FM05
Corporate Finance
Assignment – I
Assignment Code: 2013FM05B1 Last Date of Submission: 15th October 2013
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. Explain the organization chart of finance function in a typical organization. What is the key function of each role/position? Explain the difference between the treasury and controller function.
2. What are the various tools used in Financial Management. Explain five financial tools in details with examples.
3. What are the different valuation approaches used to value an unlevered firm as well as a levered firm. Will the value of the company differ according to the different approaches? Explain with example.
4. What is a capital investment decision? Which all decisions would be considered a capital investment decision? Write short notes on all of them.
Section-B
Case Study
You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information:
Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm had a book value of equity is Rs. 4068.3 million and book value of debt of Rs.1567.83 million at the end of 2011.The management of the firm is expecting a stable growth at a rate of 5% annually.
You are aware that the risk free rate is 9% and the company operates in a risk premium of 7.5%. You have been informed that the beta for the company has averaged around 1.2. At the same time the after tax cost of debt is 11%.
Case Questions:
On the basis of the above mentioned information you as a finance manager are asked to provide the following :
• Estimate the firms return on capital.
• What would be the reinvestment rate of the firm?
• What is the cost of equity under which Zurich is operating?
• What is the cost of capital?
• What is the expected free cash flow to the firm?
• What is the value of the operating assets of firm?
FM05
Corporate Finance
Assignment – II
Assignment Code: 2013FM05B2 Last Date of Submission: 15th November 2013
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. What is carrying cost and shortage cost? Which policy is recommended if the shortage cost is relatively lower than the carrying cost and vice versa? Explain the policies followed in maintaining working capital with examples.
2. How do you evaluate a proposed credit policy? How does the value of a credit policy change in case the new policy earns a repeat customer? Explain with examples.
3. What are the techniques used to accelerate collections in the area of cash management. Explain with a case study.
4. What are the different kinds of expansion and contraction policies used by firms? Explain with example.
Section-B
Pickles Ltd. Produces a single product sold throughout the state of Tamil Nadu. Its profit analysis is given below:
Per Unit( Rs)
Selling Price 40
Variable costs 36
Fixed cost 3 -39
Net profit per unit 1
Pickles Ltd. has an annual turnover of 4.8 million and an average collection period for debtors of one month. It has conducted a study on entering its neighboring state Kerala and believed that this would produce an additional sales of 25%. But the new business would require a 3 months credit period. Stocks and creditors would rise by Rs.4,00,000 and Rs. 2,00,000 respectively. The cost of financing any increase in working capital is 10 percent
The question of whether profits increases as a result of expansion into Kerala markets very much rests on whether the existing Tamil Nadu customers also demand more favorable term.
Case Questions:
1) What would be the profit increase in case only new customers take 3 months credit.
2) What would be the profit if all customers take 3 months credit.
Corporate Finance
Assignment – I
Assignment Code: 2013FM05B1 Last Date of Submission: 15th October 2013
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. Explain the organization chart of finance function in a typical organization. What is the key function of each role/position? Explain the difference between the treasury and controller function.
2. What are the various tools used in Financial Management. Explain five financial tools in details with examples.
3. What are the different valuation approaches used to value an unlevered firm as well as a levered firm. Will the value of the company differ according to the different approaches? Explain with example.
4. What is a capital investment decision? Which all decisions would be considered a capital investment decision? Write short notes on all of them.
Section-B
Case Study
You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information:
Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced a tax rate of 35% on income. The firm had a book value of equity is Rs. 4068.3 million and book value of debt of Rs.1567.83 million at the end of 2011.The management of the firm is expecting a stable growth at a rate of 5% annually.
You are aware that the risk free rate is 9% and the company operates in a risk premium of 7.5%. You have been informed that the beta for the company has averaged around 1.2. At the same time the after tax cost of debt is 11%.
Case Questions:
On the basis of the above mentioned information you as a finance manager are asked to provide the following :
• Estimate the firms return on capital.
• What would be the reinvestment rate of the firm?
• What is the cost of equity under which Zurich is operating?
• What is the cost of capital?
• What is the expected free cash flow to the firm?
• What is the value of the operating assets of firm?
FM05
Corporate Finance
Assignment – II
Assignment Code: 2013FM05B2 Last Date of Submission: 15th November 2013
Maximum Marks: 100
Attempt all the questions. All the questions are compulsory and carry equal marks.
Section-A
1. What is carrying cost and shortage cost? Which policy is recommended if the shortage cost is relatively lower than the carrying cost and vice versa? Explain the policies followed in maintaining working capital with examples.
2. How do you evaluate a proposed credit policy? How does the value of a credit policy change in case the new policy earns a repeat customer? Explain with examples.
3. What are the techniques used to accelerate collections in the area of cash management. Explain with a case study.
4. What are the different kinds of expansion and contraction policies used by firms? Explain with example.
Section-B
Pickles Ltd. Produces a single product sold throughout the state of Tamil Nadu. Its profit analysis is given below:
Per Unit( Rs)
Selling Price 40
Variable costs 36
Fixed cost 3 -39
Net profit per unit 1
Pickles Ltd. has an annual turnover of 4.8 million and an average collection period for debtors of one month. It has conducted a study on entering its neighboring state Kerala and believed that this would produce an additional sales of 25%. But the new business would require a 3 months credit period. Stocks and creditors would rise by Rs.4,00,000 and Rs. 2,00,000 respectively. The cost of financing any increase in working capital is 10 percent
The question of whether profits increases as a result of expansion into Kerala markets very much rests on whether the existing Tamil Nadu customers also demand more favorable term.
Case Questions:
1) What would be the profit increase in case only new customers take 3 months credit.
2) What would be the profit if all customers take 3 months credit.
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