Financial Management ( compounded Interest)

You deposit Rs.1,000 each and every month in your bank account. The bank pays 12% annual
rate that is compound every month. Find out how much money will be in your account at the
end of 24 months.

Formulation:
P = Rs. 1000 R = 12% T = 24 months N = 12 month

Formula:

A = P (1 + r/n) ^ nt

Where:

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per year

t = the number of years the money is invested or borrowed for

Aim:
To solve the given finance problem using spread sheet.

Algorithm:
1. Click start -> Programs-> Microsoft office -> Ms excel . The spread sheet opens.
2. Enter the formulated problem in the spread sheet with proper spacing.
3. To find the amount enter the sign = and the answer will be displayed in the cell.
4. To find the amount, enter the formula A = P (1 + r/n) ^ nt
5. Hence the result.

Inference:
 A = Rs. 27043.8
Result:
Thus the compound interest was calculated using spread sheet.
Finance Problem (EMI estimation)
Suppose if you want to take a loan of Rs.2, 00,000 at an annual interest rate of 14%. The loan
has to be repaid in 15 years in equal monthly installments. Find out the EMI.
rate of interest (rate) = 14%
number of periods (nper) = 15 years
value of the loan or present value (pv) = Rs. 2,00,000

Formula:
EMI = [P x R x (1+R)N]/[(1+R)N-1],
Where
P - the loan amount or principal
R - the interest rate per month
N - the number of monthly installments

EMI = =PMT(rate,nper,pv)
=PMT (0.011667,180,200000)
= 2663.54
Formulation:
Rate = 0.011667 nper = 180 pv = 200000

Aim:
To find out the EMI for the loan using MS EXCEL spread sheet.

Algorithm:
1. Click start Programs Microsoft office Ms excel . The spread sheet opens.
2. Enter the formulated problem in the spread sheet with proper spacing.
3. To find the amount enter the sign = and the answer will be displayed in the cell.
4. Click formulaFinancialPMT. Functional Arguments box opens. Enter the values. Click
OK.
 5. The result appears in the = Cell.
6. Hence the result.
Inference:
EMI = 2663.54
Result:
Thus the EMI was calculated using spread sheet.
Finance Problem ( pv Problem)

You expect to receive Rs.800/- every month over next 24 months. If the current discount rate is
12% per annum. What is the present value of these future payments?

Formulation:

Rate: 12% per annum Fv = Rs.800 Nper = 24 Months

Formula:

PV(rate,nper,pmt,fv,type)

Aim:
To solve the given present value problem using MS EXCEL

Algorithm:
1. Click start Programs Microsoft office Ms excel. The spread sheet opens.
2. Enter the formulated problem in the spread sheet with proper spacing.
3. To find the amount enter the sign = and the answer will be displayed in the cell.
4. Click formulaFinancialPV. Functional Arguments box opens. Enter the values. Click
OK.
5. The result appears in the = Cell.
6. Hence the result.

Inference:
Pv= Rs.630

Result:
 Thus the given present value problem was solved using spread sheet.

Net Present Value (NPV)

You are expected to get 5 monthly payments of Rs.500, 900, 550, 478, 950 respectively. At the
discount rate of 10% per annum. Find the Net Present Value (NPV).

Formulation:
Rate = 10% per annum 10/12 * 100 = 0.008333
Value 1 =Rs. 500
Value2 = Rs.900
Value3 =Rs. 550
Value 4= Rs. 478
Value 5= Rs. 950

Formula:
Net Present Value = NPV(rate, value1,value2,...)

Aim:
To solve the given Net Present Value problem using MS EXCEL
Algorithm:
1. Click start Programs Microsoft office Ms excel. The spread sheet opens.
2. Enter the formulated problem in the spread sheet with proper spacing.
3. To find the amount enter the sign = and the answer will be displayed in the cell.
4. Click formulaFinancialPV. Functional Arguments box opens. Enter the values. Click
OK.
5. The result appears in the = Cell.
6. Hence the result.

Inference:
NPV = Rs. 3300
Result:
Thus the given Net Present Value problem was solved using spread sheet.
Internal Rate of Return (IRR)

Assuming that an initial investment of Rs.1, 00,000. Results in 12 annual cash outflows as given
below.
13200, 15,000, 13,000, 2,000, 12,400, 16,000, 14,000, 16,450, 17,690, 16,550, 16,500 and
12,200.

Find the Internal Rate of Return (IRR).

Formulation:
Value 1 = Rs. 13200
Value 2 = Rs.15000
Value 3 = Rs. 13000
Value 4 = Rs. 2000
Value 5 = Rs. 12400
Value-6 = Rs. 16000
Value- 7 = Rs. 14000
Value- 8 = Rs. 16450
Value- 9 = Rs. 17690
Value-10 = Rs. 16550
Value-11 = Rs. 16500
Value-12 = Rs. 12,200

Formula:
IRR = IRR(values,guess)

Aim:
To solve the given IRR problem using MS Excel spread sheet.

Algorithm:
1. Click start Programs Microsoft office Ms excel. The spread sheet opens.
 2. Enter the formulated problem in the spread sheet with proper spacing.
3. To find the amount enter the sign = and the answer will be displayed in the cell.
4. Click formulaFinancialIRR. Functional Arguments box opens. Enter the values or
select the value cells. Click OK. Leave the guess blank
5. The result appears in the = Cell.
6. Hence the result.

Inference:
NPV = 8%

Result:
Thus the given IRR problem was solved using spread sheet.
EPS Problem:

Calculate EPS from the following informations made available to you.

