NMIMS Solved Assignment Strategic Financial Management

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School for Continuing Education (NGA-SCE)

Course: Strategic Financial Management

Internal Assignment Applicable for September 2020 Examination

Assignment Marks: 30

 

1. A Project costs Rs 1,00,000 and is expected to generate cash inflows as:

Year	1	2	3	4	5	6
Cash Inflows(Rs)	20,000	25,000	28,000	31,000	35,000	40,000

Calculate Net Present Value and Profitability Index. Comment whether project should be accepted or not. Assume cost of capital is 12%. Enumerate the steps of calculation of NPV.

2. Calculate EVA if the Earnings before interest and tax is Rs 15,00,000 and applicable tax rate is 30%. The capital structure of the firm consists of 75% Equity and 25% debt capital. After tax cost of debt is 7% and cost of equity is 12%. Total borrowed capital of the firm is Rs 25,00,000. Explain EVA and comment on the value of EVA(calculated).

 

3. A firm wanted to understand what is the importance of debt in the capital structure on the value of the firm. Company’s current operating income is ₹7 lakhs and cost of equity capital is estimated to be 12%. Assume tax rate as 30%. If you are the Finance Manager of the company determine the value of the firm using Net Income Approach and comment on the results:

a. if the firm has ₹5 lakhs of 10 percent debt outstanding.

 b. if the firm has ₹7 lakhs of 10 percent debt outstanding.