Institute of Rural Management Anand

PGDM-RM41 – Term II – End Term Examination

<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 1

a)

b) From NPV and IRR, NPV is superior method because in NPV the reinvestment happens at the
discount rate and in IRR, reinvestment happens at the IRR rate which is very high which should not
be taken. IRR method generates multiple IRR rates when cash flows are non-normal and also
timing of cash flows also matters here it will give higher IRR when cash flows are higher in initial
period.
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 2 a
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 2 b
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 3

(a)
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

(b)
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 4

(a)

Some firms do not have debt in their structure because they believe in pecking order theory which give
preference on lesser chance of loss of control and less transparency because zero debt will help in that.
Companies like Asian Paints and Johnson & Johnson which have very high profits don’t want to have debt.
It shows that they are having superior performance with low transparency. Adding debt to the portfolio
also means you are adding risk.

(b)
 Institute of Rural Management Anand
PGDM-RM41 – Term II – End Term Examination
<FM>
<13/01/2020>
<Name of the Student, Roll Number: Pankaj Gupta, P41091>

Question 5