FINANCIAL MANAGEMENT POLICY

FEASIBILITY REPORT

Monthly Profit Plus

Submitted To:
Mr. Nawez Ahmad.

Dated: February 26, 2011

Prepared By:

Group Members:
Mohammad Fahad 0000
Muhammad Haris Siddiqui 9689
Muhammad Zaryab 11031
Syed Farhan Ahmed 9606
Umair Nasir 11025

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 Table of Contents

S. No Contents Pg. No
1. Introduction 2
2. Product 3
3. Investment Tenure 4
4. Cash Flow 4
5. Net Present Value 4
6. Conclusion 4
7. Required Rate Of Return 5
8. Internal Rate Of return 5
9. Conclusion 5

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 ~ COMPANY OVERVIEW ~

INTRODUCTION

Allied Bank Ltd. is one of the largest private sector banks in Pakistan in
terms of assets, deposits and advances. The Bank is principally
engaged in providing corporate banking facilities to Pakistan’s most
valued corporations and institutions. Additionally, it also provides
general banking services to commercial, agricultural, industrial and
individual customers throughout Pakistan.

Established in Lahore in 1942, ABL was the first Muslim bank in Pre-
partition India. It was initially known as the Australasia Bank, with a
paid up share capital of PKR 0.12 million, and was renamed as Allied
Bank of Pakistan Limited in 1974 and Allied Bank Limited in 2005.
Today the Bank stands on a solid foundation of over 60 years of its
existence having a strong equity, assets and deposits base offering
universal banking services with higher focus on retail banking. The
Bank has the largest network of on-line branches in Pakistan and offers
various technology based products and services to its diversified
clientele through its network of more than 800 branches.

The Bank has the largest data communication network with all its
branches offering real-time online banking. The Bank offers a full range
of retail, commercial and corporate banking services with a focus on
service delivery through technology.

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Product:

Monthly Profit Plus

Saving has now become all the more appealing with our Monthly Profit Plus Scheme,
which provides you monthly profits on investments. The scheme is designed for a period
of 1 Year with the following profit rates:

Tenure 1 Year
Profit Rate 11.00% p.a.

Salient Features:

 Account Type: Term Deposit

 Term Period: 1 year

 Profit: Payable on monthly basis

 Minimum Deposit Amount: Rs.25,000

 Eligibility: Individuals & Institutions (other than financial institutions)

Additional Benefits :

 Chequing Account for monthly profit credit

 24 hour phone banking service

 Free internet banking facility

 SMS transaction alerts

 Allied Cash + Shop Visa Debit Card

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Investment Tenure:
We are investing Rs 1,000,000/- in Allied Bank Monthly Profit Plus Account on 11%
Interest for 5 Years.

Calculation For Cash Flow:

Cash Flow = Investment * Interest rate

Cash Flow = 1,000,000 * 11%
Cash Flow = 110,000 per Annum or 9,167 per Month
1 to 5

Year Cash Flow

0 (1,000,000)
1 110,000
2 110,000
3 110,000
4 110,000
5 1,110,000

Net Present Value:

Net Present Value = {Cash Flow * PVIFA} – CF0

N=5
I=14%

Net Present Value = {110,000 * 3.4331} + 1,000,000/ (1.14) ^5 – 1,000,000

Net Present Value = (102,990)

Financial Decision:

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Analysis of the project regarding Investing amount in Allied bank Monthly Profit Plus
showed us that it is not a feasible project. The net present value is in negative this means
that we should not invest in this business.
Hence it can be concluded that the Investing in ‘Monthly Profit Plus’ would not be a
profit generating business in the light of above calculation we would reject this project.

Required Rate Of Return:

Rate of Return =Total Income / Initial Investment

Rate of Return = 550,000/ 1,000,000

Rate of Return = 55%

Internal Rate of Return

NPV = {Cash Flow * PVIFA} – CF0

N=5

0 = {110,000* PVIFA} + 519,638 - 1,000,000

4.369 = PVIFA

IRR = 5%

Conclusion.

Internal Rate of Return (IRR) is the discount rate that makes the present value of all cash
flow equal to the initial investment in other words IRR is the discount rate that makes the
Net Present Value (NPV) equal to zero.
As far as above investment is concern we reject this investment because the IRR is less
than the discount rate.