Why Present cash flow is divided by annuity factor for equivalent future cash flows

Why Present cash flow is divided by annuity factor for equivalent future cash flows?

Present cash flows are divided by annuity factor to account for the time value of money; this is very important concept in financial decision making. If we ignore the time value of money, then we can divide the present cash flow with number of years.

What is asset replacement rule for machinery

What is asset replacement rule for machinery?

Machinery which has lower annual equivalent cost should be selected. Annual equivalent cost can be calculated dividing the present cash flows with the annuity factor.

Asset Replacement Rule example

For example there are two machinery (X, Y) with cost 100 and 150 million respectively. Running cost of both machinery is 40 million per year and useful life is 2 & 3 years, then annual equivalent cost can be calculated as under;

Year	Initial	Running cost	Net Cash	Discount	PV
0	100		100	1	100
1		40	40	.909	36
2		40	40	.826	33
PV					169

Annuity Factor (2 Years) = 1.73

Equivalent machinery cost = 169/1.73

= 98 (first Machinery)

Year	Initial	Running cost	Net Cash	Discount	PV
0	100		130	1	130
1		40	40	.909	36
2		40	40	.826	33
		40	40	.751	30
PV					229

Annuity Factor= 2.48

Equivalent Machinery Cost= 229/2.48

=92 (second Machinery)

Second machinery has lower equivalent cash outflow, and therefore be selected.

Who can demand fresh election of Board of Director

Who can demand fresh election of Board of Director?

Fresh election can be demanded by a substantial shareholder. Substantial shareholder may claim his representation in board of directors. In Pakistan substantial shareholder mean a person holding more than 12.5% of shares.

Who can remove elected Director

Who can remove elected Director?

Shareholder can remove the elected director in general meeting, provided that resolution so passed by more than votes which was taken by the director at the time of elections

What is process of electing subsequent director

What is process of electing subsequent director

Number of director fixed by the first director

1.    notice of number of director at 45 day before meeting

2.    person interested send his consent for election at 14 days before meeting

3.    Notice (consent) of person interested in director is circulated to share 7 days before meeting.

4.    director is selected by voting

5.    Number of votes number of voting shared x number of director to be selected

6.    person get highest number of votes first director, person getting second highest number of votes is second director, in all director is same manner up to the limit (director is required to be elected).

What is casual Vacancy of board of Director

What is casual Vacancy of board of Director?

Casual vacancy may result due to disqualification, death or resignation of directors.

Who would fill the casual vacancy of board of director?

Casual vacancy in board of director would be filled by the Director (remaining director) and such director would serve as director for remaining term.

How many subsequent Directors in Pakistan

How many subsequent Directors in Pakistan?

Number of subsequent director is decided by the first director, and subsequent director are selected in first annual general meeting. Subsequent director are selected by voting procedures.

What is term of subsequent directors?

Term of Director for subsequent director is three years. It important to remember that subsequent director also called elected directors.