Friday, 5 January 2018

Course: Corporate Finance

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Course: Corporate Finance



Internal Assignment Applicable for December 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.



Question. 1. Lakme India is planning to launch a new product as “Lakme fair Skin Natural Mousse – Hydrating”. The company is planning to import machinery costing Rs100 lacs from Japan. The expected life of the machinery will be 10 years. The selling price per unit will be Rs 1250 and variable cost per unit will be Rs850. Further the company will have to pay Rs25lacs as fixed cost per annum. The fixed cost includes Rs10 lacs as depreciation. The company expects to sale 150000 units of the produced per year. Tax rate applicable is 50 %. The management of the company wants to know the cash flow associated with the equipment, as the CEO of the company emphasis that it is necessary to evaluate capital budgeting decisions. Do you agree? Give reasons supporting your answer and determine the cash flow generated (that is profit after tax+ depreciation) by the equipment.

Answer:

Total Cost or Revenue   = (Rs) 3125000
Total Variable Costs       = (Rs) 2125000 
Average Cost per unit    = (Rs) 1250
Quantity of units you need to sell to break-even = (Rs) 2500

Capital planning choices are of foremost significance in budgetary choice. The benefit of a business concern relies on the level of speculation made for a long stretch. Also, ventures are made legitimately through assessing the recommendations by capital planning. So it needs extraordinary care. In this unique circumstance, capital planning is getting significance. Such significance is quickly clarified underneath.


Question. 2. If you want to run your business smoothly, you should be capable enough to manage the working capital requirements of the business in an efficient manner. “Several companies like Dabur, Dell computers, Cadbury India realized the need of maintain an adequate level of working capital. Further they also have to identify the different types of working capital needed in their business at different points of time”.

This is the statement of CEO of M-Mart Ltd who is interviewing you for the position of finance manager. Do you agree with the statement of the CEO? Give reasons and conclude the same in an effective manner.

Answer: WC "effectiveness" is generally incorporated into the Unlevered Free Cash stream calculation as the Net WC spending (NWCsp) , the distinction between last WC and current WC- - i.e., as Mahfuz stated, a punishment to (1) over the top interests in working current resources (OCA=CA - money) and (2) lacking utilization of working current liabilities (OCL=CL-ST acquiring current bit of ST obligation and capital leases




Question. 3. Miss Kavvya is a successful entrepreneur of GEMS Pharma Ltd. The entrepreneur is looking to launch a new sunscreen cream in the market at a selling price of Rs275 per unit. The fixed cost determined for producing the product is Rs55700. The variable cost of producing the product is Rs165 per unit. Miss Kavvya wants to perform the cost volume profit analysis.


a) Discuss and explain the relevant tool, formula of CVP analysis applicable in the above mentioned case and how the cost will be broken down for performing such analysis.

Answer: Given your profit margin, it is important to know how many units of a certain product that you will need to sell in order to cover your fixed/startup costs. Use this calculator to determine the number of units required to breakeven plus the potential profit you could make on your anticipated sales volume.

You would need to sell 506 units in




b) If the sales are 800 units then what will be the profit generated by the business? What would be your advice, if the fixed cost is Rs95000 instead of Rs55700?

Answer: Given your profit margin, it is important to know how many units of a certain product that you will need to sell in order to cover your fixed/startup costs. Use this calculator to determine the number of units required to breakeven plus

Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
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or
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