Finance Answers

LT India Ltd has the following capital structure, which it considers optimal: Debt 35% Equity shares 65% Total 100% Applicable tax rate for the company is 25%. Risk free rate of return is 6%, average equity market investment has expected rate of return of 12%. The company’s beta is 1.10. Debt will bear an interest rate of 9% p.a.

Calculate

a. component cost of debt and equity shares assuming that the company does not issue any additional equity shares. 

b. Weighted Average Cost of Capital (WACC). 

Shyam is working in a private investment firm. Unlike his parents who had a government job and had retirement benefits, shyam lacks on that front being in a private firm. Now he is worried about his retirement years.

a. As an insurance agent, discuss the various Risk, which Shyam will consider while planning his retirement plan.

b. Also explain the various steps which will be involved in framing the retirement plan.

Mr. Manohar is married and have two kids. He has recently undergone a surgery, which made him think about the financial security for his dependents after his death. Hence, he decided to meet his friend who was an insurance advisor to understand the life insurance policy and the various benefits attached to with this policy .Explain Mr .Manohar on life Insurance policy with its need. 

Vaishali is working as an actuarial in an insurance company. Few of the new joiners have been appointed as an underwriter in their department. Vaishali’s manager asks her to prepare a short presentation on the various methods used by them in calculating the premium rate. Help Vaishali to complete the assigned task. 

You have studied Business Ethics in a structured manner in this program. Has it helped 

you with tools to better manage your decision making process as a business person? 

Explain in your own words. 

The loan amount is 200,000, the down payment is 20,000 and the loan term is 30 years. The interest rate is 5%. To get the 30-year mortgage at 5%, we must pay 2 points at the time of closing. What is the cost of 2 points on the mortgage?

Cost and production data for Rob Manufacturing for the 2018 financial year was as follows:

Budgeted variable factory overhead $120,000

Budgeted fixed factory overhead $180,000

Total $300,000

Budgeted production (direct labour hours) $15,000

Actual variable factory overhead $125,300

Actual fixed factory overhead $164,700

Total $290,000

Actual production (direct labour hours) 15,500

It is organisational policy and procedure that Factory overhead is applied to production using direct labour hours as the cost driver.

Required:

(a) Calculate the factory overhead application rate, and,

(b) Under or over applied overhead.

Describe at least three ways that you can maximize the growth of your investment over time. Do the following calculations to help you determine what factors will help your money to grow, and use your results from these calculations in your response to this question.

• invest $5000 at 4.5% simple interest versus 4.5% compound interest (quarterly), and compare the results after 5 years
• invest $2500 at 4.5% compound interest versus $5000 at 4.5% compound interest, and compare results after 5 years with quarterly compounding
• invest $5000 at 4.5% compounded monthly versus 8% compounded monthly, and compare results after 5 years
• invest $5000 at 4.5% compounded monthly for 5 years versus 10 years, and compare results

Again, the purpose of this question is NOT for you to simply do calculations, but to analyze your results, and explain what you can do as an investor to help your money grow. Your response should be a paragraph with numbers in it, not simply numbers.

“Accounting is supposed to be an aid to management – accounting is not something to be done as an end in itself.”

a) Explain the above statement based on your understanding