NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Strategic Financial Management
Internal Assignment Applicablefor December 2019 Examination

Assignment Marks: 30

Instructions:

 All Questions carry equal marks.

 All Questions are compulsory
 All answers to be explained in not more than 1000 words for question 1 and 2 and for
question 3 in not more than 500 words for each subsection. Use relevant examples,
illustrations as far as possible.
 All answers to be written individually. Discussion and group work is not advisable.
 Students are free to refer to any books/reference material/website/internet for
attempting their assignments, but are not allowed to copy the matter as it is from the
source of reference.

 Students should write the assignment in their own words. Copying of assignments from
other students is not allowed.

 Students should follow the following parameter for answering the assignment questions.

For Theoretical Answer For Numerical Answer

Assessment Parameter Weightage Assessment Parameter Weightage

Introduction 20% Understanding and usage 20%

Concepts and Application 60% of the formula

related to the question Procedure / Steps 50%

Conclusion 20% Correct Answer & 30%
Interpretation
 NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Strategic Financial Management
Internal Assignment Applicablefor December 2019 Examination

1. Calculate EVA if the Earnings before interest and tax is Rs 10,00,000 and
applicable tax rate is 30%. The capital structure of the firm consists of 65% Equity
and 35% debt capital. After tax cost of debt is 6% and after tax cost of equity is
11%. Total borrowed capital of the firm is Rs 18,00,000. (10 Marks)

2. Alok was working as the project manager and had to decide which one of the
projects has to be selected on the basis of Net Present Value if the discounting
factor in the case of both projects is 10% and initial investment required is Rs
5,00,000. The cash inflows of both the projects are: (10 Marks)

Year Project A Project B

1 ₹75,000 ₹40,000
2 ₹1,25,000 ₹75,000
3 ₹2,00,000 ₹1,00,000
4 ₹2,25,000 ₹1,50,000
5 ₹2,50,000 ₹2,25,000

3. Walter and Gordon model analyze the impact of distribution of dividends on the
valuation of the firm but the formula used in both the cases are different. Company
ABC Ltd wanted to evaluate the price of the share in both cases. The company
earns ₹ 5 per share and the cost of capital to the firm is 12%. The company earns
return on investment of 15% and the firm is planning dividend payout ratio of 30%.
Calculate:
a) Price of the share using Walter Model. (5 Marks)
b) Price of the share using Gordon model. (5 Marks)
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