NMIMS Semester 3 APRIL 2025 Finance Assignments
Capital market and portfolio management
Q1. Mr. A is looking to invest some of his savings for the future. He has two options: stocks and bonds. He decides to visit his friend Mr. B, who is an experienced investor, to ask for some advice. Mr. B said “Think of stocks like owning a piece of a company. When you buy stocks, you’re actually buying a small share of that company. But bonds are like loans you give to companies or governments. When you buy a bond, you’re lending them money, and they promise to pay you back with interest over a set period. From investment adviser’s point of view how will you differentiate stock & bond?
Q2. John, a new investor, is interested in putting his money into mutual funds but is worried about the risk. Suppose you are investing in mutual fund from several years, as a friend explain the different types of mutual funds that can help John in diversifying risk.
Q3a. Alpha takes in to an account the volatility of an asset & compares its risk adjusted performance to an already established benchmark index. If portfolio return is 30%, the risk-free rate is 8%, beta is 1.1, and the benchmark index return is 20% calculate alpha.
b) Arbitrage pricing theory helps investors to determine whether an asset is undervalued or overvalued. On the basis of this information investors can decide invest or not to invest. Arbitrage Pricing Theory is based on some assumption describe few of them.
Strategic cost management
1. New Era Corp., a mid-sized manufacturing company, has been struggling with inefficiencies in its budget allocations. For years, the company relied on incremental budgeting, where previous year’s expenses were carried forward with minor adjustments. Over time, this led to certain departments hoarding funds they didn’t necessarily need, while other critical areas remained underfunded. Facing increasing competition and pressure to improve profitability, the management decided to overhaul their budgeting process. They proposed shifting to a zero based budgeting (ZBB) system, where every expense would have to be justified from scratch for each new budgeting cycle. The finance team welcomed the opportunity to streamline spending but raised concerns about the time and resources required to implement ZBB. Department heads expressed mixed reactions—some saw it as a chance to highlight their real needs, while others worried about the effort involved in preparing detailed justifications for every cost. After a six-month trial run with ZBB, the company observed some significant changes. Now, the management must decide whether to fully adopt ZBB across the organization or return to the traditional budgeting approach. What are the advantages and disadvantages of adopting a zero-based budgeting system as observed in this case?
2. Mindset Ltd., a manufacturing company producing Product A and Product B, is facing challenges in accurately allocating overhead costs using the traditional costing system. To address this, the management has decided to implement an Activity-Based Costing (ABC) system to ensure a fair allocation of costs and better decision-making. The following data is available:
Overhead Costs and Activity Drivers:
| Activity | Total Overhead Cost | Activity Driver | Total Activity |
| Machine Setup | ₹50,000 | Number of setups | 100 setups |
| Quality Inspection | ₹60,000 | Number of inspections | 120 inspections |
| Material Handling | ₹40,000 | Number of
material movements |
80 movements |
Activity Usage by Products:
| Activity Driver | Product A | Product B |
| Number of setups | 60 setups | 40 setups |
| Number of inspections | 80 inspections | 40 inspections |
| Number of material movements | 50 movements | 30 movements |
Allocate overhead costs to Product A and Product B using activity-based costing. Calculate the overhead cost per unit for each product if units produced of product A are 1000 and that of product B are 500. What insights do the results share?
3. Delta Ltd. is a mid-sized manufacturing company specializing in high-quality kitchen appliances. Their flagship product, the ‘SmartCook Pro’, is gaining popularity, but the management team is concerned about fluctuating profit margins due to rising raw material costs and competitive pricing pressures. To address these challenges, DEF Ltd. wants to use Cost-Volume-Profit (CVP) analysis to better understand the relationship between their costs, production volume, and profit. They need insights into the breakeven point, the sales volume required to meet a target profit, and how changes in variable costs or selling prices might impact their financial performance. The company has set a selling price of ₹2,000 per unit, incurs variable costs of ₹1,200 per unit, and has total fixed costs of ₹8,00,000. The management also plans to introduce a discount strategy, reducing the selling price to ₹1,800 per unit to boost sales, and they wish to evaluate its impact on profitability. Using CVP analysis, they aim to make informed decisions on production levels and pricing strategies.
a) Based on the current pricing strategy, calculate the breakeven point in units. What is break-even analysis and what does these number of units signify?
b) If Delta Ltd. reduces the selling price to ₹1,800 per unit to achieve a target profit of ₹4,00,000, calculate the number of units they need to sell?
