BALANCE SHEET

(Rupees in Thousands)
EQUITY AND LIABILITIES 2007 2008 % of Sales 2009 2010
Sales 10,961,438 11,174,014 12,274,922 13,484,296

Share capital and reserves

Authorised capital
20,000,000 (June 30, 2007: 20,000,000) ordinary shares of Rs. 10/- each 200,000 200,000

Issued, subscribed and paid up capital 187,420 187,420 187,420 187,420

General reserve 1,986,000 2,211,000 19.79% 2,428,836 2,668,135
Unappropriated profit 450,638 576,917 5.16% 633,757 696,197
Fair Value Reserve 72,522 63,542 0.57% 69,802 76,680
2,696,580 3,038,879 3,319,816 3,628,432
Non-current liabilities

Security deposits 9,285 9,485 9,485 9,485

Deferred revenue 36,478 32,729 32,729 32,729
Deferred taxaton 5,587 12,355 12,355 12,355
Accumulating compensated absenes 26,029 28,344 0.25% 31,137 34,204
77,379 82,913 85,706 88,773
Current liabilities

Current portion of deferref ervenue 224,199 218,127 1.95% 239,618 263,226

Trade and other payables 3,241,181 3,925,019 35.13% 4,311,727 4,736,536
Mark-up accured on short term borrowings 4,579 2,858 0.03% 3,140 3,449
Short Term Borrowings 20,406 0 0.00% 0 0
3,490,365 4,146,004 4,554,485 5,003,211
Contingencies and commitments
Total 6,264,324 7,267,796 7,960,006 8,720,416
 ASSETS
Non-current assets

Property, plant and equipment 230,474 298,219 2.67% 327,601 359,877

Capital work-in-progress 128,969 179,955 1.61% 197,685 217,162
Intangible assets-in progress 16,527 17,028 17,028 17,028
Investment property 255,708 273,203 2.44% 300,120 329,689
Long term investments 284,364 315,425 315,425 315,425
Long term loans - considered good 4,142 4,385 4,385 4,385
920,184 1,088,215 1,162,244 1,243,566
Current assets

Stores and spares 44,081 78,292 0.70% 86,006 94,479

Stock in trade 1,840,082 1,636,153 14.64% 1,797,353 1,974,436
Trade debts 275,953 102,660 0.92% 112,774 123,885
Loans and advances 63,163 98,082 0.88% 107,745 118,361
Trade deposit and prepayments 5,308 7,782 0.07% 8,549 9,391
Other receivables 416,300 1,167,286 10.45% 1,282,292 1,408,628
Taxation - net 80,811 8,198 8,198 8,198
Short-term investments 2,496,300 2,831,770 25.34% 3,110,767 3,417,252
Cash and bank balance 122,142 249,358 2.23% 273,926 300,914
5,344,140 6,179,581 6,787,610 7,455,544

Total Assets 6,264,324 7,267,796 7,949,854 8,699,110

EFN 10,153 21,306

7,960,006 8,720,416
 AFN / EFN 2009 AFN / EFN 2010

Total assets = 7,949,854 Total assets = 8,699,110

Total Liabilities = 7960006 Total Liabilities = 8720416

EFN = -10,153 EFN = -21,306

For projected Balance Sheet of 2009 and 2010, I took 2008 as base year and then calculated the % of sales of some of the heads of Balance Sheet.
With the help of these calculated % of sales, i calculate the Balance Sheet for Years 2009 and 2010 while keeping growth rate of 9.85% as shown in
Income Statement.

After calculating EFNof 2009 I came to know that my company, Millat Tractors needed External financing of Rs. 10,513 in assets in order to equalize
the balance sheet. Similarly, in 2010 Millat Tractors needed External financing of Rs. 21,306 in assets in order to equalize the balance sheet.
 INCOME STATEMENT (Rupees in Thousands)
PROFIT and LOSS ACCOUNT 2007 2008 % of Sales 2009 2010
Rupees In thousands
Sales-net 10,961,438 11,174,014 12,274,922 13,484,296
Cost of sales 9,832,853 9,701,298 86.82% 10,657,108 11,707,089
Gross profit 1,128,585 1,472,716 1,617,814 1,777,207

