2020 April nmims assignments ABC Ltd is considering two f

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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)

Assignment Solutions, Case study Answer sheets
Project Report and Thesis contact
[email protected]
www.mbacasestudyanswers.co
m
ARAVIND 09901366442 09902787224