Marketing of financial services
Q1. How does the strategic allocation of assets contribute to the overall effectiveness of Financial Planning, and what are the key considerations and benefits that individuals or organizations should keep in mind when implementing an asset allocation strategy? How come this Asset Allocation Strategy involves understanding the importance of diversification, risk management, and aligning asset with long-term financial goals? Explain the pedagogics from Financial Planner Perspective.
Q2. How do Indian commercial banks employ innovative marketing strategies to promote their financial services, and what impact does this have on consumer behavior and the broader banking industry? This includes understanding the role of digital marketing, customer segmentation, and product differentiation in enhancing the visibility and adoption of financial products. How these marketing efforts shape industry trends and consumer preferences. Ultimately, explain the paradigm highlights the critical role of marketing in the success of commercial banks in India.
Q3A. In what ways is the Indian government enhancing community welfare through the marketing of financial services at post offices and other public venues, and how does this initiative impact the broader financial inclusion landscape? This involves examining the role of government-sponsored programs and initiatives in promoting financial literacy and access to banking services.
Q3B. How the Digital Marketing plays an influential Role in Customer Relationship Management? Elaborate any 4 to 5 Distinct features of CRM Digital Marketing Cruciality / Importance for Banks & Other Institutions Financial Services Marketing.
Taxation- Direct and Indirect
1. Mr. Narayan, a businessman, purchased a house property on 1.5.1978 for Rs. 1,12,000. He incurred the following expenses for making some additions and alterations to the house property:
Construction cost of first floor, incurred in 1984-85, for Rs. 2,95,000. Construction cost of second floor, incurred in 2003-04, for Rs. 8,05,000. Renovation expenses of the building, incurred in 2013-14, for Rs. 5,11,000. The fair market value of the property as on 1.4.2001 is Rs. 9,40,000. This house property was sold by Mr. Narayan on 11.8.2018 for Rs.77,00,000 after incurring expenses of Rs. 40,000 on the transfer. The capital gains on such transfer are calculated as follows:
Financial Year (FY) Cost Inflation Index (CII)
2001-02 100
2003-04 105
2013-14 200
2018-19 280
2019-20 289
2020-21 301
2. Section 28 is the charging section of profits and gains of business or profession. You are required to list and explain those 10 items of income which are chargeable to tax under the head ‘Profits and Gains of Business or Profession’
3. a) When an organization decides to retrench certain workforce, the workmen are entitled to retrenchment compensation at the time of their retrenchment. You are required to explain the taxability of such Retrenchment Compensation.
b) Different rates of TDS are prescribed for different items depending on the type of payment. You are required to list down 5 of these types of payment along with the relevant section and the rate of TDS.
Cost and management accounting
Q1. The stock in hand of material as on 1st September was 500 units at Rs. 10 per unit. The following purchases and issues were subsequently made. Prepare the Stores Ledger Account showing how the value of the issues would be recorded under FIFO method.
Purchases
6th Sept. 100 units at Rs. 11
20th Sept. 700 units at Rs. 12
27th Sept. 400 units at Rs. 13
13th Oct. 1,000 units at Rs. 14
20th Oct. 500 units at Rs. 15
17th Nov. 400 units at Rs. 16
Issues
9th Sept. 500 units
22nd Sept. 500 units
30th Sept. 500 units
15th Oct. 500 units
22nd Oct. 500 units
11th Nov. 500 units
Q2. Discuss the role of management accounting in shaping strategic decisions within an organization. Provide examples of how management accounting practices can influence long-term planning and sustainability.
Q3 (a) Calculate Break-Even Point from the following particulars. Fixed Cost Rs.1,50,000
Variable cost per unit Rs.10
Selling price per unit Rs.15
Q3 (b) Analyze the differences between standard costing and budgetary control. How do these tools help in managing operational performance within an organization?
