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Corporate Finance
Dec 2025 Examination
Q1. An Indian FMCG company is
experiencing rapid sales growth but is facing frequent cash flow shortages,
leading to delayed supplier payments and missed opportunities for bulk
inventory discounts. The CEO is concerned that poor liquidity management could
undermine the company’s reputation and growth prospects. The finance manager
must analyze the situation and implement effective working capital management
strategies to optimize cash flow and maintain smooth operations. How should the
finance manager apply working capital management principles to resolve the
company’s liquidity challenges, ensuring operational efficiency and the ability
to capitalize on new business opportunities? (10 Marks)
Q2(A).
A perpetuity pays Rs.25,000 at the end of each year. However, due to inflation,
the payment increases by 4% annually. The appropriate discount rate is 10%.
After 15 years, the perpetuity is expected to be replaced by a new instrument
that pays a fixed Rs.60,000 per year in perpetuity, discounted at 8%. Calculate
the present value of this entire cash flow stream as of today, considering the
change in payment structure and discount rates after year 15. (5 Marks)
Q2(B). A company issues Rs.50,00,000
in 8% redeemable preference shares at a 5% premium, redeemable at par after 6
years. Annual dividend is paid on face value. The issue expenses are 2% of the
face value. Calculate the cost of preference shares, considering the effect of
issue expenses and premium, and interpret how this cost would impact the
company’s overall cost of capital if preference shares constitute 20% of the
capital structure. Show all intermediate steps. (5 Marks)
Dear students, get fully
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Do send your query at :
or call us at :
08263069601
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assignments available with 100% surety and refund)
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