NMIMS Semester 3 December 2024 Finance Assignments
Capital market and portfolio management
Q1. Suppose you are advising a friend who is unsure about investing. What key factors would you explain to them to help them make a more informed decision?
Q2. Suppose you had to create a visual representation of stock return distributions. What features would you include to effectively illustrate the characteristics of both types of stock return distribution and their impact on understanding stock performance?
Q3a. ABC Ltd earned a net income= ₹4,00,000/- at the end of the year 31st March 2020. Shareholder’s equity on 31st March 2019 = ₹16,00,000/- & on 31st March 2020 = ₹15,00,000/- Calculate ROE for the year ended 31st March 2020.
b. Imagine you are an investment adviser and your client decides to invest Rs.10,000/- in multiple investment avenues. He decides to invest 40% in mutual fund and rest in shares. Expected return from mutual fund is 8% & from shares is 12%. Calculate total expected return for your client. .
Strategic cost management
1. A leading business school is planning to launch a new post-graduate course in Data Science and Analytics. The course is designed to cater to the growing demand for skilled professionals in this field. The school’s administration is tasked with determining the optimal pricing strategy for the course. The school has conducted market research to understand the demand for the course and the pricing sensitivity of potential students. The research indicates that there is a strong demand for the course, and students are willing to pay a premium for a high-quality education from a reputable institution. However, students are also price-conscious, and the school needs to balance the demand for the course with the need to generate revenue. The school’s administration is considering two pricing methods: cost-plus pricing and break-even pricing. Explain the advantages and disadvantages of cost-plus pricing and break-even pricing in the context of this situation.
2. The management of a retail company, “The Retail Haven,” carries a notion that it has been experiencing declining profits despite a steady increase in sales. The company’s management is concerned about the company’s financial health and has tasked you with conducting a ratio analysis to identify potential areas of concern
Particulars Year 1 Year 2
Sale ₹1,00,000 ₹1,20,000
Cost of Goods Sold ₹70,000 ₹80,000
Gross Profit ₹30,000 ₹40,000
Operating Expenses ₹20,000 ₹25,000
Operating Income ₹10,000 ₹15,000
Interest Expense ₹2,000 ₹2,500
Net Income ₹8,000 ₹12,500
Total Assets ₹50,000 ₹60,000
Total Liabilities ₹20,000 ₹25,000
Shareholders’ Equity ₹30,000 ₹35,000
a) You’re required to calculate the following financial ratios for both years:
Gross Profit Margin Ratio
Net Profit Margin Ratio
Return on Assets Ratio (ignore taking average for balance sheet number)
Return on Equity Ratio (ignore taking average for balance sheet number)
b) Analyze the trends in these ratios and comment if the management is correct.
3. August Ltd. is a medium-sized enterprise operating in the consumer electronics industry. The company has been in business for several years and has a reputation for producing high-quality products. However, the company has been facing increasing competition from both domestic and international rivals. To maintain its market position and drive growth, the company is considering launching a new product.
The new product is a cutting-edge gadget that is expected to appeal to a wide range of consumers. The company believes that the product has the potential to become a major success and significantly boost its revenue and profitability. However, before launching the product, the company needs to conduct a thorough analysis to assess its financial viability and potential risks. It is considering launching a new product. The estimated fixed costs for the product are ₹1,000,000 per year, and the variable cost per unit is ₹50. The expected selling price per unit is ₹100.
a) Calculate the break-even point in units and in rupees for the new product. If the company expects to sell 20,000 units of the product per year, what will be its profit or loss?
b) Calculate the margin of safety in units and in rupees for the new product, assuming expected sales of 20,000 units per year. What does the margin of safety indicate about the product’s profitability?
Marketing of financial services
Q1. A Finance Head (CFO) of Finance Company is deeply analyzing the criticalities of outside Market environment from Customer point of view. While analyzing Consumer Choices for Financial Services, how CFO & his team can demarcate the ‘Non- Controllable’ Consumer Choices in rendering of Financial Services? Kindly elaborate.
Q2. A 60-year-old senior citizen, recently retired from a GM position at an MNC, has received a substantial retirement corpus. Seeking to ensure a comfortable and secure post- retirement life, he approaches an investment planning firm for guidance. What guidelines should the Firm’s Investment Advisor follow in developing a retirement plan for this individual?
Q3. a) In case if a NBFC is being set up at Town place and planning to render core financial services to young & mid age Crowd (50% population) what they can enlist as most Distinct Characteristics of Financial Services? Elaborate any 4 to 5 Distinct Financial Services.
Q3. b) How a Bank Manager foresee their Customers Important Choices while availing different types of Banking Services? Explain Paradigm as Internal Factors.
