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Corporate Finance NMIMS Global Access School for Continuing Education (NGA-SCE) Course: Corporate Finance Internal Assignment Applicable for December 2019 Examination
1. Assume that ABC Ltd has equity share capital of ₹15,00,000 divided into shares of Rs150 each. The company wishes to raise additional total capital of ₹6,00,000 for expansion through ₹3,00,000 in equity shares and ₹3,00,000 in debts at 10%. The EBIT of the company is ₹3,00,000 and tax rate is 50%. Calculate EPS. Suggest what will happen to EPS if entire capital was raised through debts. (10 Marks) 2. Alpha Ltd is expecting an annual Earnings Before Interest and Tax of ₹1,50,000. The company had 10% debentures of ₹ 5 Lakhs. Calculate the overall cost of capital of the firm if the cost of Equity is 12% assuming NI approach in the calculation. Suggest what happens to the value of the firm when more debentures are issued. (10 Marks) 3. Mr. Mehta works as a Management Consultant in XYZ Ltd and his role involved analyzing capital investment projects. His manager asked him to analyze project X which involved capital investments of ₹10,00,000 and the cost of capital of 12%. The projects net cash flows are as follows: Years
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