Corporate Finance
1. Mr. Joshi is the Finance Manager at M/s Vriddhi Impex. The Company is looking at lateral growth and diversification into garment making from cloth making. For doing this, there needs to be put up a factory with all the latest machinery for cutting and stitching garments. The cost of acquisition of land, setting up the factory and buying the machinery works out to Rs. 100 lacs. It is estimated that the project will start generating revenue immediately from year 1. The Net revenue (after tax) for the next 5 years is Rs. 20 lacs, 30 lacs, 35 lacs, 45 lacs, 48 lacs.
A new loan is available to Vridhi Impex at 9% p.a. interest rate (net of tax). Mr. Joshi has another proposal which gives him a return of 12% p.a. and hence he does not want to invest below this rate. Assist Mr. Joshi to evaluate the project proposal using NPV and IRR. (Show all calculations for comparing it with the alternative proposal also). Should he go ahead with the project proposal?
2. Parag is evaluating 3 options for investment of his surplus money of Rs. 15,00,000/- for a period of 5 years.
i. Invest it in a Debenture which gives him a return of 12% compounded quarterly.
ii. Invest in a Corporate Deposit at a rate of 9% compounded bi-annually.
iii. Invest it in a Business Proposal which gives him the following returns.
Considering the risk involved, the discounting factor is considered @ 11%.
Year CF
1 250,000
2 350,000
3 575,000
4 525,000
5 645,000
As his finance advisor which option would you suggest him. Provide reasons.
3. a) In the following Balance sheet, calculate the Current Ratio and the Acid Test Ratio for both years Mar 2024 and Mar 2023. What do they indicate about the company’s financial position and the movement over the years?
Tata Motors
Standalone Balance Sheet
——————- in Rs. Cr. —————–—
Mar 24 Mar. 23
EQUITIES AND LIABILITIES
SHAREHOLDER’S FUNDS
Equity Share Capital 766.50 766.02
Total Share Capital 766.50 766.02
Reserves and Surplus 29,374.83 21,701.37
Total Reserves and Surplus 29,374.83 21,701.37
Money Received Against Share Warrants – –
Total Shareholders Funds 30,141.33 22,467.39
1.72 2.46
NON-CURRENT LIABILITIES
Long Term Borrowings 5,235.67 10,445.70
Deferred Tax Liabilities [Net] 49.78 51.16
Other Long Term Liabilities 1,392.16 1,411.78
Long Term Provisions 1,936.92 1,588.75
Total Non-Current Liabilities 8,614.53 13,497.39
CURRENT LIABILITIES
Short Term Borrowings 8,535.37 8,426.74
Trade Payables 8,826.46 7,162.60
Other Current Liabilities 8,830.41 9,805.30
Short Term Provisions 1,133.92 408.89
Total Current Liabilities 27,326.16 25,803.53
Total Capital And Liabilities 66,083.74 61,770.77
ASSETS
NON-CURRENT ASSETS
Tangible Assets 11,990.26 12,129.14
Intangible Assets 2,353.79 2,413.18
Capital Work-In-Progress 645.03 575.65
Intangible Assets Under Development 588.92 509.30
Fixed Assets 15,578.00 15,627.27
Non-Current Investments 30,315.57 29,181.62
Deferred Tax Assets [Net] 1,558.65 1,477.26
Long Term Loans And Advances 101.89 114.40
Other Non-Current Assets 3,321.96 3,870.27
Total Non-Current Assets 50,876.07 50,270.82
CURRENT ASSETS
Current Investments 1,993.50 3,142.96
Inventories 3,470.38 3,027.90
Trade Receivables 2,765.16 2,307.72
Cash And Cash Equivalents 5,150.96 1,414.65
Short Term Loans and Advances 132.19 132.29
Other Current Assets 1,695.48 1,474.43
Total Current Assets 15,207.67 11,499.95
Total Assets 66,083.74 61,770.77
b) Monica has a debenture of Face value Rs. 100/- @ 8.5%. Calculate its current yield if:
i) Market Price is Rs. 98.90
ii) Market Price is Rs. 95.20
iii) Market Price is Rs. 105
What inference can you draw from this about the relation between Market price and yield?
