MCO-07 SOLVED ASSIGNMENT 2026-27 ENGLISH MEDIUM

TUTOR MARKED ASSIGNMENT

Course Code: MCO-07 | Course Title: Financial Management | Assignment Code: MCO-07/TMA/2026-27 | Coverage: All Blocks | Maximum Marks: 100

Attempt all the questions.

Why do we use cash flow analysis instead of profit analysis in capital budgeting decisions? What are the general principles of cash flow estimation? ABC Ltd. is considering the purchase of a machine costing %1,50,000. The project requires an additional investment in working capital of %20,000, which is recoverable at the end of the project's life. The expected cash flows are as follows:

Year 1: 325,000

Year 2: 35,000

Year 3: 245,000

Year 4: 355,000

Year 5: 360,000

The machine is expected to have a salvage value of 215,000 at the end of Year 5:

Required:

1. Calculate the Payback Period.

2. Comment on the project's liquidity position based on the payback criterion. Dividend policy plays a significant role in determining the market value of equity shares. Discuss the concept of dividend-based share valuation and explain the major models used for valuing equity shares.

An equity analyst is evaluating the shares of ABC Ltd. The company has recently paid a dividend of X6 per share. Dividends are expected to grow at a constant rate of 5% per annum in the future. The required rate of return expected by investors is 13%.

Required: 1. Calculate the intrinsic value of the equity share using Gordon's Growth Model. 2. If the current market price of the share is ¥78, determine whether the share is overvalued or undervalued. What is lease financing? Discuss different types of leases and outline their advantages and disadvantages.

(10+10)

(10+10)

(10+10) b) Given below is the data of two companies:

Particula | A Ltd. | B Ltd. rs (€3] ® Gl 4,00,00 | 3,50,00 0 0 Variable | 40% of | 40% of Cost Sales Sales Bixed 25,000 | 30,000 Cost ¢ ' Interest 1’40’08 80,000

Calculate the operating leverage and financial leverage of both companies. 4) a) What are the different types of capital budgeting projects? Explain the (10+10) distinguishing features of each type of project. b) A firm with a cost of capital of 10% is considering two mutually exclusive projects, X and Y. The details are as follows:

Projec | Projec

Year | o J(z) tY J(z) 0| -70,000 | -70,000

1] 10,000 | 50,000

2| 20,000 | 40,000

3| 30,000 | 20,000

4 45,000 | 10,000

5| 60,000 | 10,000

Find the net present value (NPV) at a 10% discount rate for both projects. (The present value of %1 at 10% from year 1 to year 5 is 0.909, 0.826, 0.751, 0.683, and 0.621, respectively.) 5) Write short notes on the following topics: (5×4)

a) Capital Rationing

b) Techniques of inventory management ¢) Receivables Management

d) Capital Structure