Preparing Profit and Loss Account, Balance Sheet and Cash Flow Statement: Scenario in FY10: Mr. B, Mr.

BA, Mr.C and other 3 people aspired to start a new business. They decided to go ahead with the private limited company. Mr. H had initiated the concept and had invested initial amount and taking the highest risk and hence he was to be given the highest stake of 50%. Mr. A was also fulltime involved in the activities and hence he was given 24% stake in the shareholding. The remaining stake was equally distributed among the remaining aspirants. Q1. Find the sharing holding pattern of the company and also how much each had to invest if the initial equity contribution was Rs2,00,000/-. Assume face value to be Rs20 per share.

Of the amount initially invested, they bought AC worth Rs15,000/-, Furniture worth Rs20000/-. This was the scenario in FY10. Q2. Prepare Balance Sheet for the company

Scenario in FY11: In FY11, the company made revenues of Rs11,00,000/-. Direct costs as % of sales were 60% and indirect costs were 10%. The company paid taxes at the rate of 30%. Dividend paid was 5% of PAT. The company invested further Rs20,000/- in furniture and bought 1 more AC in FY11 worth Rs20,000/-. Assets are expected to depreciate at 10% and have life of 10 years.

Q3. Q4. Q5.

Prepare Profit and loss account and Balance Sheet for FY11. Compute EPS. Compute Return on Equity

Scenario in FY12: In FY12, the company was expected to grow at 80% in revenue. Its direct cost as % of revenue will remain same and indirect costs would come down to 9% of revenue. Tax rate remains same and dividend was up to 10% of PAT. The company has planned to invest about Rs30,000/- into furniture. However, this time the company has 30 days of debtors and 20 days of creditors. The company has also invested into some investments to the extent of Rs10,000/-. The company has given advances to its employees of the worth of Rs20,000/ and other payables are Rs5,000/-. Company has also done further issue of equity. The company has diluted its equity by 20% at a offer rate of Rs80 per share. Assets are expected to depreciate at 10% and have life of 10 years.

Q6. Q7. Q8. Q9. Q10.

Prepare Profit and loss account and Balance Sheet for FY11. Compute Equity capital Compute Share premium Compute Return on Equity Prepare Cash Flow Statement.

Dividend Discount Model a. 1 Stage Model DPS0=Rs100, gn= 5%, Rfr=8.76%, Rm=15%, =1.1. Compute Ke and P0 b. 2 Stage Model DPS0=Rs100, gH= 30%, gn= 5%, n=5, Rfr=8.76%, Rm=15%, =1.1 Compute Ke, Terminal Value and P0 using 2 stage DDM. c. 3 Stage Model DPS0=Rs100, gH= 30%, gn= 5%, n=5, Rfr=8.76%, Rm=15%, H =1.1, n=0.75 Compute P0 (Fair value) using 3 Stage DDM. Also compute Target Price and do the sensitivity analysis for gH and gn and H and n.