Assignment: Net Present Value and Capital
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AMITY SCHOOL OF DISTANCE LEARNING
Post Box No. 503, Sector-44
Noida – 201303
FINANCIAL MANAGEMENT
Assignment A Marks 10
Answer all questions.
1.
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
3.
a.How leverage is linked with capital structure? Take example of a MNC and analyse.
b. The following figures relate to two companies (10) P LTD. Q LTD. (In Rs. Lakhs) Sales 500 1,000 Variable costs 200 300 ---- ------- Contribution 300 700 Fixed costs 150 400 ---- ------- 150. 300 Interest 50 100 ---- ------- Profit before Tax 100 200 ---- ------- 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
4. 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
AMITY SCHOOL OF DISTANCE LEARNING
Post Box No. 503, Sector-44
Noida – 201303
FINANCIAL MANAGEMENT
Assignment A Marks 10
Answer all questions.
1.
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
3.
a.How leverage is linked with capital structure? Take example of a MNC and analyse.
b. The following figures relate to two companies (10) P LTD. Q LTD. (In Rs. Lakhs) Sales 500 1,000 Variable costs 200 300 ---- ------- Contribution 300 700 Fixed costs 150 400 ---- ------- 150. 300 Interest 50 100 ---- ------- Profit before Tax 100 200 ---- ------- 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
4. 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