.39) ($13,346.67)
53 ($1,021.24) ($12,325.42) ($13,346.67)
54 ($897.99) ($12,448.68) ($13,346.67)
55 ($773.50) ($12,573.17) ($13,346.67)
56 ($647.77) ($12,698.90) ($13,346.67)
57 ($520.78) ($12,825.89) ($13,346.67)
58 ($392.52) ($12,954.15) ($13,346.67)
59 ($262.98) ($13,083.69) ($13,346.67)
60 ($132.15) ($13,214.52) ($13,346.67)
Total Interest to be paid ($200,800.12) ($600,000.00) ($800,800.12)
nd IPMT functions

Total Amount Paid ($800,800.12)

Total amount Borrowed $600,000.00
Total Interest Paid $200,800.12

PV of Loan
$600,000.00
No. EMI Interest Principal
1 ($13,346.67) ($6,000.00) ($7,346.67)
2 ($13,346.67) ($5,926.53) ($7,420.14)
3 ($13,346.67) ($5,852.33) ($7,494.34)
4 ($13,346.67) ($5,777.39) ($7,569.28)
5 ($13,346.67) ($5,701.70) ($7,644.97)
6 ($13,346.67) ($5,625.25) ($7,721.42)
7 ($13,346.67) ($5,548.03) ($7,798.64)
8 ($13,346.67) ($5,470.05) ($7,876.62)
9 ($13,346.67) ($5,391.28) ($7,955.39)
10 ($13,346.67) ($5,311.73) ($8,034.94)
11 ($13,346.67) ($5,231.38) ($8,115.29)
12 ($13,346.67) ($5,150.22) ($8,196.45)
13 ($13,346.67) ($5,068.26) ($8,278.41)
14 ($13,346.67) ($4,985.47) ($8,361.19)
15 ($13,346.67) ($4,901.86) ($8,444.81)
16 ($13,346.67) ($4,817.41) ($8,529.25)
17 ($13,346.67) ($4,732.12) ($8,614.55)
18 ($13,346.67) ($4,645.98) ($8,700.69)
19 ($13,346.67) ($4,558.97) ($8,787.70)
20 ($13,346.67) ($4,471.09) ($8,875.58)
21 ($13,346.67) ($4,382.34) ($8,964.33)
22 ($13,346.67) ($4,292.69) ($9,053.98)
23 ($13,346.67) ($4,202.15) ($9,144.51)
24 ($13,346.67) ($4,110.71) ($9,235.96)
25 ($13,346.67) ($4,018.35) ($9,328.32)
26 ($13,346.67) ($3,925.07) ($9,421.60)
27 ($13,346.67) ($3,830.85) ($9,515.82)
28 ($13,346.67) ($3,735.69) ($9,610.98)
29 ($13,346.67) ($3,639.58) ($9,707.09)
30 ($13,346.67) ($3,542.51) ($9,804.16)
31 ($13,346.67) ($3,444.47) ($9,902.20)
32 ($13,346.67) ($3,345.45) ($10,001.22)
33 ($13,346.67) ($3,245.44) ($10,101.23)
34 ($13,346.67) ($3,144.42) ($10,202.25)
35 ($13,346.67) ($3,042.40) ($10,304.27)
36 ($13,346.67) ($2,939.36) ($10,407.31)
37 ($13,346.67) ($2,835.28) ($10,511.38)
38 ($13,346.67) ($2,730.17) ($10,616.50)
39 ($13,346.67) ($2,624.01) ($10,722.66)
40 ($13,346.67) ($2,516.78) ($10,829.89)
41 ($13,346.67) ($2,408.48) ($10,938.19)
42 ($13,346.67) ($2,299.10) ($11,047.57)
43 ($13,346.67) ($2,188.62) ($11,158.05)
44 ($13,346.67) ($2,077.04) ($11,269.63)
45 ($13,346.67) ($1,964.35) ($11,382.32)
46 ($13,346.67) ($1,850.52) ($11,496.15)
47 ($13,346.67) ($1,735.56) ($11,611.11)
48 ($13,346.67) ($1,619.45) ($11,727.22)
49 ($13,346.67) ($1,502.18) ($11,844.49)
50 ($13,346.67) ($1,383.73) ($11,962.94)
51 ($13,346.67) ($1,264.10) ($12,082.56)
52 ($13,346.67) ($1,143.28) ($12,203.39)
53 ($13,346.67) ($1,021.24) ($12,325.42)
54 ($13,346.67) ($897.99) ($12,448.68)
55 ($13,346.67) ($773.50) ($12,573.17)
56 ($13,346.67) ($647.77) ($12,698.90)
57 ($13,346.67) ($520.78) ($12,825.89)
58 ($13,346.67) ($392.52) ($12,954.15)
59 ($13,346.67) ($262.98) ($13,083.69)
60 ($13,346.67) ($132.15) ($13,214.52)
($800,800.12) ($200,800.12) ($600,000.00)
PV function It Returns the present value of an investment : The total Amount that a series of future payments is worth now

