**Assignment 1: Capital Structure and Firm Value**

Due on = Jan 21, 2014

__Instructions__- This is a group assignment. Student groups and assigned companies can be found here [Download ]
- Collect 5 years data for the assigned companies from year 2007 to 2011.
- Find the company's beta in the last 5 years on monthly share prices data
- Find the annual market return for KSE 100, and average it.
- Deduct the yearly t-bills rate from the market return to find average market risk premium (i.e. Rm -Rf)
- Find the cost of equity with CAPM equation [Beta calculations can be viewed in this VIDEO]
- Find the company's financial expenses and divide it on the interest-paying liabilities (i.e. exclude accounts payable, wages payable etc). This will give you the interest rate that the firm is paying.
- Find the cost of debt after taxes (1-Tax)*interest rate
- Assume that interest rates increase by 5% with every 10% increase in debt . Your starting point should be the cost of debt which you would have calculated in step 8 above
- Find the average net income and assume that this net income will remain constant for ever.

**Required:**

**(i) Find the optimal capital structure where value of the firm is maximized.**

**(ii) Find the value of debt at this level**

**(iii) Should the company increase debt-level or reduce debt-level**

**(iii) What will be the share price after your proposed capital structure**

**Assignment 2: Cash Flow Estimation and Project Evaluation**

**Requirements:**

**INCOME TAX SLAB RATES FOR BUSINESSMEN IN PAKISTAN FOR YEAR 2013-14**

S.No. | Taxable income | Rate of tax |

1 | Where the taxable income does not exceed Rs.400,000 | 0% |

2 | Where the taxable income exceeds Rs.400,000 but does not exceed Rs.750,000 | 10% of the amount exceeding Rs.400,000 |

3 | Where the taxable income exceeds Rs.750,000 but does not exceed Rs.1,500,000 | Rs.35,000 + 15% of the amount exceeding Rs.750,000 |

4 | Where the taxable income exceeds Rs.1,500,000 but does not exceed Rs.2,500,000 | Rs.147,500 + 20% of the amount exceeding Rs.1,500,000 |

5 | Where the taxable income exceeds Rs.2,500,000 but does not exceed Rs.4,000,000 | Rs.347,500 + 25% of the amountexceeding Rs.2,500,000 |

6 | Where the taxable income exceeds Rs.4,000,000 but does not exceed Rs.6,000,000 | Rs. 722,500 + 30% of the amount exceeding Rs.4,000,000 |

7 | Where the taxable income exceeds Rs.6,000,000 | Rs. 1,322,500 + 35% of the amount exceeding Rs.6,000,000”; |

**Assignment 3: Short Essays**

The assignment can only and only be submitted to the www.turnitin.com, which will not accept your submission after the due time. Details for creating your account on www.turnitin.com are given below:

1. Click on this link https://www.turnitin.com/ >> Create a new account >> New students start here>>>

2. In the class ID space, give these digits 8004739

3. In the password, write= mbaims

4. Complete the rest of the registration process

5. Once the registration process is complete, then login into your account

6. After login, click on the class " MBA 1.5 Evening"

7. And then click on "Short Essays"

8. Click on submit button and upload your assignment

**Details of Assignment**

Write detailed notes on the following:

1. Discuss why WACC is important for firms? How WACC can influence the financing decisions of firms?

2. Explain the irrelevance theory of capital structure of Miller and Modigiliani?

3. What are the different methods of valuation of assets? Explain each method.

4. Discuss in detail the concept of EVA and MVA, why these measure are used and for what purpose?

5. Explain the different criteria for project evaluation, i.e. NPV, IRR, PI, Payback methods

6. Write short notes on the following:

a. Theories of capital structure

b. Theories of dividend policy