Financial Management Assignment

10/12/2010

Completed and Submitted by,

Aishwarya R. (06)

Anjana Pradeep (12)

Arijit Ghosh (18)

Gayathri M.A. (34)

Jyothi D. (44)

Lavanya P. (51)

CONTENTS

INTRODUCTION.......................................................3

COMPANIES CHOSEN..............................................3

LARSEN AND TOUBRO............................................3

Overview……………………………………………………………...3

Calculation of optimum D/E ratio............................5

Impact of capital structure on firm value................6

AMBUJA CEMENTS..................................................7

Overview..................................................................7

Calculation of optimum D/E ratio............................7

Impact of capital structure on firm value................8

WIPRO.....................................................................8

Overview.................................................................8

Calculation of optimum D/E ratio...........................9

Impact of capital structure on firm value...............10

CONCLUSION.........................................................10

REFERENCES...........................................................10

Introduction

This assignment deals with the impact of the capital structure, portrayed by the debt-to-equity ratio of the company, on the firm value as perceived by the market price of the share. The debt-to-equity ratio is a measure of the company’s financial leverage. The ratio varies from industry to industry and is also firm-specific. The graph of D/E ratio versus Weighted Average Cost of Capital is used to determine the optimal D/E ratio for each company.

Companies chosen: Larsen & Toubro, Ambuja cements and wipro. larsen and toubro oVERVIEW Larsen & Toubro (L&T) is a technology-driven USD 9.8 billion company that infuses

References: www.moneycontrol.com, BSEindia.com, Annual reports of L&T, WIPRO and AMBUJA CEMENTS.