NMIMS PLAGIARISED ASSIGNMENTS Mr. Sharma was working with Delta Ltd for the past five years. The company was planning for expansion and required a funding
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Corporate Finance
1. A Project costs ₹ 1,00,000 and is expected to
generate cash inflows as: Year Cash inflows(₹) 1 20,000 2 22,000 3 25,000 4 28,000 5 20,000
The cost of capital is 12%. Calculate Profitability Index and suggest whether
project should be accepted or not. (10 Marks)
2. Alok works in an
organization which has debt and equity in its capital structure. The net income
of the firm is ₹
2,00,000. The organization pays ₹ 50,000 every year as interest component to
debenture holders. Calculate the weighted average cost of capital if the cost
of equity is 12% and cost of debt is 9%. If the company’s new project will
provide a return of 10%, suggest whether company should make the investment or
not. (10 Marks)
3. Mr. Sharma was working with
Delta Ltd for the past five years. The company was planning for expansion and
required a funding of ₹
20,00,000 for the same. He was considering two financial plans and expected
EBIT due to expansion was ₹
8,00,000. Apart from equity(Face value ₹10) , if the company raised debt, cost of debt
was 8%. Tax rate is 35%. Calculate EPS for each financial plan and suggest
which financial plan is better for the firm. 3a) Plan
A: Funding through 100% equity
(5 Marks) 3b) Plan
B: Funding through 50% Equity
and 50 % Debt
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