5 August Financial Analysis

Financial Analysis AFTERSCHOOOL – DEVELOPING CHANGE MAKERS CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME – World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship OPEN FOR ALL FREE FOR ALL

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Financial Analysis Dr. T.K. Jain. AFTERSCHOOOL Centre for social entrepreneurship Bikaner M: 9414430763 [email protected] www.afterschool.tk www.afterschoool.tk www.afterschoool.tk

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As an investor, I have 2 options, in which I get 6000 after 1 year in another, I get 9000 after 4 years. Discount rate is 10%. Which option is better?  6000

after one year mean 6000/ (1.1)^1 today, thus I have 5454 today.  9000 after 4 years mean 9000/ (1.1)^4 means 6147, thus second option is better.

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As an investor, I have 2 options, in which I get 6000 after 1 year in another, I get 9000 after 4 years. Discount rate is 20%. Which option is better?  6000

after one year mean 6000/ (1.2)^1 today, thus I have 4999 today.  9000 after 4 years mean 9000/ (1.2)^4 means 4340, thus 1st option is better.

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As an investor, I have 2 options, in which I get 6000 after 2 year in another, I get 9000 after 5 years. Discount rate is 18%. Which option is better?

 6000

after 2 year mean 6000/ (1.18)^2 today, thus I have 4316 today.  9000 after 5 years mean 9000/ (1.18)^5 means 3933 , thus 1st option is better.

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I will need 100 crores after 5 years from now. How much money should I deposit in my bank account every year? Rate : 10%  Amt

((1+interest rate)^N – 1) / rate of interest) = future value of amount.  Thus Amt ((1.1)^5 -1)/.1 = 100  Or amt (.61/.1) = 100  Or amount = 100/6.1  Or amount = 16.38 approximate every year. www.afterschoool.tk

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My equity capital is 60 lakh, debt is 40 lakh. Beta of my stocks is 1.5, risk premium in the market = 10% and treasury bill is at 8%. What is my cost of capital ? 

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Treasury bill (govt. bill) have risk free interest = so risk free rate of return is 8%. Market rate = risk free rate + risk premium CAPM = capital asset pricing model CAPM fomulae : Risk free rate + Beta * (Market rate – risk free rate) =8 + 1.5* (18-8) =8 + 15 = 23 %.

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Risk free rate = 7.75%, Beta = 2, Market rate = 16%. Calculate cost of capital using CAPM?  CAPM

= capital asset pricing model  CAPM fomulae : Risk free rate + Beta * (Market rate – risk free rate)  =7.75 + 2 (16-7.75)  =24.25 answer.

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Risk free rate = 7.75%, Beta = 2, My cost of capital = 16%. Calculate market rate of returns using CAPM?  CAPM

fomulae : Risk free rate + Beta * (Market rate – risk free rate)  =16= 7.75 +2 (Market rate – 7.75)  =16-7.75 = 2M – 15.5  =8.25 +15.5 = 2M  M = 11.78 answer.

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If Market rate is 14%, risk free rate is 8.25% and my cost of capital is 18%. What is my BETA?  CAPM

fomulae cost of capital = : Risk free rate + Beta * (Market rate – risk free rate) 18 = 8.25 + Beta (14-8.25) 18-8.25= beta (5.75) Beta = 9.75 / 5.75 = 1.7 answer.

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You have invested your money in four sectors. The average returns are 18, 18, 24 and 16 respectively. Your beta of these sectors are .9, 1.12, 1.5, .95. which is best sector? Risk free return = 10 and market return = 18%  Expected

returns = RF + Beta(RM-RF)  =10+.9(18-10) = 10+7.2 = 17.2 so on.  Thus we get expected returns for these four sectors which are 17.2, 19, 22 and 17.6. Thus third sector has outperformed in comparison to expectations (24-22 = 2) www.afterschoool.tk AFTERSCHOOOL MATERIAL FOR PGPSE PARTICIPANTS

Solution . . . .  We

get 18% in comparison to 17.2 in the first sector, thus it is very profitable (by .8)  In second sector, we get 18% but expectation is 19%, so it is not upto the mark. Third sector is the best performing sector.

