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SEMESTER FALL 2019
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FORECASTING & BUDGETING (ECO602)

MARKS: 15

ASSIGNMENT:

Question 1

ASSIGNMENT NO. 2

Suppose MAC Estate & Builders Company is considering an investment project which requires initial investment of Rs.950,000. Annual cash inflows of this project from year 2019 to year 2024 are given in the following table.

Years | Annual cash Inflows (Rs.) |
---|---|

2019 | 150,000 |

2020 | 180,000 |

2021 | 200,000 |

2022 | 250,000 |

2023 | 270,000 |

2024 | 280,000 |

Calculate net present value using 5% discount rate. Also suggest whether the project is acceptable or not.

Question 2:

Suppose PAIR Investment Company limited is working on a project whose profitability index value is 5. The present value of cash inflows of this project is Rs. 20,00,000. Calculate the present value of cash outflows of this project from given information.

Question 3:

Suppose a firm has two investment projects, A and B, under consideration. Data on Accounting Rate of Return (ARR) and Required Rate of Return of both projects is given

```
in the table below:
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Projects | Accounting Rate of Return (ARR) | Required Rate of Return |
---|---|---|

A | 75% | 60% |

B | 55% | 60% |

Consider the given data and logically discuss the firm’s decision about investment in projects A and B.

(Marks: 5+5+5)

IMPORTANT:

24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. 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.

OTHER IMPORTANT INSTRUCTIONS: DEADLINE:

• Make sure to upload the solution file before the due date on VULMS.

• Any submission made via email after the due date will not be accepted.

FORMATTING GUIDELINES:

• Use the font style “Times New Roman” or “Arial” and font size “12”.

• It is advised to compose your document in MS-Word format.

• You may also compose your assignment in Open Office format.

```
• Use black and blue font colors only.
```

RULES FOR MARKING

Please note that your assignment will not be graded or graded as Zero (0), if:

• It is submitted after the due date.

• The file you uploaded does not open or is corrupt.

• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.

• It is cheated or copied from other students, internet, books, journals etc.

Note related to load shedding: Please be proactive

Dear students!

As you know that Post Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.

```
SEMESTER FALL 2019
```

FORECASTING & BUDGETING (ECO602)

MARKS: 15

ASSIGNMENT:

Question 1

ASSIGNMENT NO. 2

Suppose MAC Estate & Builders Company is considering an investment project which requires initial investment of Rs.950,000. Annual cash inflows of this project from year 2019 to year 2024 are given in the following table.

Years | Annual cash Inflows (Rs.) |
---|---|

2019 | 150,000 |

2020 | 180,000 |

2021 | 200,000 |

2022 | 250,000 |

2023 | 270,000 |

2024 | 280,000 |

Calculate net present value using 5% discount rate. Also suggest whether the project is acceptable or not.

Question 2:

Suppose PAIR Investment Company limited is working on a project whose profitability index value is 5. The present value of cash inflows of this project is Rs. 20,00,000. Calculate the present value of cash outflows of this project from given information.

Question 3:

Suppose a firm has two investment projects, A and B, under consideration. Data on Accounting Rate of Return (ARR) and Required Rate of Return of both projects is given

```
in the table below:
```

Projects | Accounting Rate of Return (ARR) | Required Rate of Return |
---|---|---|

A | 75% | 60% |

B | 55% | 60% |

Consider the given data and logically discuss the firm’s decision about investment in projects A and B.

(Marks: 5+5+5)

IMPORTANT:

24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. 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.

OTHER IMPORTANT INSTRUCTIONS: DEADLINE:

• Make sure to upload the solution file before the due date on VULMS.

• Any submission made via email after the due date will not be accepted.

FORMATTING GUIDELINES:

• Use the font style “Times New Roman” or “Arial” and font size “12”.

• It is advised to compose your document in MS-Word format.

• You may also compose your assignment in Open Office format.

```
• Use black and blue font colors only.
```

RULES FOR MARKING

Please note that your assignment will not be graded or graded as Zero (0), if:

• It is submitted after the due date.

• The file you uploaded does not open or is corrupt.

• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.

• It is cheated or copied from other students, internet, books, journals etc.

Note related to load shedding: Please be proactive

Dear students!

As you know that Post Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.