Question 3 (a) Capital project data: Annual interim cash inflows for first two years: ₹1,00,000 Annual interim cash inflows for next two years: ₹80,000 Useful life: 4 years; Salvage value at end: ₹50,000; IRR = 12%; Cost of capital = 10% Calculate: (i) Initial investment, (ii) NPV, (iii) Profitability Index, (iv) Discounted Payback Period, (v) MIRR (1+1+1+1+2 = 6 Marks) (b) Z Ltd. is an unlevered company. Wants to repurchase equity shares of ₹300 lakhs by issuing 12% debentures of same amount. Current MV of Z Ltd. = ₹1,400 lakhs, cost of capital = 18%, EBIT maintained, dividend payout = 100%, tax = 30%. As per MM approach, impact on: (i) Market Value of Z Ltd., (ii) Overall cost of capital, (iii) Cost of equity. (4 Marks)
Options
A
B
C
D
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