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I shall get 100 crore after 5 years (from afterschooolians), what is the value of that today? Rate = 10% =

100 / (1+interest rate)^n  =100/ (1.1)^5  =100/1.61  =62.11 approximate.

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ABO UT A FTERSCH OOO L Afterschoool conducts three year integrated PGPSE (after class 12th along with IAS / CA / CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.

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Why such a programme? 

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To promote people to take up entrepreneurship and help develop the society To enable people to take up franchising and other such options to start a business / social development project To enable people to take up social development as their mission To enable people to promote spirituality and positive thinking in the world

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Who are our supporters?  Afterschoolians,

our past beneficiaries, entrepreneurs and social entrepreneurs are supporting us.  You can also support us – not necessarily by money – but by being promotor of our concept and our ideas.

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About AFTERSCHOOOL PGPSE – the best programme for developing great entrepreneurs     

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Most flexible, adaptive but rigorous programme Available in distance learning mode Case study focused- latest cases Industry oriented practical curriculum Designed to make you entrepreneurs – not just an employee Option to take up part time job – so earn while you learn The only absolutely free course on internet

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Workshops from AFTERSCHOOOL         

IIF, Delhi CIPS, Jaipur ICSI Hyderabad Branch Gyan Vihar, Jaipur Apex Institute of Management, Jaipur Aravali Institute of Management, Jodhpur Xavier Institute of Management, Bhubaneshwar Pacific Institute, Udaipur Engineering College, Hyderabad

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Flexible Specialisations:          

Spiritualising business and society Rural development and transformation HRD and Education, Social Development NGO and voluntary work Investment analysis,microfinance and inclusion Retail sector, BPO, KPO Accounting & Information system (with CA / CS /CMA) Hospital management and Health care Hospitality sector and culture and heritage Other sectors of high growth, high technology and social relevance

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Salient features: The only programme of its kind (in the whole world)  No publicity and low profile course  For those who want to achieve success in life – not just a degree  Indepth knowledge and expertise  Professional approac: World class approach  Strong intellectual and business capabilities  Flexible – you may stay for a month and continue the rest of the education by distance mode. / you may attend weekend classes  Scholarships for those from poor economic background  Latest and constantly changing curriculum – keeping pace with the time  Placement for those who are interested  Admissions open throughout the year  Latest and most advanced technologies, books and study www.afterschoool.tk AFTERSCHOOOL MATERIAL FOR PGPSE PARTICIPANTS material 

Components              

Pedagogy curriculum and approach based on IIM Ahmedabad and ISB Hyderabad (the founder is alumnus from IIMA & ISB Hyderabad) Meditation, spiritualisation, and self development Essential softwares for business Business plan, Research projects Participation in conferences / seminars Workshops on leadership, team building etc. Written submissions of research projects/articles / papers Interview of entrepreneurs, writing biographies of entrepreneurs Editing of journals / newsletters Consultancy / research projects Assignments, communication skill workshops Participation in conferences and seminars Group discussions, mock interviews, self development diaryng Mind Power Training & writing workshop (by Dr. T.K.Jain)

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Pedagogy          

Case analysis, Articles from Harvard Business Review Quiz, seminars, workshops, games, Visits to entrepreneurs and industrial visits Presentations, Latest audio-visuals Group discussions and group projects Periodic self assessment Mentoring and counselling Study exchange programme (with institutions out of India) Rural development / Social welfare projects

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Branches  AFTERSCHOOOL

will shortly open its branches in important cities in India including Delhi, Kota, Mumbai, Gurgaon and other important cities. Afterschooolians will be responsible for managing and developing these branches – and for promoting social entrepreneurs.

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Case Studies  We

want to write case studies on social entrepreneurs, first generation entrepreneurs, ethical entrepreneurs. Please help us in this process. Help us to be in touch with entrepreneurs, so that we may develop entrepreneurs.

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Basic values at afterschoool        

Share to learn more Interact to develop yourself Fear is your worst enemy Make mistakes to learn Study & discuss in a group Criticism is the healthy route to mutual support and help Ask fundamental questions : why, when, how & where? Embrace change – and compete with yourself only

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www.afterschoool.tk social entrepreneurship for better society

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