FIN 622 Assignment# 1 Solution

(FIN 622) CORPORATE FINANCE

Solution Idea of Assignment No. 1

Q # 1:

(a) Current Ratio:

Current Assets / Current Liabilities

       166,689   /   219,186 = 0.76

(b) Quick Ratio:

Quick Assets = Total Current Assets – Inventory

166,689   -    104,339 = 62,350

Quick Assets / Current Liabilities

    62,350   /     219,186 = 0.28

(c) Cash Ratio:

Cash + Cash Equivalents / Current Liabilities

18,288 + 0 / 219,186 = 0.0834

(d) Total Debt Ratio:

Total Assets = Total Equity + Total Debt

Total Assets – Total Equity / Total Assets

  748,879 – 339,693 / 748,879 = 0.5463

(e) Debt Equity Ratio:

Total Liabilities / Total Shareholder Equity

           409,186   /   339,693 = 1.20Q # 2:

Req (i):

= CCF x {[(1+i/m) nxm-1] / (i/m)}

= 850 x {[(1+0.08/4)6x4-1] / (0.08 / 4)}

= 850 x {[(1+0.02)24-1] / (0.02)}

= 850 x {[1.608-1] / (0.02)]

= 850 x {[0.608] / (0.02)}

= 850 x 30.4

= 25,840 Ans

Req (ii):

= CCF x {[(1+i/m) nxm-1] / (i/m)}

= 1700 x {[(1+0.09/2)6x2-1] / (0.09 / 2)}

= 1700 x {[(1+0.045)12-1] / (0.045)}

= 1700 x {[1.6958814] / (0.045)]

= 1700 x {[0.6958814] / (0.045)}

= 1700 x 15.4640312

= 26,288.853  Ans

Req (iii):

Second plan would be more feasible keeping the value of saving in

consideration.