NMIMS Semester 3 June 2026 Finance Assignments

Corporate Finance

Q1 A mid-sized Indian manufacturing firm is experiencing declining profitability despite steady revenue growth. The CFO attributes this to escalating operational costs and inefficient asset utilization, compounded by a recent spike in short-term liabilities. The company is considering introducing automated inventory management and tighter receivables policies, but also faces pressure from suppliers demanding shorter payment cycles. The management team must ensure operational efficiency while maintaining liquidity, without compromising on the firm’s ongoing investment in quality improvements and expanding production capacity. Drawing on working capital management concepts, how should the firm apply cash flow forecasting, inventory control, and receivables management strategies to optimize liquidity and operational efficiency in this scenario? What specific actions would you recommend to balance short-term obligations and strategic growth initiatives?

Q2 (A) An Indian manufacturing firm is evaluating the purchase of a machine costing Rs.24,00,000 with the following expected operational data for 5 years: depreciation is calculated using the straight-line method over 5 years with zero salvage value. The machine will generate incremental cash inflows as per the table below. However, it requires an additional working capital investment of Rs.4,50,000 at the end of Year 1, recoverable fully at the end of Year 5. The firm’s cost of capital is 10% p.a. and corporate tax rate is 30%. Using the time value of money, determine whether the investment should be undertaken by calculating the Net Present Value (NPV) of all cash flows (including working capital impacts and tax shields on depreciation). Table: Year | Incremental Cash Inflows (before tax & depreciation) (Rs.): 1 | 7,00,000; 2 | 8,00,000; 3 | 9,80,000; 4 | 9,00,000; 5 | 8,50,000. Show all intermediate calculations in your answer.

Q2 (B) A firm has the following market values and component costs:

Component Market Value (Rs. lakh) Cost (Before Taxes)

Equity Share Capital Rs. 1050 15%

Preference Share Capital Rs. 150 10%

Long-term Secured Debt Rs. 750 9%

Short-term Unsecured Debt Rs. 100 11%

Corporate tax rate is 25%. The company is considering two alternative financing scenarios for a major expansion: Scenario A – increase secured debt by Rs. 250 lakh replacing an equal amount of equity; Scenario B – raise preference share capital by Rs. 100 lakh, reducing unsecured debt and equity equally. Assuming the respective costs remain unchanged and all weights are on the new market value proportions, calculate the WACC for each scenario and determine which scenario yields a lower WACC. Show all steps including tax adjustments and market value re-weighting.

Research Methodology

Q1 Rohit is tasked with comparing the effectiveness of various employee retention strategies as part of his research project. While conducting the literature review, he comes across contradictory studies – some find strong links between flexible work and retention, others see minimal impact. Rohit’s challenge is to objectively synthesise contrasting viewpoints and maintain balanced reporting while avoiding bias or publication bias. Apply the frameworks for critical literature review and ethical reporting to show how Rohit should handle contradictory findings. What steps can he take to ensure objectivity and present a comprehensive synthesis that upholds research integrity?

Q2 (A) A non-profit organization is conducting a field study to understand community participation dynamics during public health awareness events. The research director is torn between participant observation, which offers an insider’s view but risks researcher bias, and nonparticipant observation, which provides objectivity but may limit access to nuanced social contexts. Senior staff are also concerned about ethical integrity and the need for reliable data to influence policy recommendations. Each method presents unique advantages and dilemmas related to trust, data richness, and impartiality. Evaluate the appropriateness of participant versus nonparticipant observation in achieving the organization’s research goals. Critique both approaches by discussing how ethical, methodological, and practical concerns influence the reliability and depth of findings, and recommend the most suitable method with clear justification.

Q2 (B) A market research agency is hired to evaluate consumer perceptions of a new grocery store chain. The client suggests relying solely on brief paper-based surveys at the checkout counters, due to the ease of distribution and lack of digital infrastructure in the area. The agency, however, worries about manual data entry errors, low engagement, and incomplete responses. The client insists this is the most practical approach given budget constraints. Critique the client’s preference for exclusive use of paper-based questionnaires in this situation. What trade-offs must be considered between cost, data integrity, and research effectiveness? Justify an improved approach, considering the constraints, that maximizes both efficiency and data quality.

Business Valuation

Q1. Ms. Neha plans to invest Rs.8,00,000 in a fixed deposit for 7 years at an annual interest rate of 12%. Calculate the Effective Annual Rate (EAR) and the maturity value (future value) of the investment assuming interest is compounded once a year, 2 times a year, 4 times a year, and every month. Comment on the results.

Q2 (A). BlueWave Infrastructure Ltd. is being evaluated for acquisition by a private equity firm. During negotiations, both parties agree that the company’s assets and liabilities should not be considered at their historical book values shown in the balance sheet. Instead, independent professional valuers are appointed to reassess all major assets and liabilities at their fair market value as on the valuation date before determining the company’s overall worth. Identify the valuation method being used and explain how it is calculated. Also discuss its relevance in this situation.

Q2 (B). XYZ Retail Ltd, a chain of supermarkets operating across South India, reported the following financial data for the year ended March 2026: Net Profit after Tax: Rs.8,00,000, Shareholders’ Equity: Rs.40,00,000, Total Revenue: Rs.1,20,00,000, Total Assets: Rs.60,00,000. Based on the above information, calculate the Return on Equity (ROE) and Asset Turnover Ratio. Briefly interpret what these ratios indicate about the company’s profitability and efficiency.

