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NMIMS
Global Access
School for Continuing Education (NGA-SCE)
Course: Corporate Finance
1. ABC Ltd. is considering two
financing plans to raise ₹ 8,00,000. The key information is as follows:
TABLE GIVEN BELOW:
|
Plan
|
Equity
|
Debt
|
Preference Shares
|
||
|
1
|
50%
|
50%
|
|||
|
2
|
50%
|
50%
|
|||
Expected EBIT is ₹ 2,40,000.
Cost of Debt is 10% and cost of
Preference Shares is 10%.
Tax rate is 50%.
Equity shares of the face value of ₹
10 each will be issued at a premium of ₹ 10 per share.
Calculate Earnings per share for plan
1 and 2 and suggest which one is better.
(10 Marks)
2. A Project costs ₹ 60,000 and is
expected to generate cash inflows as:
|
Year
|
Cash inflows(₹)
|
|
1
|
10,000
|
|
2
|
12,000
|
|
3
|
15,000
|
|
4
|
18,000
|
|
5
|
20,000
|
|
6
|
22,000
|
Calculate Net Present Value and
Profitability Index. Comment whether project should be accepted or not. Assume
cost of capital is 10%. Enumerate the steps of calculation of NPV.
3. The following information is given
for Alpha Ltd.
|
Earnings per share
|
₹ 12
|
|
Dividend per share
|
₹ 3
|
|
Cost of Capital
|
18%
|
|
Internal Rate of Return On
Investment
|
22%
|
|
Retention Ratio
|
75%
|
Calculate the market price per share using
a. Gordon’s Dividend Model (5 Marks)
b. Walter’s Dividend Model (5 Marks)
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by professionals
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or call us at :08263069601
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