Distribution & marketing expenses 346,260 361,495 3.24% 397,111 436,236

Administrative expenses 183,303 210,120 1.88% 230,822 253,563
529,563 571,615 627,933 689,799
Operating profit 599,022 901,101 989,881 1,087,408

Other operating income 332,614 321,608 2.88% 353,294 388,102

EBIT 931,636 1,222,709 1,343,175 1,475,510

Finance cost 15,997 20,996 0.19% 23,065 25,337

Other operating expenses 75,437 81,574 0.73% 89,611 98,440
91,434 102,570 112,676 123,777
Profit before taxation 840,202 1,120,139 1,230,500 1,351,733

Taxation 203,305 309,681 363,633 426,984

Profit after taxation 636,897 810,458 866,867 924,749

Basic earnings per share - Rupees 33.98 43.24 46.25 49.34

TAX RATE 24.20% 27.65% 29.55% 31.59%

TAX RATE GROWTH RATE 6.89%
No. of shares outstanding 18,741,969 18,741,969 18,741,969 18,741,969
Net Income 636897000 810458000 866866562.46 924748885
 GROWTH RATE

2008 2007 2006 2005 2004

Sales - Net 11,174,014 10,961,438 9,737,382 8,326,231 6,984,922

GROWTH RATE i 9.85%

5 YEARS
PV 6,984,922
FV 11,174,014
n 5

GROWTH RATE 7.63%

4 YEARS
PV 6,984,922
FV 11,174,014
n 4

GROWTH RATE 4.69%

3 YEARS
PV 6,984,922
FV 11,174,014
n 3

First I took out the graowth rate of Income Statement for 5, 4 and 3 years respectively. Their growth rate will be 9.85% for 5 years, 7.63% for 4 years
and 4.69% for 3 years. So, I took the highest growth rate 9.85% of 5 years. My base year was 2008 and then I found the % sales of heads of Income
Statements. For projected Income Statement of 2009 and 2010, I used this growth rate and % of sales.
 Trading Results (Sales)

2008 2007 2006 2005 2004

Sales - Net 11,174,014 10,961,438 9,737,382 8,326,231 6,984,922

Gross Profit 1,472,716 1,128,585 1,292,838 927,359 847,336
Operating Profit 901,101 599,022 938,960 712,651 619,805
Profit before tax 1,120,149 840,202 1,074,597 700,198 595,342
Net Profit after tax 810,458 636,897 730,577 453,862 394,622
 Sensitivity Analysis of CGS (Rs.)

PROFIT and LOSS ACCOUNT Base 30% 15% -15% -30%

Sales-net 11,174,014 11,174,014 11,174,014 11,174,014 11,174,014

Cost of sales 9,701,298 12,611,687 11,156,493 8,246,103 6,790,909
Gross profit 1,472,716 -1,437,673 17,521 2,927,911 4,383,105

Distribution & marketing expenses 361,495 361,495 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120 210,120 210,120
571,615 571,615 571,615 571,615 571,615
Operating profit 901,101 -2,009,288 -554,094 2,356,296 3,811,490

Other operating income 321,608 321,608 321,608 321,608 321,608

1,222,709 -1,687,680 -232,486 2,677,904 4,133,098

Finance cost 20,996 20,996 20,996 20,996 20,996

Other operating expenses 81,574 81,574 81,574 81,574 81,574
102,570 102,570 102,570 102,570 102,570
Profit before taxation 1,120,139 -1,790,250 -335,056 2,575,334 4,030,528

Taxation 309,718 -495,004 -92,643 712,080 1,114,441

Profit after taxation 810,421 -1,295,246 -242,413 1,863,254 2,916,087

Taxation 27.65%

From Sensitivit Analysis of Cost of Sales I came to know that if I increases my Cost of Slaes by 15%, my Income Statement will
become negative which shows the loss for my company and definetely same is the case with 30% increase in Cost of Sales. If I
decreases my Cost of Sales by 15 %, then my company will be in +ve and same is the case with 30% decrease in cost of Sales
 Sensitivity Analysis of Sales (Rs.)