Financial Derivatives

Q1. Meera is an investor interested in Solarwave Industries Ltd, currently trading at Rs.950 per share. She is considering two option contracts: A call option with a strike price of Rs.920 and a premium of Rs.60 per share. A put option with a strike price of Rs.980 and a premium of Rs.70 per share. Calculate the intrinsic value, and profit or loss for both the call and put options if the stock price rises to Rs.940 at expiry and if the stock price remains at Rs.950 at expiry. Also calculate the initial time value of both call and put options at the time of purchase. Further, comment on the minimum stock price at expiry at which Meera will start making a profit on the call option and the maximum stock price at expiry at which she will start making a profit on the put option.

Q2 (A). Arjun, an investor, buys 40 futures contracts of XYZ Motors Ltd. at a futures price of Rs.1,500 per share. Each contract represents 25 shares. The exchange follows daily mark-to-market (MTM) settlement. Over the next three days, the closing futures prices are Rs.1,480 on Day 1, Rs.1,520 on Day 2, and Rs.1,510 on Day 3. Calculate Arjun’s daily profit or loss based on the change in futures prices each day. Also determine the total net gain or loss after three days of MTM settlement.

Q2 (B). Global Auto Components Ltd., an Indian company operating in Europe, earns revenue in Euros but has long-term debt in Indian Rupees. Due to exchange rate fluctuations, its debt servicing costs have become uncertain. To manage this currency risk, the company enters into a five-year, privately negotiated agreement with an international financial institution to better match its debt obligations with its foreign currency earnings. Identify the type of financial contract entered into by Global Auto Components Ltd. and explain how such contracts play a crucial role in cross-border transactions.

Strategic Cost Management

Q1. A diversified electronics manufacturer produces both high-volume smartphones and low-volume specialty devices. Using traditional costing, the company found that many overhead costs were being assigned uniformly, resulting in misleading information about the profitability of each product line. After complaints from the product management team that specialty devices appeared unprofitable, the finance director wants to implement Activity-Based Costing (ABC) to analyze where overhead costs are truly incurred. By identifying cost pools and drivers, the company hopes to make informed decisions regarding pricing and product mix to enhance competitiveness. Applying the ABC framework, how should the company restructure its cost allocation process to obtain a more accurate understanding of product-level profitability? Discuss the steps involved in implementing ABC and recommend actions for product mix and pricing decisions based on these new cost insights.

Q2 (A). A leading infrastructure firm is considering a major investment in new plant machinery and wants to ensure a thorough understanding of all costs over the asset’s lifecycle. The management team is concerned about not only the initial and operating expenses but also the long-term risk, maintenance, residual, financing, inflationary, and external environmental costs. With the increasing emphasis on sustainable practices and financial prudence, the CEO asks the finance team to develop a detailed Life Cycle Costing (LCC) analysis. Critically evaluate the importance of identifying and integrating each major cost component in the Life Cycle Costing (LCC) analysis for the firm’s investment decision. Justify how a comprehensive approach to LCC can help the company balance profitability, risk, and sustainability across the asset’s lifespan.

Q2 (B). A company is considering two alternative production processes for manufacturing its product. Process X incurs annual fixed costs of Rs.8,00,000 and has a variable cost per unit of Rs.180, while Process Y requires an investment that increases the annual fixed costs to Rs.12,00,000 but lowers the variable cost per unit to Rs.140. The selling price per unit remains constant at Rs.280 for both processes. If market analysis predicts that actual demand may fluctuate between 15,000 and 30,000 units per year, calculate the break-even quantity for each process, then determine over what exact range of sales volumes Process Y becomes more profitable than Process X (ignore taxes and assume all units produced are sold). Clearly justify your reasoning numerically at all key decision points.

Capital Market and Portfolio Management

Q1. An individual investor, Mr. Arjun, recently opened a trading account and wants to invest in equity shares listed on the stock exchange. While placing his first order, he notices several trading terms such as market order, limit order, bid price, ask price, and order matching mechanism on the trading platform. Since he is new to the stock market, he wants to understand how the stock market trading mechanism works before making investment decisions. Question: Explain the structure of the capital market and the trading mechanisms used in modern stock exchanges. In your answer, discuss the role of stock exchanges, brokers, order types, and electronic order matching systems in facilitating efficient trading.

Q2 (A). A senior manager at an investment firm receives confidential information that a listed company is about to announce a major merger that will significantly increase its share price. Before the news becomes public, the manager considers purchasing shares of the company for personal gain. Question: Identify the ethical and regulatory issues involved in this situation. Explain how securities regulators such as SEBI ensure fair and transparent functioning of capital markets.

Q2 (B). An investor wants to evaluate the performance of a mutual fund using different risk-adjusted performance measures. The following information is available: Return of the Portfolio (Rp): 14%, Risk-Free Rate (Rf): 6%, Market Return (Rm): 12%, Beta of Portfolio (p): 1.2, Standard Deviation of Portfolio (p): 10%. Required: a) Calculate the Sharpe Ratio of the portfolio. b) Calculate the expected return using CAPM. c) Calculate Jensen’s Alpha and interpret whether the portfolio has outperformed the market.