EPGDM TERM II GRADABLE ASSIGNMENT
Evaluation of employee group housing offer 20 Marks
Pharma company has recently recruited 4 scientists at an average age of 27 and
is looking to develop quite a few pharmacological formulations. With a view to
retain them the company proposes to offer a housing scheme to them on the
following terms and conditions:
1. The number of beneficiaries will be four in number
2. The total cost of purchasing apartments will be Rs.1
3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC
offers 15 years term @ 8% interest.
4. The company will pay the housing finance company on an
5. A Down payment of 5% of the cost of the apartment has to
be made and recoverable from the employee in 24 installments. The upfront
payment will be made by the company.
6. In case of availing the loan from HDFC, 50% of the
installment will be recovered from the employee on a monthly basis and in case
of availing the loan from PNBHFL 45% will be recovered from the employee. The
option of choosing the service rests with the company only.
7. Assume that employee deductions happen on the first day
of the month and housing loan payments made by the company happens on the last
day of the year.
8. The housing loan is offered on a fixed interest basis and
EMI will not change.
9. Assume the individual apartments are of equal value.
You are called upon to do the following:
1. Calculate the two EMI options and choose the best one.
2. Case Let on Agency Conflict 20
Lean Conductors Ltd is a
mid-sized Public limited company engaged in the manufacture and sale of
electrical cables. As a public limited company the organization was performing
reasonably well, earning steady profits and declaring a stable dividend of
The CEO was feeling the urge
to expand the business and taste the growth of business operations and profits.
He started addressing various options and shortlisted 2 options namely
manufacture of LED bulbs and solar panels.
He called the Gen Mgr. -
Finance for a discussion in this regard to probe the matter further. He also
went on to share his dream of making the company a larger one and his belief in
people like the GM who needs to stay and grow with the organization.
The GM felt excited at this
prospect and started making a project report. He decided in his own mind the
solar panel project with a larger profit margin looked to be a better one than
LED bulbs which was dealer intensive and lesser in terms of unit margin.
Feeling the need to expand
rapidly on the investment of the company and make it bigger and become a CFO in
the bargain, he chose the solar panel project which was more capital intensive.
An assumption about a capital structure and cost congruent to the existing
structure was assumed and the projected financials were prepared.
The board of
directors representing the majority of shareholders believing in the
recommendations of the report adopted it for implementation. The project faced
various hurdles in its implementation such delay in signing collaboration
agreements, inflated cost due to poor supply of money in the market, downturn
of the economy and so on. The project cost started spiraling up and to fund the
expansion the funds of the existing business line were inducted into the new
project since no further borrowing could be made. The company slipped into the
red and reached a stage of bankruptcy without the new project even taking