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1. Dear students, get latest Solved NMIMS assignments and case study help by
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NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
Assignment Marks: 30
Instructions:
 All Questions carry equal marks.
 All Questions are compulsory
 All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far aspossible.
 All answers to be written individually. Discussion and group work is not advisable.
 Students are free to refer to any books/reference material/website/internet for
attempting theirassignments, but are not allowed to copy the matter as it is from the
source of reference.
 Studentsshould writethe assignment in their own words. Copying of assignments from
otherstudents is not allowed.
 Studentsshould followthefollowing parameterforanswering theassignmentquestions.
For Theoretical Answer For Numerical Answer
AssessmentParameter Weightage AssessmentParameter Weightage

2. Introduction
20%
Understandingandusage
of the formula 20%
ConceptsandApplication
relatedtothe question 60%
Procedure /Steps
50%
Conclusion
20%
Correct Answer&
Interpretation 30%
1. Org Pvt. Ltd. is considering two mutually exclusive capital investments. The project’s
expected net cash flows are as follows:
Expected Cash Flows
Year Project A Project B
0 -400 -575
1 95 150
2 110 200
3 118 250
4 125 275
5 140 230
6 150 180
a. If you were told that each project’s cost of capital was 10%, which project should be
selected using the NPV criteria?
b. What is each project’s IRR?
c. What is the regular payback period for these two projects?
d. What is the profitability index for each project if the cost of capital is 12%?
(10 Marks)

3. SOLUTION:
Introduction:
The Capital of a company may comprise of both equity and debt. Each component of the
Capital has its cost, and the Cost of Capital is the aggregate cost of acquiring them.
Net present value (NPV) is the difference between the discounted value of future cash inflows
and the current cash outflow value
2. Assume that your father is now 55 years old and plans to retire after 5 years from now. He
is expected to live for another 15 years after retirement. He wants a fixed retirement income
of Rs. 1,00,000 per annum. His retirement income will begin the day he retires, 5 years from
today, and then he will get 14 additional payments annually. He expects to earn a return on
his savings @ 10% p.a., annually compounding. How much (to the nearest of rupee) must
your father save today to meet his retirement goal? (10 Marks)
SOLUTION:
Introduction:
Every person intends to save for a rainy day. Most important is to save for the time after
retirement. There are specific insurance plans like pension plans which take care of the
policyholderaftertheirretirement in the pension plan form. Just like investments, the goal of every
individual is to get the maximum out of his savings. The savings can be done in any insurance
scheme, financial institutions, etc. The given question is based on the concept of the annuity.
Concept and application:
3. Cummins India Ltd has the following capital structure, which it considers optimal:
Debt 25%
Preference Shares 10%
Equity shares 65%
Total 100%

4. Applicable tax rate for the company is 25%. Risk free rate of return is 6%, average equity
market investment has expected rate of return of 12%. The company’s beta is 1.10.
Following terms would apply to new securities being issued as follows:
1. New preference can be issued at a face value of Rs. 100 per share, dividend and cost of
issuance will be Rs. 10 per share and Rs. 2 per share respectively.
2. Debt will bear an interest rate of 9%.
Calculate
a. component cost of debt, preference shares and equity shares assuming that the company
does not issue any additional equity shares. (5 Marks)
SOLUTION:
Introduction:
A company needs funds to operate. These funds are woven into different forms in its capital. A
company's capital structure is a mix of its various long and short-term components, viz. equity,
reserves, preference shares, and debts. These funds are acquired at a cost.
Debt is a cheaper source of finance, but it is to be repaid. Equity is not to be repaid, but it leads
to dilution of ownership.
Concept and application:
1. Cost of debt:
Debt is an external source of finance
b. WACC. (5 Marks)
Introduction:
The different components of capital may be present in the capital in a different proposition.
WACC is the Cost of capital based on the weights of these components. These weights can be
found either on the book value of the capital components or the market value. Weighted
Average Cost of capital (WACC) may be called a financial metric used to measure capital's value
to a firm.

5. Concept and Application:
The company's capital may consist of some internally raised funds, and some funds may be
borrowed from outside. All these funds have some cost, and WACC refers to calculating the
Total Cost of capital as per such the Weight of different sources of capital. Thus, the weighted
average Cost of capital is the cost of raising the capital apportioned to respective weights of
various capital elements. The concept
Dear students, get latest Solved NMIMS assignments and case study help by
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Call us at : 08263069601