Who Decide Composition of Board of Director in Pakistan

Who Decide Composition of Board of Director in Pakistan

Basic Composition of board of director i.e. maximum and minimum number of director is normally decided by the regulator, corporate law of the country. Specific number of Directors is decided either by memorandum of association, articles of association or board of directors.

In Pakistan board of Director composition is decided as follow;

·         Minimum number of Director is given or decided by law

·         Number of first Director is decided by subscriber to memorandum subject to law.

·         Number of subsequent Director by first Director subject to law.

Fixed Installment Loan Calculation

Fixed Installment Loan Calculation

Fixed installment loan installment can be calculated by dividing the loan amount by the annuity factor.  This would provide us the equal cash outflows (loan installment).

Fixed Installment Loan Calculation Example

Mr. Saleem is planning to take 1 million $ from a bank. Interest rate is 12% and term of loan is 5 years, what would be yearly installment.

Solution

In first place we would calculate, the annuity factor, and then we would divide the loan amount by the annuity factor.

1.    Annuity Factor

Annuity Factor= 1-(1.012)^-5

                           .12

Annuity Factor = 3.60

2.    Fixed installment

Annual installment = 1,000,000/ 3.60

277,777 – Yearly installment

Total Market Value from Equity & Debt

Total Market Value from Equity & Debt

Total market Value of entity may be calculated from the market value of debt and market value of equity. Total market value is calculated by simply adding market value of Debt & Equity.

Vt= Ve + Vd

Vt= Total Market Value

Ve= Market Value of equity

Vd= Market Value of debt

Total Market Value from Debt & Equity Example

XYZ Company market value of equity is 50 million, while market value of debt is 35; total market value has been calculated for XYZ as under.

Vt= Ve+Vd

Vd= 50+ 35

Vd= 85 (Total Market Value)

Market Value of Debt from Market Value of Equity

Market Value of Debt from Market Value of Equity

Market Value of debt can be calculated from the relationship between Total value of entity, market value of debt and market value of equity. This relationship has been explained by following formula

Vt= Ve + Vd

Vt= Total Market Value

Ve= Market Value of equity

Vd= Market Value of debt

Market Value of Equity Example

ABC Company has current value of 350 million, equity market value is 100, calculate debt market value?

Vd= Vt-Ve

Vd= 350-100

Vd= 250 (Market value of equity)

Market Value of Equity and Total Value of Company

Market Value of Equity and Total Value of Company

Market Value of equity can be calculated from the Total value of entity and market value of debt. Formula for calculating market value of equity is

Ve= Vt-Vd

Ve= Market Value of equity

Vt= Total Market Value

Vd= Market Value of debt

Market Value of Equity Example

Company total market value is 250 million, the market value of debt is 50 million, and then market value of equity can be calculated as under

Ve= Vt-Vd

Ve= 250-50

Ve= 200 (Market value of equity)

Volatility of Project

Volatility of Project

Volatility of project varies with the length of period. it means longer period project has higher volatility and shorter period has small volatility. Relationship between time and volatility has been explained by the following formula

S.D (Longer period) = S.D (short period of time) √T – measure of volatility

Volatility of Project example

Project has cash inflow of 200,000 annual. Life of project is 5 years. Volatility in cash flow is 30,000. Calculate the cash inflow for 5 year and volatility.

Cash flow 5 years = 200,000 x 5 years = 1,000,000

Volatility for 5 Years = 30,000 x √5

=30,000x2.236

= 67080

Risk in Return

Risk in Return

Risk in return means that expected return may not be achieved. This risk can be measured with the help variance and standard deviation.

1.    High Volatile Return

High volatile return means return differ substantially from the expected value (average value of return. high volatile return also differ substantially from each other.

2.    Risk of Return measurement

Risk of return may be measured by statically technique i.e. calculating variance and standard deviation.

Variance = p Σ(r-r)²

S.D = √ p Σ(r-r)²