NMIMS April 2018 Assignments: Contact us for answers at assignmentssolution@gmail.com

Corporate Finance

1: Calculate the degree of operating leverage and degree of financial leverage for the following firms:

Firms
   

A
   

B

Sales (Rs.)

Variable cost p.u

Fixed cost (Rs.)

Output (units)

Interest
   

3,60,000

20

72,000

6,000

40,000
   

7,50,000

150

1,40,000

1,500

80,000




Q2. A Project costs Rs 60,000 and is expected to generate cash inflows as:

Year
   

Cash inflows(Rs)

1
   

10000

2
   

12000

3
   

15000

4
   

18000

5
   

20000

6
   

22000


Calculate the Net Present Value of the project if the cost of capital is 10%.



Q3. Solve the following:

a) A company earns 5 per share. The cost of capital is 10%, the rate of return on investment is 14% and the dividend payout ratio is 25%. Calculate the value of each share by using Walter’s Model.

b) XYZ Limited has a paid-up share capital of Rs. 10 lakhs of Rs. 10 each. The company has a dividend payout rate of 10%. Annual growth rate is expected to be 4%. The capitalisation rate is 20%. Calculate the value of the share of XYZ based on Gordon’s Model.