Taxation- Direct and Indirect
Q.1. You are required to compute the taxable income for Mr. Sharan for the Assessment
Year 2023-24 from the information provided below:
Basic salary – Rs. 20,000 per month
Bonus – Rs. 30,000
Cash gift – Rs. 40,000
Arrears of salary – Rs. 10,000
Dearness allowance – Rs. 8,000 per month
Insurance premium paid by Employer – Rs. 20,000 per annum
Medical expenses paid by employer – Rs. 18,000
Education allowance for his two children – Rs. 600 per month
City compensatory allowance – Rs. 2,000 per month
He is given lunch allowance – Rs. 100 per day for 250 days during the previous year.
He contributes 15% of his salary to a recognized provident fund and his employer also contributes the same.
He is provided with a mobile phone, the bill of which is paid by the company – Rs. 6,000. [10 Marks]
Q.2. Mr. Fenil is a 52 year old IT professional. He provides you with the following information related to the premium payments made by him for the year ending 31st March 2024 towards the mediclaim policy.
From the above information, you are required to help Mr. Fenil in computing the correct deduction value under section 80D considering the fact that he has made all the premium payments by cheque and only one payment towards preventive health check-up is made in cash as mentioned in the list below.
Payment made for dependent father’s medical expenditure (Age: 81 years): Rs.50,000
Premium paid for dependent mother (Age: 72 years): Rs. 7,000
Payment made for preventive health check-up of self and spouse (Cash payment): Rs.6,000
Premium paid for self (Age: 52 years): Rs. 10,000
Premium paid for spouse (Age: 49 years): Rs. 9,000
Premium paid for dependent mother in law (Age: 65 years): Rs.5,000
Also comment whether the computed value of deduction under section 80D would change if the above premium payments were made in cash. [10 Marks]
Q.3 (a) “Direct Taxes. are taxes that are to be paid by an assessee or the tax payer directly to the government, whereas, Indirect Taxes are the taxes that are levied on various business activities including manufacturing, trading, imports, exports, etc.”
In the context of the above, highlight 5 points of differences between the Direct and Indirect Taxes.
Q.3 (b) Sam is a British citizen, comes to India for the first time during PY 2018-19. He stays in India for 55 days during 2018-19. In the following financial years as well, he stays in India for the following duration:
2019-20: 60 days
2020-21: 90 days
2021-22: 150 days
2022-23: 70 days
From the above information, you are required to determine Sam’s residential status for the AY 2023-24.
Cost and management accounting
Q1. ABC Ltd., has given the following budgeted and actual sales figures:
Budgeted Actual
Quantity Sale Price Value Quantity Sales Price Value
Rs. Rs. Rs. Rs.
Product A 500 60 30,000 600 65 39,000
Product B 700 40 28,000 650 38 24,700
The cost per unit of product A and B was Rs. 55 and Rs. 32 respectively. Compute variances to explain difference between budgeted and actual profit.
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) Analyze the differences between standard costing and budgetary control. How do these tools help in managing operational performance within an organization?
Q3 (b) Evaluate the importance of understanding cost behaviours in decision-making. How can misinterpretation of cost behaviours impact a company’s financial decisions?
Corporate Finance
1. ABC Limited has equity with a market value of Rs. 20 Lacs and debt with a market value of Rs. 15 Lacs. The Balance sheet of the company showed the Capital Structure as under:
Capital Structure BV
Share Capital 10,00,000
Debentures 5,00,000
Bank Loan 8,00,000
Cost of debt is 9%. The risk-free rate is 8% and the market rate is 18%. The beta of the company is 0.15. The firm pays no taxes.
What is ABC Limited’s debt to equity ratio?
What is ABC Limited’s weighted average cost of capital based on Market value as well as Book value? Answer up to 2 decimal places.
ABC Limited is in growing stage and soon the company will be under 35% tax bracket, in such a scenario the company is thinking to raise the debt up to 70%. Under these conditions, what will be the new DE ratio and the new cost of capital of the company?
What is the impact of change in DE ratio as above on the Company and why?
2. XYZ Ltd. is evaluating a new project proposal with a cash outlay of Rs. 80,000. Cash inflows are 25,000 , 28,200 , 32,000, 12,000, 15,000. The project is being funded entirely by a bank loan raised at an interest rate of 9% p.a. Currently there is no tax applicability to the firm. Evaluate the project using NPV and IRR methodologies.
The Board of Directors want a minimum of 12% as its rate of return on the project. Will the company take up the project? How will the situation be different if the company is subject to a tax of 25%?
3a. Maya bought a house of value Rs. 65,00,000. She got a loan of 80% of the value of the house from the bank. The bank offered her a loan for 10 years @ 8.5% interest payable annually. Calculate the equated annual payment to be made by her and draw up her annual payment schedule.
b) With the following data, calculate DSO and Debtor Turnover Ratio (in no. of times) for FY 2021-22. What is better for the company, a higher ratio or lower ratio? Give brief reasons? (In one line)
FY 2021-22 FY 2020-21
Sales 1,500,000 1,650,000
Receivables 30,000 35,000
60% of the sales are on credit basis
