Monday 27 April 2020

NMIMS - Corporate Finance


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NMIMS
School for Continuing Education (NGA-SCE)
Master of Business Administration - MBA Semester 3
Corporate Finance
Q1. Alpha Ltd is expecting an annual earnings before interest and tax of Rs. 1.5 Lakhs. The company has 10% debentures of ₹ 4 lakhs and cost of Equity capital is 12%. Calculate the total value of the firm and the overall cost of capital of the firm according to Net
Income Approach. Also comment what will happen to the value of the firm and the overall cost of capital if debt is increased in the capital structure. (10 Marks)

Q2. The Capital structure of ABC Ltd, is as under:
Equity share capital
Ø  Rs. 100 Lacs
Ø  10% Debentures
Ø  Rs. 50 Lacs
1. The sales for the year 2019 are 1.5 Lac units@ ₹ 40per unit
2. Also, the variable cost per unit is 20 % of sales revenue
3. 12 Lacs is the fixed operating cost.
4. Assume Income tax rate as 40 %
Calculate Operating, Financial and Combined Leverage of the firm and interpret the result. (10 Marks)

Q3. Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires. Assume a return of 7% per annum on her retirement funds and if her planning is for 25 years after retirement, calculate:
a. How much lumpsum she should deposit in her account today so that she has enough funds for retirement? (5 Marks)
b. How much she should deposit each year so that she has enough funds for retirement? (5 Marks)

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For queries mail us at: subjects4u@gmail.com or contact at
08894344452, 08728863595

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