Capital structure :-
10,000 equity shares of 100 each 10,00,00
14% Debenture - 40,00,000
The expected EBIT of the company is estimated at Rs 15,00,000 per annum. The company is in
the tax bracket of 40%.

Formulation:
No. of equity shares: 10000
EBIT : Rs. 1500000
Tax : 40%
14% Debenture - 40,00,000

Formula:
EBT = EBIT- Interest
Interest = 14% of 40,00,000
EAT = EBT taxes
Tax = 40% of EBT
EPS = Earnings for equity share holders /No. of Equity Shareholders

Aim:
To solve the given EPS problem using MS Excel spread sheet.

Algorithm:
1. Click start Programs Microsoft office Ms excel. The spread sheet opens.
2. Enter the formulated problem in the spread sheet with proper spacing as below
EBIT 15000
00
Less interest 56000
0
EBT 94000
 0
Less taxes (0.40) 37600
0
EAT 56400
0
Earnings for equity- 56400
holders 0
number of shares 10000
EPS 56.4

3. Enter the formula in required cells and get the appropriate results.
4. The result appears in the = Cell.
5. Hence the result.

Inference:
EPS = 56.4

Result:
Thus the given EPS problem was solved using spread sheet.
Ratio Analysis:

The following financial details of Express Company Ltd are available. You are required to
calculate the following ratios:

Business profitability
Gross profit margin
Net Profit margin
Return on equity

Financial Stability
Current Ratio
Debt/Equity Ratio
Quick Ratio

Resource Utilization
Total Asset Turnover
Inventory Turnover
Debt Turnover

P&L Account

31st Dec 31st Dec

2010 2011
Sales
Cash 150 180
Credit 330 480 420 600
Less: cost of Goods
sold
opening
inventory 200 195
Purchases 60 80
260 275
Less closing
inventory 30 10
230 265
Gross Profit 250 335
Less: operating
expenses
administrative
expenses 75 70
financial 18 20
 expenses
selling and
distribution
expenses 55 148 60 150
net profit before
tax 102 185
Less: corporation
tax 25 47
net profit after
tax 77 138

Balance Sheet
31st Bec 31st Dec
2010 2011
Fixed Assets
Building and land 60 90
equipement 110 170 85 175
Current assets
Inventory 30 10
Debtors 50 90
Cash 150 230 100 200
400 375
Current Liabilities &
owner's equity
creditors 80 55
dividends 30 42
overdraft 4 114 20 117
Owner's equity 286 258
Total Libilities &
owner's equity 400 375

Formula:

Business profitability
Gross profit margin (Gross profit)/Net Sales
Net Profit margin (Net Profit after tax)/(Net Sales)
Return on equity (Net Profit after tax)/(Owner's equity)

Financial Stability
Current Ratio (Current assets)/Current Liabilities
Debt/Equity Ratio (Total assets-Owner's equity)/Owner's equity
Quick Ratio (Current assets less inventory)/(Current Liabilities)

Resource Utilization
Total Asset Turnover (Net sales)/Total assets
Inventory Turnover (Cost of goods sold)/Inventory
Debt Turnover (Credit Sales)/Debtors
Calculate the above ratios for the Express Company Limited

Aim:

To solve the Ratio Analysis problem using Excel spread sheet

Algorithm:

Inference:

Ratio Analysis
1 2
Business
Profitability
Gross Profit 0.520 0.558
Margin 83 33
0.212 0.308
net profit margin 5 33
0.269 0.534
Return on Equity 23 88
Financial
Stability
3.508 3.205
Current ratio 77 13
Debt Equity ratio 1 1
1.754 1.623
Quick ratio 39 93

Resource
Utilization
Total Assets
Turnover 1.2 1.6
Inventory 7.666
Turnover 67 26.5
4.666
Debt Turnover 6.6 67

Result:

Thus the Ratio Analysis problem was solved using Excel spread sheet.
Revenue management using Spreadsheet

INDUSTRY SALES SALE SALE

DATE S S
UNITS PRICE
(Rs.)
Agriculture 08/07/201 5647 73.5
2
Manufacturin 09/07/201 2537 130.84
g 2
Services 10/07/201 846 21.99
2
Manufacturin 11/07/201 455 137.39
g 2
Agriculture 12/07/201 2467 7.85
2
Construction 13/07/201 9345 280.69
2
Services 14/07/201 3446 104.09
2
Agriculture 15/07/201 8946 269.09
2
Manufacturin 16/07/201 7346 221.41
 g 2
Construction 17/07/201 2744 83.29
2
Agriculture 18/07/201 6957 208.69
2
Services 19/07/201 2475 4.24
2
Manufacturin 20/07/201 5455 17.03
g 2
Construction 21/07/201 9244 277.54
2
Agriculture 22/07/201 1057 28.41
2
Construction 23/07/201 7757 233.33
2
Services 24/07/201 2257 68.07
2
Manufacturin 25/07/201 2055 62.37
g 2
Construction 26/07/201 5657 168.87
2
Services 27/07/201 1157 34.42
2

Revenue management using Spreadsheet

Aim :

To calculate the revenue for the given problem using spreadsheet

Algorithm:

1. Click start -> All programs -> Microsoft office - > Ms Spreadsheet -> Ms excel.
2. The spreadsheet opens. Enter the given problem in the spreadsheet.
3. To calculate the revenue enter = sign and enter sales price * sales unit.
4. The revenue is calculated.
5. For calculating the sector wise total, sort according to the industry and sum up the
revenue.
6. The grand total for each industry was calculated.
7. The grand sales and revenue was calculated.
8. Hence the result.

Output:
Inference:

Total number of sales units = 87850 units.

Total revenue = 15329249.26

Result

Hence the revenue was calculated using spreadsheet.