NMIMS - Corporate Finance

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NMIMS

Master of Business Administration - MBA Semester 3

Corporate Finance

Q1. Alpha Ltd is expecting annual earnings before interest and tax of Rs. 1.5 Lakhs. The company has 10% debentures of Rs. 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.

Answer. Value of the Equity of the firm

Particulars	If Debt is 400000	If debt is 500000
Current Opening Income	150000	150000
Less : Interest on Debt 10%	40000	50000
Earnings for share Holders	110000	100000
Equity Capitalisation rate	0.12	0.12
Value of Equity	916667	833333

           

Q2. The Capital structure of ABC Ltd is as under:

Equity share capital                          Rs. 100 Lacs

10% Debentures                                Rs. 50 Lacs

●       The sales for the year 2019 are 1.5 Lac units@ ₹ 40per unit

●       Also, the variable cost per unit is 20 % of sales revenue

●       Rs. 12 Lacs is the fixed operating cost.

●       Assume Income tax rate as 40 %

Calculate Operating, Financial and Combined Leverage of the firm and interpret the result.

Answer.

Q3. Neha would retire 30 years from today and she would need Rs. 6, 00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires.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 lump sum she should deposit in her account today so that she has enough funds for retirement?

b. How much she should deposit each year so that she has enough funds for retirement?

Answer. a) Cash PV annuity factor = (1 – (1/(1+r)^n))/r

= (1 – (1/(1+0.07)^25))/0.07

= (1 – (1/(1.07)^25)/0.07

= (1 – (1/5.427)/0

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NMIMS - Consumer Behaviour

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NMIMS

Master of Business Administration - MBA Semester 3

Consumer Behaviour

Q1. GSK Horlicks is an iconic health drink for kids. Over the years, the brand has introduced several variants of Horlicks. What is segmentation and targeting? Identify the type of segmentation done for each of the following:

1. Horlicks Chocolate for fussy children who like fun flavours

2. Mother’s Horlicks for pregnant women and lactating mothers

3. Junior Horlicks for newborns and infants

4. Horlicks Lite for calorie-conscious adults

Answer. Segmentation

Market segmentation allows a marketer to take a heterogeneous market, heterogeneous is a market consisting of customers with diverse characteristics, needs, wants, and behaviour, and divides it up into one or more homogeneous markets which are made up of individuals or organisations with similar needs, wants, and behavioural tendencies. In order to capture this heterogeneous market for any product, you need to divide or disintegrate the market into a number of sub-markets or segments and this process is known as market segmentation.

Segmentation is more likely to be successful if a step-by-step approach is used. Segmentation strategy is not a simple process. It is the result of applying a systematic and analytical process to the crucial decisions about product market entry.

●       Step 1: Forming market segments: This is the beginning of the market segmentation process. The marketing manager follows two approaches for identifying market segments. They are called build-up and breakdown approach. While the former approach is more appropriate for business-to-business markets or industrial buyers, the latter is used in the context of business-to-consumer or individual market segments.

Q2. What are the steps in the consumer decision-making journey? Describe your decision-making journey for the following products:

a. Sugar

b. Men’s aftershave lotion

c. Smartphone

Answer. a) Stages in Consumer Decision journey (Sugar)

Need Recognition: Purchase decision-making process begins when a buyer becomes aware of an unsatisfied need or a problem. Problem recognition is a critical stage in consumer decision-making process because without it, there is no deliberate search for information. If the consumer does not perceive any discrepancy between her/his current state and the desired state, the current state for the concerned consumer is apparently quite satisfactory and does not need decision-making. Sugar is widely used in every household as there are so many uses of sugar such as in making tea, coffee, sweets etc.

Q3. a. Explain the different adopter categories in the Innovation adoption process, taking the example of any innovative product of your choice.

b. What are membership groups and symbolic groups? Discuss 1 membership group and 1 symbolic group from your life.

Answer. a) Innovation adoption process

Innovators: They constitute, on an average the first 2.5 percent of all those consumers who adopt the new product and are technology enthusiasts. Their venturesome attitude is reflected in their risk taking willingness and eagerness bordering obsession to try new products and ideas. Innovators tend to be younger, better educated, have higher incomes, are cosmopolitan, and more active outside of their community than non-innovators. Here I am mentioning about the wearable’s product which are very famous these days. Initially, few individuals used these products as an experiment and knew they will be hit in the market.

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NMIMS - Compensation and Benefits

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NMIMS

Master of Business Administration - MBA Semester 3

Compensation and Benefits

Q1. WONDERWORLD Enterprises is a leading automobile company in India manufacturing two wheelers. Company has expanded its operations in Asia by setting up a unit in Indonesia. A team of 50 employees is sent on deputation to handle the Indonesian project. You are an HR Manager of WONDERWORLD and you are entrusted with the responsibility of designing the compensation for these 50 employees. Which approach to compensation management will you adopt?

Answer. Compensation in its simplest form is the payment that one gets for the work done by him either on full time or on part time basis. The issue of compensation has always been a critical issue for both the employer and the employee. Money is a crucial incentive and can be directly or indirectly stated as a medium of fulfilling human needs. On one hand, employees need it to meet their primary needs. On the other hand, the employers provide compensation to meet their firm’s objectives of manpower requirement. Employers also provide compensation to engage, motivate and incentivise employees and not only to meet manpower requirement.

