Course: Corporate Finance

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NMIMS Global Access

School for Continuing Education (NGA-SCE)

                                                    Course: Corporate Finance

             Internal Assignment Applicable for September 2017 Examination

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 as possible.

·       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 their assignments, but are not allowed to copy the matter as it is from the source of reference.

·       Students should write the assignment in their own words. Copying of assignments from other students is not allowed.

·       Students should follow the following parameter for answering the assignment questions. 

            

Question1.TATA Steels is looking forward for entering into a joint venture with United States Steel Corporation in USA. The company is planning to access funds from the international market. Discuss                           (10 Marks)

·      Meaning of the overseas sources of finance

·      Why the company wants to raise fund from international market?

·      Methods which can be employed by the company to raise fund from the international market.

·      Is it advisable that company should go for Sourcing equity globally?

Answer1.

Worldwide organizations frequently have high capital needs, as worldwide exchange can be asset escalated (however it's important that the computerized age has changed this essentially for some businesses). Securing subsidizing in the cutting edge economy can be profoundly enhanced, from acquiring obligation from banks to seeking after blessed messenger speculators to swarm sourcing financing for a little startup venture.

Question2. LIMBDI Ltd started a chain of hotels with “profit maximization” as the basic financial objective and TEBDI Ltd started with a portfolio management company with the basic objective as “wealth maximization”. In light of the relevant concepts of financial management give your opinion on “which company will surely survive in long run” and why?               (10 Marks)

Answer2.

Profit maximization vs. wealth maximization is an exceptionally normal yet an extremely urgent difficulty. The money related administration has made considerable progress by moving its concentration from conventional way to deal with present day approach. The advanced approach concentrates on expansion of riches as opposed to benefit. This gives a more extended term skyline for evaluation, clearing a path for practical execution by organizations.

A nears ighted individual or business is for the most part worried about here and now benefits. A fleeting skyline can satisfy target of gaining benefit

Question3. Kabra Motors is considering a proposal to install new machine. The initial capital outflow will be 15 lacs. The expected cost of capital is 12 %. The expected cash inflows from the operations will be as under-

a. Calculate the NPV of the proposal. And give your opinion whether to accept or reject the proposal.                                                                   (5 Marks)

Answer3a.                             Calculating NPV by cash inflow

Year	Cash Inflow
1	2
2	3
3	4
4	5
5	5

Formula for NPV = C x {(1 - (1 + R)^-T) / R} − Initial Investment

Putting the values, the NPV is -14, 99,986.96.

The NPV is negative value and therefore company should reject the proposal.

b. Calculate the profitability index and give your opinion whether to accept or reject the proposal.                                                                                 (5 Marks)

Answer 3b.

300000 / 1500000 = 0.2

P.V = - 14,99,

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