Rate nper FV PV Verification

5% 5 100000 $78,352.62 ($100,000.00)
6% 8 400000 $250,964.95 ($400,000.00)
7% 6 600000 $399,805.33 ($600,000.00)
8% 5 1000000 $680,583.20 ($1,000,000.00) Verification
9% 7 700000 $382,923.97 ($700,000.00)
10% 4 800000 $546,410.76 ($800,000.00)
11% 6 500000 $267,320.42 ($500,000.00)
12% 10 600000 $193,183.94 ($600,000.00)
13% 12 1000000 $230,705.89 ($1,000,000.00)
14% 7 400000 $159,854.93 ($400,000.00)
15% 8 900000 $294,211.60 ($900,000.00)
payments is worth now

($100,000.00)
NPV It returns the net present value of an investment based on a discount rate and a series of future payme

Syntax

Rate 10%
Flows Period Cash Flows
outflow 0 -10000 With Excel Calculations
Inflow 1 2000 Result
Inflow 2 3000 4443.38
Inflow 3 4000
Inflow 4 5000
Inflow 5 6000
With Manual Function
4443.38

With Excel Power Function

4443.38
ount rate and a series of future payments (negative values) and income (positive values)

=NPV(rate,value1,[value2],….)

with power function NPV = F/[(1+r)^n], Where

F = Future payments
n = No. of periods in the future based on future cash flows
4443.38 r = Discount rate

4443.375
uture cash flows
NPV
Year (at end) Machine A Machine B
0 -100000 -120000
1 20000 0
2 60000 60000
3 40000 60000
4 30000 80000
5 20000 0

Rate (Cost of Capital) 7%

NPV 40896.41 42415.81
NPV(Manual) 40896.41 42415.81
NPV (Power Function) 40896.41 42415.81

NPV (Manual with dragging) 40896.408 42415.81

NPV with Manual Calculation 40896.41 42415.81

NPV with Power Function 40896.41 42415.81

 Problem No. 4.11
Year Project X
0 -210000
1 40000
2 80000
3 90000
4 75000
5 25000

Rate 10%

NPV 26846.7
npv(maunally)
NPV (Power Function)
PV of Cash Inflows (manual) 236846.71
Profitability Index = PVCI/PVCO 1.13

IRR 15%
NPV at IRR should be zero 0
roblem No. 4.11
Project Y
-210000
222000
10000
10000
6000
6000

15419.40

225419.40
1.07

17%
0
Cost of Capital 10%

PV and NPV with Specific values

Project X year Cash Flow Present Value
Cash Outflow 0 -1000000 -1000000
Cash Inflow 1 350000 318181.82 ($318,181.82) 318181.82
Cash Inflow 2 300000 247933.88 ($247,933.88) 247933.88
Cash Inflow 3 250000 187828.70 ($187,828.70) 187828.70
Cash Inflow 4 450000 307356.05 ($307,356.05) 307356.05
Cash Inflow 5 400000 248368.53 ($248,368.53) 248368.53
Total PV 1309668.99 ($1,309,668.99) 1309668.99
NPV 309668.99 309668.99
 NPV with Excel

NPV 309668.99 309668.99

PI 1.30966898684268 1.309668987

NPV with Manual

NPV 309668.986842677 309668.98684

NPV with Power Function

309668.986842677
 IRR It returns the internal rate of retu

Function Syntax
IRR =IRR(Values,[guess])

year Cash Flow

0 -100000
1 30000
2 40000
3 50000 NPV at 12%
4 20000
5 10000 Verification NPV at 18% which is IRR