Compensation includes all the rewards that an employee receives during the course of his or her job–for his or her contributions to the organisation.  The idea of a good compensation philosophy is to attract, retain and motivate high-quality people. Compensation encompasses base salary, incentives, bonus and benefits, and is based on job evaluation. Compensation systems though are similar

Q2. REGENCY Group is a leading business conglomerate in India. The group is planning to diversify into construction sector and as an HR Manager you are asked to conduct a compensation survey in construction sector in India so that important compensation decisions can be made. Suggest a step by step process for conducting this compensation survey.

Answer. Compensation system plays an integral role in retention of employees as a poor compensation is indeed one of the strong factors of employees leaving the organisation. A compensation system in an organisation can be linked to employees’ behaviour and attitude. An ineffective compensation strategy can result in poor job satisfaction and organisational identification which may further affect employee behaviours towards each other and the organisation. Compensation Management is more than just the means to attract and retain talented employees. In today’s competitive labour market, organizations need to fully leverage their

Q3. You are hired as an HR consultant by ABC Ltd, a newly set up IT Company, to design a new compensation system. In this background, answer the following:

a. It is important to identify all the stakeholders before designing a new compensation system. Identify the stakeholders of compensation for ABC Ltd.

b. Discuss the types of compensation that will be a part of compensation system of ABC Ltd.

Answer. a) Stakeholders of compensation

Organization: First and prime stakeholder of compensation management is organization as it pays to all the employees for their hard work and also motivate them continuously so that they can improve their productivity level. Without proper compensation, employees will not be motivated to perform to their best, which will adversely affect organizational efficiency and effectiveness.

Managers: Next we have managers as other important stakeholders who play a key role in supervising and guiding employee efforts and outcomes. They motivate and appraise performance of employees regularly and recommend compensation increases to employees. Managers ensure that all the departmental activities are carried out as per the timeline framed at the beginning of the year.

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NMIMS - Capital Market and Portfolio Management

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NMIMS

Master of Business Administration - MBA Semester 3

Capital Market and Portfolio Management

Q1. Calculate the standard deviation and return of portfolio consisting of 60% of Security A and 40% of Security B.

Year	Security A return %	Security B return
2015	10	18
2016	12	15
2017	9	11
2018	10	9
2019	5	7

Answer. Expected return of Portfolio (Ep): W1E1 + W3E3 + ………….WnEn

Q2. Calculate the return as per CAPM for each of the company’s stock, identify whether they are underpriced, overpriced or correctly priced and advise accordingly. Returns of T- Bill are 9%.

Stock	Expected Return %	Beta
Titan	24	1.8
Nestle	30	1.5
Eicher Motors	12	1.2
HDFC	25.9	1.3
Sensex	22

Answer. Calculation of CAPM

CAPM = Rf + β(Rm – Rf)

Where,

Rf = Risk free rate

β = Beta

Rm = Market rate of return

Q3. An investor was tracking SBI and HDFC mutual funds whose return and beta are as given below:

	Observed Return %	Beta
Portfolio SBI	18	0.75
Portfolio HDFC	25	1.25

Return on the market portfolio is 11%, while the risk-free return is 8%. Assume standard Deviation of the market to be 7%.

a. Compute the Jensen index for each of the funds and comment which one is better.

b. Compute the Treynor index for each of the funds and comment which one is better.

Answer. Jensen’s Alpha

Jensen’s Alpha = Portfolio return – Risk free rate - [Beta of the portfolio * (Expected market return – Risk free rate)]

Portfolio SBI	Portfolio HDFC
= 18 – 8 – [0.75(11-8)] = 10 – [0.75(3)] = 10 – 2.25	= 25 – 8 – [1.25(11-8)] = 17 – [1.25(3)] = 17 – 3.75
= 7.75	= 13.25

Conclusion: A positive alpha means the fund has outperformed its benchmark index.

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NMIMS - Brand Management

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NMIMS

Master of Business Administration - MBA Semester 3

Brand Management

Q1. In a competitive market of commodities, Ali plans to launch Organic milk in a country where people are new to the concept of organic and heavily rely on synthetic/chemical products. If Ali wants to launch this product, then how can branding help him. Define the name for the product & come up with a brand manual including all brand elements. Also design a marketing plan to push the product.

Answer. Brands are everywhere in our life. A product is anything that can be offered to a market for attention, use, or consumption that might satisfy a need or want. A product is a physical good, service, retail store, person, organisation, place, or idea. A brand helps the customer to distinguish the goods of one producer from another. Let us understand the conceptual meaning of the term brand. A person is known by a name. Likewise, a product is known by a brand name, which enables the consumers to distinguish it from other products.

Q2. What is Strategic Brand Management Process that the Ali’s organic milk brand should follow? Explain the 4 steps.

