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Strategic Financial Management NMIMS assignment April 2024

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Strategic Financial Management NMIMS assignment April 2024

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Description

NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Strategic Financial Management
Internal Assignment Applicable for April 2024 Examination
Assignment Marks: 30
Instructions:
 All Questions carry equal marks.
 All Questions are compulsory.
 All answers to be explained in not more than 1000 words for question 1 and 2 and for question 3 in not more than 500 words for each subsection. Use relevant examples, illustrations as far as possible.
 All answers to be written individually. Discussion and group work is not advisable.
 Students are free to refer to any books/reference material/website/internet for attempting their assignments but are not allowed to copy the matter as it is from the source of reference.
 Students should write the assignment in their own words. Copying of assignments from other students is not allowed.
 Students should follow the following parameter for answering the assignment questions.
Question 1
Alpha Ltd is contemplating an investment in a new piece of machinery. Based on the details given below calculate the cash flows and perform the capital budgeting analysis. Would you go ahead with the investment?
Initial Investment Cost: Rs.100,000
Useful Life of Machinery: 5 years
Annual Revenue: Rs. 40,000
Annual Operating Costs: Rs. 10,000
Annual Depreciation (Straight-line method): Rs. 20,000
Tax Rate: 30% Discount Rate: 10% (10 marks)
Question 2 The current stock price of XYZ Inc is Rs. 100 per share. Based on the information given below calculate the total profit or loss for an investor who buys one call option contract (representing 100 shares) and exercises it at expiration, depending on different scenarios of the stock price at expiration. Option Type: Call Option Strike Price: Rs.105 per share Premium (Cost of the Option): Rs.5 per share Expiration Date: 30 days from now (10 marks)
Question 3a Maurya Ltd issues bonds with a face value of INR 1000, coupon rate 6% (annual coupon payment) with time to maturity as 5 years. Compute the Yield to Maturity (YTM) assuming the current market price of the bond is INR 950. (5 Marks)
Question 3b
Micro Ltd considering its dividend policy. The current earnings per share (EPS) are Rs. 5. The shared holders of Micro Ltd expect a return (ke) of 10%. Assuming the retention ratio (b) is 60%, what would be the optimal dividend payout ratio as per Walter’s Model?
(5 Marks)
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