PROFIT and LOSS ACCOUNT Base 30% 15% -30% -15%

Sales-net 11,174,014 14,526,218 12,850,116 7,821,810 9,497,912

Cost of sales 9,701,298 9,701,298 9,701,298 9,701,298 9,701,298
Gross profit 1,472,716 4,824,920 3,148,818 -1,879,488 -203,386

Distribution & marketing expenses 361,495 361,495 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120 210,120 210,120
571,615 571,615 571,615 571,615 571,615
Operating profit 901,101 4,253,305 2,577,203 -2,451,103 -775,001

Other operating income 321,608 321,608 321,608 321,608 321,608

1,222,709 4,574,913 2,898,811 -2,129,495 -453,393

Finance cost 20,996 20,996 20,996 20,996 20,996

Other operating expenses 81,574 81,574 81,574 81,574 81,574
102,570 102,570 102,570 102,570 102,570
Profit before taxation 1,120,139 4,472,343 2,796,241 -2,232,065 -555,963

Taxation 309,718 1,236,603 773,161 -617,166 -153,724

Profit after taxation 810,421 3,235,740 2,023,080 -1,614,899 -402,239

Taxation 27.65%

From Sensitivit Analysis of Sales - Net, I came to know that if I decreases my Slaes by 15%, my Income Statement will become
negative which shows the loss for my company and definetely same is the case with 30% decrease in Sales. If I increases my
Sales by 15 %, then my company will be in +ve and same is the case with 30% increase in Sales
 Sensitivity Analysis of Expenses (Rs.)

PROFIT and LOSS ACCOUNT Base (2008) 30% 15% -30% -15%

Sales-net 11,174,014 11,174,014 11,174,014 11,174,014 11,174,014

Cost of sales 9,701,298 9,701,298 9,701,298 9,701,298 9,701,298
Gross profit 1,472,716 1,472,716 1,472,716 1,472,716 1,472,716

Distribution & marketing expenses 361,495 469,944 415,719 253,047 307,271

Administrative expenses 210,120 273,156 241,638 147,084 178,602
571,615 743,100 657,357 400,131 485,873
Operating profit 901,101 729,617 815,359 1,072,586 986,843

Other operating income 321,608 321,608 321,608 321,608 321,608

1,222,709 1,051,225 1,136,967 1,394,194 1,308,451

Finance cost 20,996 20,996 20,996 20,996 20,996

Other operating expenses 81,574 81,574 81,574 81,574 81,574
102,570 102,570 102,570 102,570 102,570
Profit before taxation 1,120,139 948,655 1,034,397 1,291,624 1,205,881

Taxation 309,718 262,303 286,011 357,134 333,426

Profit after taxation 810,421 686,352 748,386 934,490 872,455

Taxation 27.65%

From Sensitivit Analysis of Expenses, I came to know that with the increase or decreases in my expenses by 15% and 30%, my
Income Statement remains same. It has no affect on my income statement and Millat Tractors remains stable.
 ` Sensitivity Analysis of Financial Cost (Rs.)

PROFIT and LOSS ACCOUNT Base (2008) 30% 15% -30% -15%

Sales-net 11,174,014 11,174,014 11,174,014 11,174,014 11,174,014

Cost of sales 9,701,298 9,701,298 9,701,298 9,701,298 9,701,298
Gross profit 1,472,716 1,472,716 1,472,716 1,472,716 1,472,716

Distribution & marketing expenses 361,495 361,495 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120 210,120 210,120
571,615 571,615 571,615 571,615 571,615
Operating profit 901,101 901,101 901,101 901,101 901,101

Other operating income 321,608 321,608 321,608 321,608 321,608

1,222,709 1,222,709 1,222,709 1,222,709 1,222,709

Finance cost 20,996 27,295 24,145 14,697 17,847

Other operating expenses 81,574 81,574 81,574 81,574 81,574
102,570 108,869 105,719 96,271 99,421
Profit before taxation 1,120,139 1,113,840 1,116,990 1,126,438 1,123,288

Taxation 309,718 307,977 308,848 311,460 310,589

Profit after taxation 810,421 805,863 808,142 814,978 812,699

Taxation 27.65%

From Sensitivit Analysis of Financial Cost, I came to know that with the increase or decreases in my expenses by 15% and 30%,
my Income Statement remains same. It has no affect on my income statement and Millat Tractors remains stable.
 Breakeven Analysis & Liverages

