NMIMS Corporate Finance Sep 2021 Solved Assignment

Corporate Finance 1. The capital structure of ABC Pvt. Ltd is as follows: Equity share capital each share of Rs. 10 Rs. 16,00,000 Debentures with a coupon rate of 10 % Rs. 10,00,000 Revenue from the business activities for the company is Rs. 2.00 crores. Its cost is 10% of the revenue, fixed operating cost is Rs. 60 lakhs and the company pays income tax at a rate of 25%. a. Calculate financial leverage, operating leverage and combined leverage for the company. b. Determine the likely level of EBIT for EPS of i Rs. 45, ii Rs. 60, and iii Rs.75. 2. The equity shares of a publicly traded company are priced at Rs. 600 with P/E Price to Earnings ratio of 20. The company announces a dividend of Rs. 12 per shares. The shareholders of the company expect the dividend to grow at a rate of 5% every year, and the cost of equity for the company is 16%. According to the dividend relevance approach suggested by Walter and Gordon, what would be the impact of dividend announcement on the market price of the shares of the company if required rate of return for investors is i 10%, ii 15% and iii 20%. 3. A manufacturing company forecast that it is likely to sell 8,00,000 units for the year 2021. The processing cost of an order is Rs. 200 and the carrying cost per unit of inventory is Rs. 16. The lead time of an order is 5 days. a What would be the economic order quantity EOQ and re-order point assuming 360 days in a year b The company implements business process reengineering which results in to reduction of 25% in cost of an order, 15% in carrying cost per unit of inventory and 20% in lead time of an order. What would be the new EOQ and re-order point.