Course: Corporate Finance

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NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Corporate Finance

Internal Assignment Applicable for December 2016 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 3in 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.

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

Question. 1. “Leverage being defined as the relationship between two financial variables”. Why the study of leverages is an important concept in finance? (10 marks)

Answer: Leverage is considered a strong pillar between two financial variables because leverage can allow you to get increased profitability. This is the use of fixed costs that allows you to increase the profitability level. Basically, leverage carries the ability of effective level and variability of overall tax earning of any company or organization therefore it is the evaluator or firm’s complete return and risk value as well.

There are many reasons why study of leverages becomes an important concept in finance and some of the commonly known advantages and significance

Question.2. You being the finance manager of AB Ltd. The management is interested in CVP analysis which helps in forecasting profits, in analyzing the changes in profit happens because of changes in sales volume and cost. Discuss such CVP techniques you will use to satisfy the management. (10 marks)

Answer: The position of finance manager has certain responsibilities and when you are a finance manager of AB Ltd then you will need to do CVP analysis which will allow you to forecast the profits in the analysis process. When we run the CVP analysis then it leads to certain changes in the sales volume and cost. To know these changes in better way, here i will discuss different CVP techniques that can be used in order to satisfy the management of AB Ltd.

CVP techniques you will use to satisfy the

Question. 3. a) Given the following as cash flow from a project, calculate the NPV. The required rate of return is 9 %

year	Cash flow
0	-150000
1	25000
2	35000
3	45000
4	45000
5	55000

Whether the company should accept the project or not ? (5 Marks)

Answer:

Here,  Initial Investment Amount = -150000

b) Given the following financial statement data, calculate the net operating cycle.

Credit sales	250000
Cost of goods sold	200000
Accounts receivable	25000
Inventory closing balance	23000
Inventory opening balance	20000
Accounts payable	17000

Answer:

Net operating cycle =  DIO + DSO – DPO

where,

DIO = Days Inventory Outstanding

Dear students get fully solved assignments

Send your semester & Specialization name to our mail id :

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