Projected
Accounting Breakeven (FC/1-(VC*Q)/(P*Q) 2008 2009 2010
Administrative Expense FC 210,120 230,822 253,563
CGS V*Q 9,701,298 10,657,108 11,707,089
Sales P*Q 11,174,014 12,274,922 13,484,296
Accounting Breakeven 210,119 230,821 253,562

Cash Breakeven Projected

(FC-Dep/1-(VC*Q)/(P*Q) 2008 2009 2010
Administrative Expense FC 210,120 230,822 253,563
CGS V*Q 9,701,298 10,657,108 11,707,089
Sales P*Q 11,174,014 12,274,922 13,484,296
Dep 11,149
Cash Breakeven 1509663 1666735 1839283

Degree of Levearage
(%change in EBIT / %Change in Sales Projected
2007 2008 2009 2010
EBIT 931,636 1,222,709 1,343,175 1,475,510
Sales 10,961,438 11,174,014 12,274,922 13,484,296
Degree of Leverage 16.11 1.00 1.00

Degree of Financial Leverage

(%change in EPSI / %change in EBIT) Projected
2007 2008 2009 2010
EBIT 931,636 1,222,709 1,343,175 1,475,510
EPSI 33.98 43.24 46.25 49.34
Degree of Financial Leverage 1.15 1.42 1.48
Total Leverage 18.47 1.42 1.48

From Breakeven Analysis I came to know that Millat Tracrors Accounting Breakeven of 2009 will be at the cost Rs.
230,821 and year 2010 breakeven will be at the cost of Rs. 253,562. At these costs the firm will be in a NO PROFIT NO
LOSS point.

From Breakeven Analysis I came to know that Millat Tracrors Cash Breakeven of 2009 will be at the cost Rs. 1666,735 and
year 2010 breakeven will be at the cost of Rs. 1839283. At these costs the firm will be in a NO PROFIT NO LOSS point.
 Scanerio Analysis

Worst 25% Base Best 25%

Sales 8380510.5 11,174,014 13967518
Variable Cost 12126622.5 9,701,298 7275973.5
Fixed Cost 262650 210,120 157590
Depreciation 11149 11,149 11,149
OCF
NPV

In Scenario Analysis, in its worst case sales decrases and Cost increases, whereas in its best case, sales increases and cost
decreases.
 WACC
Stock Price Market Index Relative Index
2006 June 322 9,989.41 99.8941
July 328 10,497.63 104.9763
August 351.1 10,064.13 100.6413
September 340 10,512.48 105.1248
October 290 11,327.71 113.2771
November 289 10,618.75 106.1875
December 282 10,058.46 100.5846
2007 January 294 11,272.33 112.7233
February 286.1 11,179.97 111.7997
March 275 11,271.59 112.7159
April 300.25 12,369.70 123.697
May 342.45 12,961.26 129.6126
June 331.5 13,772.46 137.7246
July 330 13,738.87 137.3887
August 315.5 12,214.26 122.1426
September 302 13,351.79 133.5179
October 282.5 14,319.42 143.1942
November 281 14,070.05 140.7005
December 270.5 14,075.83 140.7583
2008 January 271.4 14,017.01 140.1701
February 297 14,934.30 149.343
March 297 15,125.29 151.2529
April 292.5 15,122.47 151.2247
May 265.25 12,130.51 121.3051

Covariance -108.523393403

Variance 626.0916259058
β -0.17333468284 β UL -0.002182

rRF 9%
RPM 11%
 Beta -0.173335
Risk Free Rate,Rf 9.45%
June,2008
Market Risk 8%
CAPM=k= 0.0806332254

WACC FOR 2008

Tax rate 33%

Cost of debt 0.78%

Weight of debt 57.05%

Cost of equity 8.06%

Weight of equity 43%

Cost of Prefered Stock

Weight of Prefered stock

WACC 3.91%
 Dividend Policy % Change in Net Income

Year BV / Share MV / Share Year Current Year % Change

2007 14.39% 331.50 2007 636,897,000
2008 16.21% 265.25 2008 810,458,000 27.25%
2009 Projected 17.71% 298.38 2009 Projected 866,866,562 6.96%
2010 Projected 19.36% 281.81 2010 Projected 924,748,885 6.68%

