Description
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Corporate Finance
1. ABC Ltd. is considering two financing plans to raise ₹ 8, 00,000. The key information is as follows:
TABLE GIVEN BELOW:
Plan Equity Debt Preference Shares
1 50% 50%
2 50% 50%
Expected EBIT is ₹ 2, 40,000.
Cost of Debt is 10% and cost of Preference Shares is 10%.
Tax rate is 50%.
Equity shares of the face value of ₹ 10 each will be issued at a premium of ₹ 10 per share.
Calculate Earnings per share for plan 1 and 2 and suggest which one is better. (10 Marks)
2. A Project costs ₹ 60,000 and is expected to generate cash inflows as:
Year Cash inflows(₹)
1 10,000
2 12,000
3 15,000
4 18,000
5 20,000
6 22,000
Calculate Net Present Value and Profitability Index. Comment whether project should be accepted or not. Assume cost of capital is 10%. Enumerate the steps of calculation of NPV.
3. The following information is given for Alpha Ltd.
Earnings per share ₹ 12
Dividend per share ₹ 3
Cost of Capital 18%
Internal Rate of Return On Investment 22%
Retention Ratio 75%
Calculate the market price per share using
a. Gordon’s Dividend Model (5 Marks)
b. Walter’s Dividend Model (5 Marks)
For answersheets contact
[email protected]
+91 95030-94040
doc_806929912.doc
For answersheets contact
[email protected]
+91 95030-94040
Corporate Finance
1. ABC Ltd. is considering two financing plans to raise ₹ 8, 00,000. The key information is as follows:
TABLE GIVEN BELOW:
Plan Equity Debt Preference Shares
1 50% 50%
2 50% 50%
Expected EBIT is ₹ 2, 40,000.
Cost of Debt is 10% and cost of Preference Shares is 10%.
Tax rate is 50%.
Equity shares of the face value of ₹ 10 each will be issued at a premium of ₹ 10 per share.
Calculate Earnings per share for plan 1 and 2 and suggest which one is better. (10 Marks)
2. A Project costs ₹ 60,000 and is expected to generate cash inflows as:
Year Cash inflows(₹)
1 10,000
2 12,000
3 15,000
4 18,000
5 20,000
6 22,000
Calculate Net Present Value and Profitability Index. Comment whether project should be accepted or not. Assume cost of capital is 10%. Enumerate the steps of calculation of NPV.
3. The following information is given for Alpha Ltd.
Earnings per share ₹ 12
Dividend per share ₹ 3
Cost of Capital 18%
Internal Rate of Return On Investment 22%
Retention Ratio 75%
Calculate the market price per share using
a. Gordon’s Dividend Model (5 Marks)
b. Walter’s Dividend Model (5 Marks)
For answersheets contact
[email protected]
+91 95030-94040
doc_806929912.doc