INSTITUTE OF MANAGEMENT TECHNOLOGY- GHAZIABAD

Post-Graduate Diploma in Management – Full Time

(Batch 2021 – 23)
End Term Exam: II (Take Home Exam)
Subject: Business & Corporate Finance (B&CF)
Faculty Name: Profs Samie A Sayed / Ritesh Pandey /   Atul Kedia
Puja Aggarwal Gulati / Neha Arora 
Exam Date: 30.12.2021 Time: 2 Hours 30 Minutes Max. Marks: 40
Instructions:

1. All Questions are compulsory

2. Each Question carries 10 marks
3. Solutions to Q1- Q3 are to be submitted in word file. Solution to Q 4 is to be
submitted in excel file.
4. Take your own logical assumption wherever required and mention the assumption
very clearly.
5. All the papers will go through a plagiarism check.

Q 1 After completing your post-graduation, you have a plan to start your own venture of
manufacturing customized gift packaging wooden boxes. The initial market research suggests
that the project will require an initial capital investment of Rs. 500,000. You are required to
give a forecasted plan of cash flows for next five years (assuming the venture life as five
years) and evaluate the project using the method which suits best in your opinion. Following
additional information is given:
a) Assume the revenue for first years as per your opinion
b) Assume the growth rate in revenues to be 5%
c) Assume the operating cost for all the five years as per your understanding
d) Calculate depreciation on straight line basis.
e) Tax rate may be taken as 30%
f) Give your plan of raising capital and accordingly calculate weighted average cost of
capital.
Q 2 Coupon bonds are more complex debt instruments than simple zero-coupon bonds since
their properties are affected by time-to-maturity, coupon rates and coupon frequency in a
more complicated way than are the properties of the latter. Describe the process of
calculating the value of a coupon bond with the help of a numerical example, clearly stating
the face value, coupon rate, term, issue rate, redemption rate etc.
Further, without doing actual numerical calculations, explain how the yield to maturity of a
coupon bond is calculated.

Q 3 The debate surrounding the concept of an optimal capital structure is a central

controversy in finance. Nevertheless, for a given mix of debt, common equity and preferred
equity financing options, we can use the EBIT-EPS relationship to draw a meaningful
conclusion about which option should be preferred. Explain, with an example each in each
case, how EBIT-EPS analysis can be useful in deciding between
a. preferred equity and debt financing, and
b. common equity and debt financing.
(Assume the amount of total capital required, proportion of capital financed from different
sources, coupon rates, dividend rates, face values and tax rate etc)

Q 4 Select any company listed at BSE and calculate the beta using daily returns for last five
years. Use BSE SENSEX for market returns. Clearly mention the sources/links from where
the data is extracted. The company must be different from the industry and company that you
may have selected for your project work in BCF course.