Firm's Tax Bracket

Years Average Taxation

2007 24.20%
2008 27.65%
2009 Projected 29.55%
2010 Projected 31.59%

Firm's Dividend Policy Dividend Pyout Ratio

Year Dividends / Share % Change Year Retention Rate

2007 1.82% 2007 53.42% 46.58%
2008 2.45% 34.97% 2008 56.66% 43.34%
2009 Projected 2.13% -12.95% 2009 Projected 56.66% 43.34%
2010 Projected 2.29% 7.44% 2010 Projected 56.66% 43.34%

Sustainable Growth Rate

Year Retention ROE Growth Rate Average

2007 46.58% 23.62% 12.36%
2008 43.34% 26.67% 13.07%
12.65%
2009 Projected 43.34% 26.11% 12.76%
2010 Projected 43.34% 25.49% 12.42%
 Internal Growth Rate

Year Retention ROA Internal Growth

2007 46.58% 10.17% 4.97%
2008 43.34% 11.15% 5.08%
2009 43.34% 10.89% 4.95%
2010 43.34% 10.60% 4.82%

The dividend policy is calculated by dividend per share and dividend payout ratio in previous years it has decreasing trend this is shown by
the table. Company is paying dividend in cash and as bonus shares as well. In 2008 company has decreased its cash dividend and its payout
ratio has decreased
 OPTIMAL CAPITAL STRUCTURE

Component of capital Proposed Proposed

2007 2008 2009 2010
1 Equity 2,696,580 3,038,879 3,319,816 3,628,432
2 Total Debt 3,490,365 4,146,004 4,554,485 5,003,211
Total Capital of firm 6,186,945 7,184,883 7874301 8,631,643
% in total capital
% of equity 43.59% 42.30% 42.16% 42.04%
% of Debt 56.41% 57.70% 57.84% 57.96%

Net working capital

2007 2008 2009 2010

1,853,775 2,033,577 2,233,125 2,452,334

Change in NWC 1,853,775 179,802 199,548 219,209

Through Optimal Capital Structure I calculated proposed % of Equity and % of Debt for year 2009 & 2010. In optima capital structure
WACC and multiplies by short term borrowings, accrued mark up and provisions.WACC is calculated by finding company share price
and market index, I obtained the beta. Beta is the measure to which the portfolio return should exceed the risk free rate. Here the
share price is the measure which increases the risk free rate.
 INCOME STATEMENT (Rupees in Thousands)
PROFIT and LOSS ACCOUNT 2008 2008 2008
Rupees In thousands

With No Debt With Optimal Capital Structure

Sales-net 11,174,014 11,174,014 11,174,014

Cost of sales 9,701,298 9,701,298 9,701,298
Gross profit 1,472,716 1,472,716 1,472,716

Distribution & marketing expenses 361,495 361,495 361,495

Administrative expenses 210,120 210,120 210,120
571,615 571,615 571,615
Operating profit 901,101 901,101 901,101

Other operating income 321,608 321,608 321,608

EBIT 1,222,709 1,222,709 1,222,709

Finance cost 20,996 0 112

Other operating expenses 81,574 81,574 81,574
102,570 81,574 81,686
Profit before taxation 1,120,139 1,141,135 1,141,023

Taxation 309,681 309,681 309,681

Profit after taxation 810,458 831,454 831,342

Basic earnings per share - Rupees 43.24 44.36 44.36

No. of shares outstanding 18,741,969 18,741,969 18,741,969
Net Income 810458000 831454000 831342310.843038
 IPO
2009 2010

AFN 10,152,598 21,305,656

Markret price 298.38 281.81

Subscription price 1 1

# of rights = old no. of shares / new no. of shares 1.84602698266791 1787.89192856

# of new shares = Fund required / subscription price 10152597.5383706 11916.635115

ex-right price=(# of rights* market price) 193.887234490048 281.655524335

subcription price)/ (N+1)

Value of right 104.487765509952 0.15697566495

The calculated AFN is the part of equity, so I don’t go for

issuing the share for the public because the flotation cost and
dilution effect. In order to avoid this I give the more rights to
existing share holders for the two years.