Answer. The brand is the best tool which helps to attract the consumer’s attention to the product. It serves to create an image for the product in the market. Branding cannot be undertaken as a superficial exercise, as brand is the unique signature of the product and is a symbol of the creative process of product development. While the company makes the product, the brand is the value of the expectations or service perceived by the consumer, for which the customer buys the product.

Brand management is nothing but an art of creating and sustaining the brand. It includes managing the tangible and intangible characteristics of brand. The aim of branding is to convey brand message vividly, create customer loyalty, persuade the buyer for the product, and establish an emotional connectivity with the customers.

Strategic Brand Management Process

Identifying and establishing brand positioning: Brand positioning is a delicate task that needs a thorough and deep knowledge of the market and competitors’ activities. It is done by the following tools:

Q3. Mother Dairy Fruits & Vegetables, a company with a billion-dollar (Rs 4,200-crore) turnover, has been a well-established player in NCR known for products the firm has been largest seller of milk in NCR , with 65% of the revenue being contributed by milk. Amul entered Delhi market few years back and in 2011 with in a span on 4years it defeated mother dairy in terms of market share. Amul procures fresh milk and packages it. Mother dairy adds powder milk in its products to the tune of 40%. This spoils the taste of the product. Also Amul is credited with more awareness and knowledge about its products amongst consumers. Amul is a leader in the ice cream segment of the country. Their capacity to develop products and gain market leadership helped them gain substantial share in the NCR region in the milk segment raising question marks on the brand equity of the company. Mother Dairy has been market leader in NCR for 35 years. Losing ground to Amul in 2011 in the milk segment is forcing company to rethink its strategy. They plan to increase their capacity and also expand procurement of the milk. One of the regions why Consumer shifted to Amul has been difference in the taste of the milk. Amul milk is fresh where as a portion of Mother dairy milk is reconstituted. Mother dairy sells through its own outlets and home delivery is not possible where as Amul used channel and home delivery of the milk is possible. Mother dairy milk price has been less than the price of Amul milk, still a huge number of mother dairy loyal customers moved to Amul. Now Mother dairy is restructuring its strategy and systems to combat Amul.

a. What would you suggest to Mother Dairy for its revitalization plan

b. What more challenges you foresee for the brand?

Answer. a) Brand image is the perception of customers about a particular brand. Image of any brand tends to develop over time. Brand image is formed in the minds of customers based upon the experience and interaction of the customers with the brand, interactions can take place in different ways and not necessarily only the buying or using of the product and service. Brand repositioning is undertaken in order to increase a brand’s competitive position and therefore increase sales volume by seizing market share from rival products. When repositioning companies can change aspects of the product, change the brand’s target market or both.

When the brand is not working well, company should go for brand repositioning so as to survive in the market and keep its existing share. As mentioned in the question, Mother dairy was not performing well for last few years and losing market share to Amul.

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Latest Govt. Jobs 2019

GOVT. JOBS DAILY UPDATES 22.07.2019

1.       Bank of Baroda

has come up with Recruitment of Specialists IT Officers.

Ø  Application Dates

a.       Online registrations have started from 13.07.2019

b.      Last Date to apply is 02.08.2019

Ø  Eligibility Details

a.       Min. 60% in 4 yrs. B.E/B.Tech Degree in Computer Science / Information Technology / Electronics & Communications from a recognized university / institute recognized by the Govt. of India or its regulatory body.

b.      Post 3 Years - Experience in maintenance and Administration of Linux Operating System in a Data Centre Environment.

For more details visit: https://www.bankofbaroda.in/writereaddata/Images/pdf/advertisement-IT-specialist-officers-12-07-2019.pdf

2.       Navodaya Vidyalaya Samiti

Chandigarh has announced notification for the recruitment of Assistant Commissioner (Group-A), PGT , TGT & Other vacancies. Those Candidates who are interested in the vacancy details & completed all eligibility criteria can read the Notification here

https://img.freejobalert.com/uploads/2019/07/Official-Notification-NVS-PGT-TGT-LDC-Other-Posts.pdf

Ø  Application Dates

c.       Online registrations have started from 10.07.2019

d.      Last Date to apply is 09.08.2019

Ø  Eligibility Details

Have to go through the link for detailed one

3.       Indian Air Force

Offers opportunities for UNMARRIED MALE INDIAN / NEPALESE CITIZENS from designated Districts of State of Punjab to join as Airmen. The Recruitment Test for Group ‘Y’ (Non-Technical) Automobile Technician (Auto Tech) and Indian Air Force (Police) {IAF(P)} Trades will be held at Punjab Armed Police (PAP) Grounds, Jalandhar, Punjab.

Ø  Application Dates

Direct walk-in from 05.08.2019 to 09.08.2019 for Physical, Written & Adaptability Test.

Ø  Eligibility Details

Candidates born between 19 July 1999 and 01 July 2003 (both days inclusive) are eligible to appear in the Recruitment Rally.

Candidate should have passed Intermediate / 10+2 / Class XII or Equivalent

Examination in any stream/subjects approved by Central / State Education Boards with minimum 50% marks in aggregate as well as in English in Class XII or equivalent examination.

For more details visit: http://www.davp.nic.in/WriteReadData/ADS/eng_10801_18_1920b.pdf