problem 1: The key goals of total economic policy are conventionally defined as the growth, equity and stability. It has long been understood that these three goals are complementary over the long-term. Economic growth gives the resources required for poverty reduction, however can't be sustainable if it is not accompanied by sufficient stability and equitable policies. Unstable economic and financial circumstances are inimical to growth, and usually hurt the poor most. However stability in a context of persistent economic stagnation and poverty is hardly a desirable outcome. In short-term, though, these goals might be mutually conflicting, and a sound resolution is required (and therefore a robust institutional mechanism) that takes all three into consideration in a coherent policy package.
Required: Describe in details the three main objectives of Public Expenditure Management.
problem 2: An Organisation has Equity Share Capital of Rs 500, 000 (face value Rs100 per share). To meet the expenditure of an expansion Programme, the company wishes to raise Rs300, 000 and is having the given four alternatives to raise the funds:
Plan A: To have full money from equity shares.
Plan B: To have Rs100, 000 from equity and Rs 200, 000 from borrowing from the Financial Institution @ 10% p.a.
Plan C: To have full money from borrowing @ 10% p.a.
Plan D: To invest Rs100, 000 in equity and Rs 200, 000 from preference shares at 8% p.a.
The Organisation earnings before interest and tax are Rs 150, 000 and the corporate tax is 50%.
Required: As a financial controller, recommend which plan you would propose the Organisation to adopt?