Corporate Finance, NMIMS Dec 2025 Assignment

Description

Corporate Finance

Internal Assignment Applicable for Dec 2025 Examination

 

Q1 An Indian FMCG company is experiencing rapid sales growth but is facing frequent cash flow shortages, leading to delayed supplier payments and missed opportunities for bulk inventory discounts. The CEO is concerned that poor liquidity management could undermine the company’s reputation and growth prospects. The finance manager must analyze the situation and implement effective working capital management strategies to optimize cash flow and maintain smooth operations. How should the finance manager apply working capital management principles to resolve the company’s liquidity challenges, ensuring operational efficiency and the ability to capitalize on new business opportunities?

(10 Marks)

 

Q2 (A) A perpetuity pays Rs.25,000 at the end of each year. However, due to inflation, the payment increases by 4% annually. The appropriate discount rate is 10%. After 15 years, the perpetuity is expected to be replaced by a new instrument that pays a fixed Rs.60,000 per year in perpetuity, discounted at 8%. Calculate the present value of this entire cash flow stream as of today, considering the change in payment structure and discount rates after year 15.

(5 Marks)

 

Q2 (B) A company issues Rs.50,00,000 in 8% redeemable preference shares at a 5% premium, redeemable at par after 6 years. Annual dividend is paid on face value. The issue expenses are 2% of the face value. Calculate the cost of preference shares, considering the effect of issue expenses and premium, and interpret how this cost would impact the company’s overall cost of capital if preference shares constitute 20% of the capital structure. Show all intermediate steps.