NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
Internal Assignment Applicable for December 2018 Examination
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
Internal Assignment Applicable for December 2018 Examination
Taking into account its target capital structure, how much of equity portion should the
company invest in these projects? If the company follows Irrelevance Approach
(Modigliani and Miller) or residual dividend policy, what will be its dividend payout ratio?
(10 Marks)
3. Hi-Tech company’s partial balance sheet for 2 years is given below
|
Current Assets (Rs. Lakhs)
|
Year 2017
|
Year 2018
|
|
Raw materials
|
20
|
30
|
|
Finished goods
|
15
|
15
|
|
Receivables
|
10
|
30
|
|
Other current assets
|
5
|
7
|
|
Current liabilities (Rs. Lakhs)
|
||
|
Creditors
|
25
|
35
|
|
Other current liabilities
|
15
|
20
|
Due to a new product launch, Hi-Tech’s sales grew at a faster pace in year 2018. HiTech’s working capital bank had been assessing its Maximum Permissible Bank
Finance (MPBF) under Method 1 till 2017, but due to a credit squeeze it suddenly
changed to Method 2 in year 2018.
a) What is the change in net working capital between 2018 and 2017? (5 Marks)
b) What is the change in MPBF limit assigned by the bank from year 2017 to 2018?
With this change in MPBF limit, will the working capital financing from the bank
increase or decrease? (5 Marks)
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