FM05
Corporate Finance
(For CNM Cases)
Assignment – I
Assignment Code: 2016FM05A1 Last Date of Submission: 30th April 2016
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?
Corporate Finance
(For CNM Cases)
Assignment – I
Assignment Code: 2016FM05A1 Last Date of Submission: 30th April 2016
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?
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