NMIMS ASSIGNMENT 3RD SEM JUNE 2023 FINANCIAL MANAGEMENT

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Project Report & Thesis

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Capital Market and Portfolio Management

1. Suppose you have Rs. 100000/- & interested to invest in financial assets. Which factors you should keep in mind while investing in financial assets?

2. Suppose there are two stocks in the market, namely stock A & stock B. whichever stock will give maximum return investor will invest in that stock. For this purpose, investor needs to measure the return from the asset. What is the different measuring return?

3. a. Mr. A wants to buy some stocks, but he is confused because he doesn’t know how to measure the risk. He wants your suggestion for risk measurement, please suggest.

3. b. If you are planning to invest in mutual fund so you must know the risk involved in it. Highlight three to four risk that everyone needs to know.

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Corporate Finance

1. Compute the NPV and IRR for project whose initial cost is 30,000 and cash inflows are 14000, 8200, 12000, 15000, 22000. Discount Rate is 10%. Cost of Capital if borrowed is 15%.

Show value of NPV at IRR as discount factor. Based on the above calculations, should the project be considered?

2. Calculate the Cash Cycle using the following information. (Assume 360 days in a year).

30% of sales are on credit and 80% of purchases are on credit.

3. a. In the following balance sheet calculate the Current Ratio and the Acid Test Ratio.

BALANCE SHEET AS AT 31ST MARCH 216

I.

II. ASSETS

3. b. Sanghvi & Sons P. Ltd. is a private limited company with almost 80% shareholding with the Sanghvi family. It has now a requirement of Rs. 400 crores for a project to be undertaken. Currently it has a debt-equity ratio of about 1.5:1. The management of the company feels that

a ratio of up to 2:1 is acceptable. Discuss whether the company should fund its requirements by Debt or Equity and various considerations for the same.

Question 1:

Office Products Ltd provides the Sales and the cost data for 60,000 units as given below.

At full capacity the plant can produce 100,000 units

Sales Rs. 12,00,000

Costs:

Variable:

Material Rs. 2,40,000

Labour Rs. 3,60,000

Overheads Rs. 1,80,000

Fixed Cost Rs. 3,20,000

Total Rs. 11,00,000

PROFIT Rs. 1,00,000

Prepare the Income statement under marginal costing for production at 80,000 units.

Question 2:

Nikson Ltd provides the following information relating to the activities of a production department for the month of January 2023

Material Used Rs. 72,000

Direct wages Rs. 60,000

Machine hours 20,000 hours

Labour hours 24,000 hours

Overhead chargeable to the department Rs. 48,000

The relevant data for carrying out one order in the month of February is given below:

Material used Rs. 4,000

Direct Wages Rs. 3,300

Machine hours 1,200 hours

Labour hours 1,650 hours

Using the rates of the month of January, prepare a comprehensive statement of cost for this order by using the following absorption of overheads

1) Direct labour hours

2) Percentage of direct wages

3) Machine hour rate

Question 3a

Samsung Ltd. are the manufacturers of Television. The following are the details of a Product during the year 2022.

Ordering Cost Rs.50 per order

Inventory carrying cost 10% per annum

Cost of Product A is Rs. 500 per unit

Annual consumption of Product A is 5000 units.

Compute the Economic order quantity. What if the inventory maintained by the company is 200 units?

Question 3 (b)

New Corp Ltd. incurs fixed costs of Rs. 5,00,000 per annum. The company produces a single product with annual sales budgeted to be 70,000 units at a sales price of Rs.300 per unit. Variable costs are Rs.280 per unit.

You are required to determine the breakeven point and explain the significance of breakeven point.

Q1) Develop a Public Relations campaign for IRDA to help create awareness about Life Insurance sector and to educate policyholders about their rights.

Q2) Amit Chopra, (age 31 years) works with a pharmaceutical company and has not yet started to invest for his retirement. Amit is married to Neelam (age 28 years) and they have one son aged 2 years. Amit wants you to prepare a plan for him to retire by age 60. (You can make any assumptions to further build up your case.)

Q3) You are a Financial Planner. Your client Prashant Pandey aged 35 years and works with an IT company earning Rs 15 lakhs per year. His wife Priti, aged 32 years, is a homemaker. They have one daughter aged 5 years. The couple requires your help to make some financial decisions. (You can make any assumptions to further build up your case.)

a) Prashant wants to buy a Pure Risk Life Insurance cover of Rs 1.5 crore. He is confused whether he should buy a ULIP or a Term Plan. Recommend the product best suited for his requirement.

b) Prashant and Priti want your help to invest for their daughter’s higher education which they estimate would be required after 15 years.

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Strategic Cost Management

1) The following information is available for a watch showroom. Calculate the following:

a) Contribution

b) PV Ratio

c) BE Ratio (in no. of units and value)

d) MOS at actual sales of Rs. 6,00,000/-

e) Number of watches to be sold to get a profit of Rs. 20,000/-

Sale Price Per unit (Rs.) 9800

Variable Costs Per unit (Rs.) 4905

Commission (variable) Per unit (Rs.) 500

Rent Per month (Rs.) 100000

Salaries Per Month (Rs.) 120000

2) A Factory produces 3 types of shoes. While producing, for switching over from one type to another, there is a shift-over process involved. Costs incurred are as follows:

Shift-over costs Rs. 50,000

Factory Overheads Rs. 1,00,000/-

Packing costs Rs. 20,000/-

Engineering Costs Rs. 30,000/-

Supervisor Costs Rs. 10,000/-

Quantity produced A- 1000, B – 2000, C- 4000

Allocate the costs to the 3 shoes (A, B and C) using Traditional Costing method and Activity Based Costing. Some other information of the 3 products is as under:

Compare the results and discuss.

3)

a) Prepare a Cash Budget with following information.

b) A firm faces a decision about replacement of a machine. Following is the information available:

1. Depreciation of existing machine is Rs. 25000/- p.a.

2. A new machine is available at Rs. 45000/- that is much more efficient in production.

3. Increase in power cost due to the new machine is Rs. 5000/- p.a.

4. Rent of the factory building is Rs. 60000/- p.a.

5. Scrap Value of the old machine is Rs. 4000/-

Identify which of the above information is relevant and which is not relevant for taking the decision whether to continue with the existing machine or use new one.

Taxation - Direct and Indirect

Q1. Mr. X sold a residential house property in June 2022 for a sale consideration of ₹75,00,000. The property was purchased by him in May 2010 for ₹35,00,000. He incurred ₹1,50,000 on stamp duty, registration and legal expenses related to the sale. Compute the long-term capital gains, tax liability and the amount of investment to be made in specified bonds to claim exemption under Section 54EC of the Income Tax Act, 1961.

Q2. "How do Double Taxation Avoidance Agreements (DTAAs) work in international taxation and what are the key provisions of such agreements? Critically evaluate the effectiveness of DTAAs in eliminating double taxation and promoting cross-border investments."

Q3. A) Mr. X owns a house property in Mumbai. The details of the property are as follows:

The property is let out for residential purposes.

The annual rent received from the property is ₹3,00,000.

Municipal taxes paid during the year amounted to ₹20,000.

The interest on loan taken for the property was ₹1,80,000.

Compute the income from house property for Mr. X for the Assessment Year 2022-23.

Q3. B) Mr. A, a resident individual, gifted a residential house property to his wife, Mrs. B, who is also a resident individual. The property generates an annual rent of ₹6,00,000. Mr. A has no other income, while Mrs. B has an income from her profession of ₹5,00,000. Compute the total taxable income of Mr. A and Mrs. B for the Assessment Year 2022-23, considering the clubbing provisions of income.

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