Assignment: Net Present Value and Capital

Topics: Net present value, Time value of money, Rate of return Pages: 13 (2375 words) Published: October 25, 2012

Post Box No. 503, Sector-44
Noida – 201303

Assignment A
Marks 10
Answer all questions.

a. Should the titles of controller and treasurer be adopted under Indian context? Would you like to modify their functions in view of the company practice in India? Justify your opinion? b. A firm purchases a machinery for Rs. 8,00,000 by making a down payment of Rs.1,50,000 and remainder in equal instalments of Rs. 1,50,000 for six years. What is the rate of interest to the firm? 2.

a.Explain the mechanism of calculating the present value of cash flows..What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate b.”The increase in the risk-premium of all stocks,irrespective of their beta is the same when risk aversion increases” Comment with practical examples

a.How leverage is linked with capital structure? Take example of a MNC and analyse.

b. The following figures relate to two companies (10)
(In Rs. Lakhs)
Variable costs200 300
Contribution300 700
Fixed costs150 400
150. 300
Interest 50 100
Profit before Tax100 200
You are required to:
i) Calculate the operating, financial and combined leverages for the two companies ; and Comment on the relative risk position of them

a. Define various concepts of cost of capital. Explain the procedure of calculating weighted average cost of capital.

b.The following items have been extracted from the liabilities side of the balance sheet of XYZ Company as on 31st December 2005. Paid up capital: Rs. 4, 00,000 equity shares of Rs each 40, 00,000 Loans:

16% non-convertible debentures 20, 00,000 12% institutional loans 60, 00,000

Other information about the company as relevant is given below: 31st dec Dividend Earning average market price Per share per share per share 2005 7.2 10.50 65

You are required to calculate the weighted average cost of capital, using book values as weights and earnings/price ratio as the basis of cost of equity. Assume19.2% tax rate 5.
a. .A company has issued debentures of Rs. 50 Lakhs to be repaid after 7 years. How much should the company invest in a sinking fund earning 12% in order to be able to repay debentures? Show the procedure of loan amortization and capital recovery through an example. b.A bank has offered to you an annuity of Rs. 1,800 for 10 years if you invest Rs. 12,000 today. What is the rate of return you would earn?

Assignment B
Marks 10
Answer all questions.

The proforma of cost-sheet of HLL provides the following data:

|Cost (perunit): | | |Raw materials |52.0 | |Direct labour |19.5 | |Overheads |39.0 |...
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