Narsee monjee assignments Sep 2020 - Mr. Mehta was working with Delta Ltd for the past ten years. The company was planning for expansion and required a funding of ? 25,00,000 for the same.

  • Narsee monjee assignments Sep 2020 - Mr. Mehta was working with Delta Ltd for the past ten years. The company was planning for expansion and required a funding of ? 25,00,000 for the same.

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, Bangalore, Karnataka

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Corporate Finance


1. Amit works in an organization which has debt and equity in its capital structure. The net income of the firm is ?3,00,000. The organization pays ? 75,000 every year as interest component to debenture holders. Calculate the weighted average cost of capital if the cost of equity is 14% and cost of debt is 10%. If the company’s new project will provide a return of 11%, suggest whether company should make the investment or not. (10 Marks)

2. Mr. Mehta was working with Delta Ltd for the past ten years. The company was planning for expansion and required a funding of ? 25,00,000 for the same. He was considering two financial plans and expected EBIT due to expansion was ? 12,00,000. The firm was considering to raise funds through equity(Face value ?10) and the debt @8%. Suggest should the company raise capital through all equity or through equal proportion of debt and equity on the basis of EPS. Assume tax rate as 35% (10 Marks)

3. Solve the following:

a. A company earns ? 7 per share. The cost of capital is 10%, the rate of return on investment is 12% and the dividend payout ratio is 20%. Calculate the value of each share by using Walter’s Model. (5 Marks)

b. XYZ Limited has a paid-up share capital of ?15 lakhs of ?10 each. The company has a dividend payout rate of 15%. Annual growth rate is expected to be 3%. The capitalization rate is 15%. Calculate the value of the share of XYZ based on Gordon’s Model.

For Nmims Assignments Contact
[email protected]
+91 95030-94040

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Added On: 14 Sep, 2020


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