Cost of Capital 12%

IRR 18%
returns the internal rate of return generated from the project

12647.11

0.00

IF IRR > Cost of Capital Accept the Project

IF IRR < Cost of Capital Reject the Project
IF IRR = Cost of Capita Indifferent
IRR is the rate at which NPV is zero
 M_I M_II M_III
Intital Investment Required (Rs.) 300000 300000 300000
Estimated Annual Sales (Rs.) 500000 400000 450000
Cost of Production(Rs.)
DM 40000 50000 48000
DL 50000 30000 36000
FOH 60000 50000 58000
Admn Cost 20000 10000 15000
S&D OHS 10000 10000 10000
Total Cost 180000 150000 167000
EBDIT (Rs.) 320000 250000 283000
Less: Depreciation 130000.00 91666.67 90000.00
EBIT 190000.00 158333.33 193000.00
Less: Tax@30% 57000 47500 57900
EAT 133000.00 110833.33 135100.00
Add: Depreciation 130000.00 91666.67 90000.00
CFAT (Rs.) 263000.00 202500.00 225100.00
Life(years) 2 3 3
Scrap Value (Rs.) 40000 25000 30000
Depreciation as per SLM 130000 91666.666667 90000

year CFAT1 CFAT2 CFAT3

1 263000.00 202500.00 225100.00
2 263000.00 202500.00 225100.00
3 0 202500.00 225100.00
Cash Outflow -300000 -300000 -300000
NPV 156446.28 203587.53 259790.38
 (Cost - Scrap)/life

Cost of Capital 10%

 The Following information is available in reapect of a compa

Earning Per Share EPS or E 10

Cost of Capital Ke 10%
rate of return r 15% 15%

Dividend Payout Ratio 0%

Dividend Paid 0
Price per Share (P) 150

Dividend Payout Ratio 100%

dividend per share 10

Price per Share as Walter's 100

ect of a company XYZ Ltd.

rate of return
Dividend Payout Ratio

P = D + (r/Ke)(E-D)
Ke
8% 10% 15%
0% 40% 80% 100%

rate of return
8%

10%

15%
 The Following information is available in respect of a c

Earning Per Share EPS or E 10

Cost of Capital Ke 10%
rate of return r 10%
As per

Dividend Payout Ratio 0%

P= E
Retention Ratio (b) 100%
Dividend Per share 0 #DIV/0!
growth rate (b*r) 10.00%
Price Per Share (P)

Dividend Payout Ratio 40%

retention Ratio (b) 60%
le in respect of a company XYZ Ltd.

As per Gordon's Model

P= E(1-b)/(Ke-br)
rate of return 8% 10% 15%
Dividend Payout Ratio 0% 40% 80% 100%
 Cost of Debt (irredemable)

Kd = I*(1-t)/B0

I= Annual Interest Payment

B0= Net Proceeds from Debt
Kd= cost of debt after tax
t= Tax Rate

Issued at Par
I= 100000
I*(1-t) = 70000
B0 950000
Kd= 7.37%
 Example

Debentures 1000000
Interest Rate 10%
Tax Rate 30%

Issued at Par
Issued at premium 20%
Issued at Discount 10%
flotation costs in all cases 5%

Issued at Premium
I= 100000
I*(1-t)= 70000
B0= 1140000
Kd= 6.14%
Example

7.37%

Flotation costs is always

computed on the issue
price or face value
whichever is higher

Issued at a Discount
I= 100000
I*(1-t)= 70000
B0= 850000
Kd= 8.24%
 Cost of Debt_Redeemable
Kd= [I*(1-t)+(RV-B0)/N]/(RV+B0)/2

I= Annual Interest Payment

B0= Net Proceeds from fRV= Redemption Value of debt
Kd= cost of debt after tax
t= Tax Rate
N= No. of years

Issued at par, redeemable at par

I= 100000 RV= 1000000
I*(1-t) 70000 B0= 970000
RV-B0 30000
N 10
(RV+B0)/2 985000

Kd= 7.41%
 Debentures
Interest Rate
Tax Rate
alue of debt
Issued at Par
Issued at premium
Issued at Discount
flotation costs

Issued at Premium, Redeembal

1.40459%
 1000000 RV= 1100000
10% B0= 1164000
30%

Redeemable at Par After

20% Redeemable at premium 10% After
10% redeemable at premium 5% After
3%

Issued at Premium, Redeembale at premium

years
10
10
10
COP
Ke= D1/P0+g When the expected

D0= 5
P0= 60 P0 60
growth 10%
Ke= 19.17%
hen the expected dividend at the end of the year is not given in the question, that mean
uestion, that means D0 is given
Ke when dividend expected at the end of year is given

D1
P0
grwoth =

Ke=
 25
1250 P0= 1250
12%

14.00%
WACC