MMPF-002 free assignments IGNOU HANDWRITTEN CAPITAL INVESTMENT AND FINANCING DECISION MBA FINANCE

MMPF-002 free assignments IGNOU HANDWRITTEN CAPITAL INVESTMENT AND FINANCING DECISION MBA FINANCE

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Equity share capital (2,00,000 shares) 10% preference shares
12% Debentures
60,00,000 10,00,000 30,00,000 100,00,000
Capital Investment and Financing Decisions MMPF-002/TMA/ JULY/2024
Al Blocks
Note: Atempt al the questions and submit this assignment ot the coordinator of your study centre. Last date of submission for July 2024 session si 31" October, 2024 and for January 2025 sessions si 30"* April, 2025.
.1 ABC Lid. has the folowing bok value capital structure sa no March, 31, 2024.
The equity share of the company sels at Rs. 30. It si expected that the company wil pay next year a dividend of Rs. 3 per equity share which si expected ot grow at %5 p.a. forever, Assume 40% corporate tax rates.
Based on the above information calculate.
(a) Weighted average cost of capital (WACC) of the company based on the existing capital structure.
b() Co eud htunes. Thsi out estni resian adt expectot daidi detybising and leave the growth rate unchanged but the price of the equity share wil fal ot Rs. 24.
.2 How are the Cash Flows for Capital Budgeting estimated? Describe the various methods used for evaluating investment proposals. .
3. What do you understand by Certainty and Risk? Describe the techniques used for measurement of Project Risk.
.4 Explain the folowing:
(a) Leasing and Hire Purchase. Discuss the difference between these two. (b) Asset Securitization
What si Financial Engineering? Discuss the factors contributing ot Financial Engineering.
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IGNOU ASSIGNMENT GURU 2024-25 Course Code : MMPF-002
Course Title: Capital Investment and Financing Decisions Assignment Code : MMPF-002/TMA/ JULY/2024 Disclaimer/Special Note: These are just the sample of the Answers/ Solutions ot some of the Questions given ni the Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance of the student to get an idea of how he/she can answer the Questions given the Assignments. Assignment Guru don't claim 100% accuracy of these sample answers as these are based on the knowledge and capability of Private Teacher/Tutor.
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1. ABC Ltd. has the following book value capital structure as on March, 31, 2024. Equity share capital (2,00,000 shares)
60,00,000
10% preference shares 10,00,000 12% Debentures 30,00,000
100,00,000
The equity share of the company sells at Rs. 30. It is expected that the company will pay next year a dividend of Rs. 3 per equity share which is expected to grow at 5% p.a. forever, Assume 40% corporate tax rates.
Based on the above information calculate.
(a) Weighted average cost of capital (WACC) of the company based on the existing capital structure.
(b) Compute the new WACC if the company raises an additional 40 Lakh debt by issuing 13% debentures. This would result in increasing the expected dividend to Rs. 3.60 and leave the growth rate unchanged but the price of the equity share wil fall to Rs. 24. Answer: 1. Existing WACC Calculation:
(a) Cost of Equity (Ke):
-
80345813
The cost of equity can be calculated using the Dividend Discount Model (DDM):
wgwnio.ue*aiesrgncutourm.
• g = 5% ( G r o w t h r a t e )
Ke=30 +0.05=0.10+0.05=0.15ог15%
Where:
• D1 = 3(Expected dividend per share) • Po = 30 (Market price per share)
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http://www.ignouassignmentguru.com (b) Cost of Preference Shares (Kp):
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The cost of preference shares is the dividend divided by the market price (assuming the market price equals book value ni the absence of specific information):
Кр = Preference Dividend Preference Share Capital
The preference dividend si 10% of *10,00,000:
Кр = 10% × 10,00, 000 10% or 0.10 10, 00, 000
(c) Cost of Debt (Kd):
The cost of debt si