India PAPER – 2 : STRATEGIC FINANCIAL MANAGEMENT Question No.1 is compulsory. Answer any five questions from the remaining six questions. Working notes should form part of the answer. Question 1 (a) A Bank sold Hong Kong Dollars 40‚00‚000 value spot to its customer at ` 7.15 and covered itself in London Market on the same day‚ when the exchange rates were: US$ = HK$ 7.9250 7.9290 Local interbank market rates for US$ were Spot US$ 1 = ` 55.00 55.20 You are required to calculate
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However‚ it is flawed to treat the value of a pound that is received in the future to be equal to the value of a pound received today. One reason is that due to rising inflation‚ the true value of the currency will depreciate over time‚ and this results in a fall in the purchasing power of a pound. Rational economic agents also tend to value near term benefits more than the long term benefits because of the future uncertainties and risks. This phenomenon is described as time preference. Hence‚ the concept
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The size of the periodic payment to settle a debt is highly dependent on the time the payment is made. For ordinary annuity ? ?=? 1 − 1 + ? −? For annuity due ? ?=? 1 − 1 + ? −? 1 + ? For deferred annuity ? 1+? ? ?=? 1 − 1 + ? −? Example The cash price of a shopping equipment was P 120‚000. Alex bought it with a down payment P 20‚000 and the balance was payable at the end of every quarter for two years. If money was worth 10% compounded quarterly‚ how much did Alex pay at the end of every
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Chapter One Basic Areas of Finance: 1. Corporate Finance = Business Finance 2. Investments a. Work with financial assets such as stocks and bonds. b. Value of financial assets‚ risk verses return and asset allocation. c. Job opportunities. 3. Financial Institutions a. Companies that specialize in financial matters. i. Banks – Credit unions‚ savings‚ and loans. ii. Insurance Companies iii. Brokerage Firms b. Job Opportunities. 4. International Finance a. An area of specialization within each of the
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investment√. Non-discounted cash flow method means that the cash flows will not be discounted‚ that is‚ the present value concept is not applied√. Timing of the cash flows does not make any difference to the evaluation√. Discounted cash flow means that cash inflows and cash outflows will be discounted according to the time value of money concept√. Different timing of returns will give different values. Two examples: Non-discounted cash flow; Payback period and ARR√√ Discounted cash flows; NPV‚ IRR discounted
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Uniform Annual Equivalent (UAE) - A Capital Budgeting Method. (The evaluation of two mutually exclusive projects with varying lives requires careful examination of the existence of the reinvestment opportunities at the end of the different economic lives of the projects. The current article deals with a method that may be adopted in situations wherein the level of investments‚ the life of the projects and cash inflows (or outflows) are unequal.) Risk is inherent in almost every business decisions
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government spending. Governments use fiscal policy‚ in conjunction with monetary policy‚ in an effort to control parts of the economy such as GDP and inflation. Many times when economic policy is used it will only affect a small portion of the overall economy. Tax breaks for seniors‚ people
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NPV is short for Net Present Value and it makes difference between the present value and cost of a project. In addition‚ NPV takes into account all cash flows through out the whole life of the projects‚ as well as the time value of money. And it compares like with like as all inflows and outflows are discounted to today¡¯s date. Also‚ the cost of capital is very unlikely to be changed over a period of time. To judge if the NPV is good‚ we should see the value of it‚ and the rule is the high the better
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Financial Management WORKBOOK The ICFAI University # 52‚ Nagarjuna Hills‚ Hyderabad - 500 082 © 2005 The Icfai University Press. All rights reserved. No part of this publication may be reproduced‚ stored in a retrieval system‚ used in a spreadsheet‚ or transmitted in any form or by any means – electronic‚ mechanical‚ photocopying or otherwise – without prior permission in writing from The Icfai University Press. ISBN : 81-7881-969-4 Ref. No. FMWB 11200502 For any clarification
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BY :SUMIT JAIN EMAIL:vaibhav4u38@rediffmail.com CHAPTER ONE FINANCIAL MANAGEMENT : AN OVERVIEW |Question : What do you mean by financial management ? | Answer : Meaning of Financial Management : The primary task of a Chartered Accountant is to deal with funds‚ ’Management of Funds’ is an important aspect of financial management in a business
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