Forums
Advance Capital Budgeting Decisions - Illustration 13
AFM
answered on 18-May-26 15:41
In this illustration coefficient of variation is written as: CV = σ/ ENPV But in the solution no discounting or NPV calculation has been done. Only expected cash flow has been calculated using CF × Probability. So should the denominator technically be Expected Cash Flow instead of Expected NPV? [Video Time Stamp: 07:09]
latest answer
If ENPV is not available i.e outflows and project timeline are not available then ECF will have to be used
Madhu GK
CA Final
★ 1K+
1
87
Borrowings
AFM
answered on 16-May-26 07:48
Sir, like borrowings made for hedging, can we also assume that ₹ equivalent export proceeds will finance both borrowing + interest. x + (x*8%*60/365) = 183,69,825.
latest answer
No you cannot make such assumption If you work out the way you were suggesting, borrowing will be for a lesser amount How do you know that it was for a lesser amount - nothing is mentioned in the question to indicate that
SANJITHA
CA Final
★ 1K+
1
82
Issue
AFM
answered on 16-May-26 07:54
Hi sir, In this problem formulae is given wrong and answers are correct
latest answer
Not sure what you are referring to. Working in video is correct only
pavan kumar
CA Final
★ 3K+
1
102
Doubt
AFM
answered on 16-May-26 09:57
Why present value factor applied to (R-C)(1-T) only. Why are we not applying the present value factor to depriciation *Tax [Video Time Stamp: 05:42]
latest answer
Ooh ok Will correct in book Thanks for highlighting Regret the inconvenience caused
pavan kumar
CA Final
★ 3K+
3
107
Gain or loss
AFM
answered on 15-May-26 14:14
For example, a) Case 1: A ltd (Indian company) imported goods worth $ 100 on Jan 1 payable after 1 month on Feb 1. Spot USD-INR = 50, Spot on 1st Feb USD-INR = 55. Cash outflow = 55*100 = ₹ 5500. In this case, whether the difference in spot rates of ₹ 5 (55-50) amounting to ₹ 500 (5*100) is the loss to the importer because of change in exchange rate over the time? b) Case 2: Forward contract A ltd (Indian company) imported goods worth $ 100 on Jan 1 payable after 1 month on Feb 1. Spot USD-INR = 50, Spot on 1st Feb USD-INR = 55. Company A entered into forward contract to buy $ at 52. Cash outflow = 52*100 = ₹ 5200 In this case, whether the difference in spot rate and forward rate of ₹ 2 (52-50) amounting to ₹ 200 (2*100) is the loss to the importer? c) Case 3: Future Contract A ltd (Indian company) imported goods worth $ 100 on Jan 1 payable after 1 month on Feb 1. Spot USD-INR = 50, Spot on 1st Feb USD-INR = 55. Company A long i month futures contract to buy $ at 52. Gain on futures = (55-52)*100 = 3*100 = ₹ 300 Cash outflow = 55*100 = ₹ 5500 Net cash outflow = ₹ 5500-300 = ₹ 5200 In this case, whether the difference in cash outflow at spot and delivery i.e. 5200-5000 = ₹ 200 is the loss to the importer? Sir, if each is seen independently whether the loss is computed as per above or in different manner? [Video Time Stamp: 10:19]
latest answer
In all cases your loss computation is right
SANJITHA
CA Final
★ 1K+
1
115
EFR Formulae
AFM
answered on 14-May-26 10:48
In the Formulae, were payable and liabilities used. Does it include debt liabilities in it ?
latest answer
No. When we say liabilities we are referring to ST or Current liabilities LT debt / Equity are external funds raised after using the formula
vignesh vijayakumar
CA Final
★ 0
1
151
Public issue share count
AFM
answered on 14-May-26 10:51
When calculating public issue, we r multiplying new no. of shares * new issue price.. so when calculating net gain also we have to take 50+new shares issued should be shown right, but y in post public issue also it is shown 50 shares only [Video Time Stamp: 00:00]
latest answer
I guess you are asking a query w.r.t Q 33 and not Q 34. The query is tagged to Q 34 We are not increase share count because in case of a rights issue, same i.e existing shareholders get the new shares In case of a public issue there new shareholders may be completely diff from existing share hlders We are trying to find out gain / loss for existing shareholders and not new share holders
Lavanya Ravi
CA Final
★ 180
1
107
Spot rate
AFM
answered on 14-May-26 10:32
Sir, the spot rate that is compared with the forward rate to arrive at gain or loss is Current spot rate or Spot at future date. And what is the logic behind considering the same? [Video Time Stamp: 18:53]
latest answer
We are assuming future spot rate is same as current spot rate. We are trying to assess if that were the case which of the 3 choices is best suited for the company
SANJITHA
CA Final
★ 1K+
1
97
Value of contract Vs Price of forward contract
AFM
answered on 13-May-26 16:49
Excerpts of the Module ..The value of a forward contract is incorrect because delivery price is not given ..In my view this 37498.11 is price of forward contract not value..Do share your view..
latest answer
Thank you Sir
Mansha Tutlani
CA Final
★ 555
2
135
Future spot will be equal to forward price
AFM
answered on 13-May-26 16:29
Sir, in Part 2, if the company anticipates that future spot is same as forward, it won't enter into forward contract. Are we also assuming that the company is not hedged through money market which is advised to follow in part 1? [Video Time Stamp: 15:55]
latest answer
If spot is same as forward then obviously it means no hedge of any form
SANJITHA
CA Final
★ 1K+
1
81