MGT201 Financial Management assignment no 1 idea solution april spring 2011

**Vuhelper** · 04-18-2011, 06:55 AM

View more random threads:

SEMESTER “SPRING 2011”
Financial Management (MGT201)
Assignment # 01 Marks: 20
“Capital*Budgeting*Techniques”
*
*
Mr.* Amir* is* planning* to* purchase* a* new* car* bearing* the* brand* name* of*
Honda*civic*(Model*2011).*He*visits*a*nearby*car*s howroom*‐*Hijaz*Motors,*and*
comes* to*know* that* price* of* the* car* is* Rs.* 1,200,000.* Amir* thinks* to* take* an*
optimistic*decision,*so*he*visits*a*local*branch*o f*Habib*Bank*Limited*for*seeking*
some*information.
**
The* branch* manager* tells* him* that* he* can* purchase* the* car* under* a* lease*
contract* to* be* signed* with* HBL.* Terms* and* conditions* of* the* lease* contract*
include:*Down*payment*of*Rs.*400,000*and*monthly*i nstallment*of*Rs.*25,000*to*
be*paid*at*the*end*of*each*month*for*next*four*yea rs.*The*rate*of*interest*to*be*
charged*by*HBL*on*this*lease*will*be*equal*to*the* discount*rate*as*determined*by*
State*Bank*of*Pakistan,*which*is*15%*at*present.
*
Moreover,*a*friend*of*Mr.*Amir*tells*him*that*he*i s*interested*to*sell*his*car*
bearing*the*same*model*for*reasonable*terms*includ ing*Rs.*400,000*at*the*time*
of* delivery* of* car,* Rs.* 10,000* p.m.* for* the* next* two* years,* a* fixed* amount* of*
Rs.300,000*after*6*months*of*3rd*year*(2.5*years)* and*Rs.200,000*at*the*end*of*
3rd*year.
*
You* are* required* to* guide* Mr.* Amir,* as* which* option* is* better* among* the*
three*options*discussed*above,* i.e.*to*purchase*from*the*car*showroom,*lease*
from*HBL*or*buy*form*the*friend.
************************************************** **************************************
(Show*complete*calculations*and*provide*all*formul as*as*they*carry*marks)
*
*

Sponsored Links