NMIMS Corporate Finance Solved Assignment June 2024

NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
Internal Assignment Applicable for April 2024 Examination
Assignment Marks: 30
Instructions:
 All Questions carry equal marks.
 All Questions are compulsory
 All answers to be explained in not more than 1000 words for question 1 and 2 and for question 3 in not more than 500 words for each subsection. Use relevant examples, illustrations as far as possible.
 All answers to be written individually. Discussion and group work is not advisable.
 Students are free to refer to any books/reference material/website/internet for attempting their assignments, but are not allowed to copy the matter as it is from the source of reference.
 Students should write the assignment in their own words. Copying of assignments from other students is not allowed.
 Students should follow the following parameter for answering the assignment questions.
1. With the following information, calculate Degree of Operating, Financial and Total Leverage.
Sharma & Co. had a sales of Rs. 25, 00,000 in their jewellery making business. That year they sold 15,000 units. The cost of production was as follows:
Raw Material 450000
Labour 750000
Factory Overheads
Fixed 120000
Variable 85000
Further the company incurred Selling and Distribution expenses of Rs. 90,000, towards advertising and other marketing overheads. The company also had borrowed Rs. 12,00,000 @ 8% interest rate. (10 Marks)
2. Parag is evaluating 3 options for investment of his surplus money of Rs. 5,00,000/- for a period of 5 years.
i. Invest it in a FD which gives him a return of 8% compounded quarterly.
ii. Invest in a Corporate Deposit at a rate of 7% compounded monthly.
iii. Invest it in a Business Proposal which gives him the following returns.
Considering the risk involved, the discounting factor is considered @10%.
As his finance advisor which option would you suggest him. Provide reasons.
Year CF
1 1,50,000
2 3,20,000
3 3,45,000
4 2,75,000
5 2,15,000
(10 Marks)
3. a. A project is started with an initial investment of Rs. 6,00,000. The cash flows generated over the next 4 years are Rs. 1,00,000 ; Rs. 2,50,000 ; Rs. 4,56,000 ; Rs. 5,74,000.
Calculate the NPV of the project at discounting rate of 11% Also calculate the real discounting rate, when inflation is at 6% (5 Marks)
b. M/s Tridev Limited issues bonds of Rs. 25,000/- at 10% interest rate for 10 years. Calculate its YTM is the bonds are issued:
a. At Par
b. At Discount of 8%
c. At premium of 12%
Make your inferences about the YTM for each option. (5 Marks)

*****************************************************************************