NEW DELHI INSTITUTE OF MANAGEMENT

60 & 50 (B & C), Tughlakabad Institutional Area, New Delhi-110062

End Term Examination | March/April, 2020

Batch 2019-21 | Semester-II
Date: 04/04/2020 | 10:00AM – 1:00PM

Subject: Corporate Finance / Financial Management (C-202)

Roll No. 19184 Enter Your Roll No. & Attempt Question Paper S

Student Name ANINDITA SENGUPTA

Specialisation-I Marketing

Section MB

Question Paper SET No. AF4

Guidelines:
1. Present Value tables can be used.
2. Use of direct finance functions like NPV, IRR etc. is not allowed in excel.
3. All the steps as taught in the class have to be shown.
4. All the questions have to be solved in this Workbook only
5. Attempt your answers in Sheet 2 labeled as "Answers"
NT

Attempt Question Paper Set which appears in the Yellow Highlighted Row No. 14
Q No.
1

2
3
4
5
6

7
8
9

10
 Answer
Wealth maximization is a modern approach to financial management. Maximization of profit used to be the main
aim of any business and financial management untill wealth maximization concept came. It is a superior concept
compared to profit maximization. this is because wealth maximization takes broader arena into
consideration.wealth or value of a business is defined as the market price of the capital invested by shareholder. it
simply means maximization of shareholder's wealth. The wealth of shareholder maximizes when the net worth of a
company maximizes.

D- None of the above (Sheet1)

Plan A(Sheet2)
B-6.9%(Sheet2)
C- 15%(Sheet1)
Various sources of finance from where a public limited company listed on BSE:can raise further capital. - 1.
preferential shares - this is a faster way for the company to raise further funds. In companies issue shares or
convertible securities to a select group of persons under section 81 of the companies act,1956. these are not rights
issue nor public issue.
2. qualified institutional placement - this type of raising funds allows an indian listed company to raise capital from
domestic markets without the need for submission of any pre-filings to the market regulators.
3. American depository receipt or ADRs - is a depository receipt issued by US depository bank against a certain
number of shares of non- US company stock, trading in the US stock exchange.
4. Global depository receipt - GDR is a negotiable instrument issued by the international depository bank,
representing foreign company's stock trading globally.
5. Foreign Currency Convertible Bond - FCCB is a convertible bond issued in a currency different than the issuer's
domestic currency.
6. Professional investors - As the company hold its ground well and raise its brand equity, many angel investors also
gets interested in proving funds for further investment in the project for the company.

D- None of the above (Sheet1)

Working capital - It is a capital which is required in day to day trading transactions of the business. It is estimated by
subtracting current liablities from current assets.
Different types of working capital- Balance sheet view of working capital
1.) Gross working capital - it is the total amount a company invests in its current assets which can
be convertible into cash in usually a year. examples- prepaid expenses.
2.) Net working capital - It is the difference between current assets and current liablities of the
company as per its balance sheet. this can be further divided into negative working capital where current liabilities
are more than current assets and positive working capital where current assets exceeds the current liabilities.
operating cycle view of working capital - Fixed
working capital and Variable Working capital

B(Sheet3)
Q.2
PV 12000
Years 10
Interest 15%
FVIF 48546.6928284949

Q.7.
Operating Leverage Financial Leverage
Firm X Firm X
Sales(Revenue) 100000 EBITD 20000
Less: Variable cost 30000 Less: Depreciation 0
Contribution 70000 EBIT 20000
Less:Fixed cost 50000 Less: Interest on the loan 9%
EBITD 20000 1800
EBT 18200
contribution/EBIT 3.5 EBIT/EBT 1.098901

Q.5.
r= 13 %
g= 16 % D1=
P0= 305 D1=
d= 13
Ke= (D1/p0)+g
20.94%

Q8.
raw material 40000
WIP 48000
finish goods 42000
purchase 126000
cost of good sold 240000
sales 360000
debtor 64000
creditors 36000
days 360

raw material conversion period 114.285714285714

WIP storage period 137.142857142857
FG storage period 63
Dr collection period 64
Cr collection period 102.857142857143
no. of days in a operating cycle 275.571428571429
D0(1+g)
15.08
Q.3.
Plan a b c d
EBIT 1500000 1500000 1500000 1500000
Debt 0 1000000 0 1500000
Interest 0 8% 0 8%
80000 120000
EBT 1500000 1420000 1500000 1380000
Tax 50% 50% 50% 50%
PAT 750000 710000 750000 690000
Preference divident 0 0 1500000 1000000
Interest 0 0 8% 12%
750000 710000 120000 120000
750000 710000 630000 570000

Q.4.
Par Value 100
interest 9.5
Premiuim intere -2
Floatation cost 1
8.5

Cost of field 8.5(1-20%)

Tax rate 20%
80%
6.8
6.9(Approx)
Q.10.
Cost 100 UNIT = CRORES
Company A
year cash inflowp/v @12% present value
1 10 0.892857 8.928571
2 20 0.797194 15.94388
3 30 0.71178 21.35341
4 40 0.635518 25.42072
71.64658
for A
NPV -28.35342 reject

Company B
year cash inflowp/v @12% present value
1 50 0.892857 44.64286
2 50 0.797194 39.85969
3 50 0.71178 35.58901
4 0.635518 0
120.0916
for B
NPV 20.09156

Company C
year cash inflowp/v @12% present value
1 50 0.892857 44.64286
2 40 0.797194 31.88776
3 30 0.71178 21.35341
4 20 0.635518 12.71036
110.5944
for C
NPV 10.59438

Company D
year cash inflowp/v @12% present value
1 20 0.892857 17.85714
2 20 0.797194 15.94388
3 20 0.71178 14.2356
4 40 0.635518 25.42072
73.45735
for A
NPV -26.54265 reject

SO this shows we will accept B