SAMPLEASSIGNMENT JAN JUNE 2016

Course Code MS - 42 Course Title Capital Investment and Financing Decisions Assignment Code MS-42/TMA/SEM - I/2016 Assignment Coverage All Blocks

MBA Help Material Provided by Unique Tech Publication

Unauthorized copying, selling and redistribution of the content is prohibited.

This Material is provided for your reference only.

The utility of this content will be lost by sharing. Please do not share this material with others.

To know price of this assignment & For more inquiry visit:

http://ignousolvedassignmentsmba.blogspot.in/

Dharmendra Kumar Singh

Mail us- ignousolvedassignmentsmba@gmail.com

School of Management Studies INDIRA GANDHI NATIONAL OPEN UNIVERSITY

MAIDAN GARHI, NEW DELHI – 110 068

This is sample copy, Only for viewing. You cannot copy or take print of this copy.

1. What is meant by cost of capital? How is cost of long term debt and preference share capital calculated? How is average weighted cost of capital measured? Explain.

Cost of capital

The cost of capital is a term ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------has to meet.

The first long term source of finance that we consider is the cost of long term debt, which is usually the cheapest of the long-

term sources of finance. The majority of long term debt of large corporations is the result of issuing bonds.

The following are ------------------------------- cost of capital:

Cost of ------------------------------------------------------------------; it is not a cost as such. A firm’s cost of capital ------------------------------------------------------------------- in at least maintaining (If not

increasing) the value of its equity shares. Cost of Capital as a rate ------------------------------------------------------------------ components of capital. It is usually -------------------------------------------------------- funds. In operational terms, ------------------------------------------------------------------------ to discount the future cash

inflows so as to determine their present value and compare it with investment outlay. Cost of ---------------------------- components:

a) Return at --------------------------------. b) ------------------------------------------------------ Risk. c) Premium -----------------------------------------------.

Thus,

a) Cost of ------------------------------------------------------------------------------------no risk; and

b) Cost of --------------------------------------------------------------------------------- Risk > Cost of Capital with no risk.

Calculation of cost of long term debt

Flotation cost Companies that issue bonds ------------------------------------------------------------------------------------------------------------------------------------------------------- preferred stock and bonds. This cost reduces the company’s net proceeds from issuing security.

Flotation cost consists of -------------------------------------------------------------------------------------------------- for their services and administrative costs are costs other than the underwriting costs of issuing bonds.

Finding the before------------------------------------------------- debt (rd) To find the after-tax cost of long ------------------------------------------------------------------------------------------------------------------------------------------- corporations are the result of issuing bonds. By using a financial calculator, we can find the before tax cost of a bond (cost of long-term debt).

THE ---------------------------------------------:

FV =

(------------------------------------------------------------- the face value, and is usually $1,000)

PV =

The --------------------------------------------------------------------------------- flotation cost)

PMT =

payment on the bond (for example, ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ periods.

For example, if payment is made semi--------------------------------------- to multiply number of periods by 2.

N =

------------------------------------

Calculate I =

the cost of the ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------tax cost of long-term debt.

Note that if the net proceeds from the sale of the bond is the same as the face value of the bond than the before-tax cost of long-

term debt will be equal to the coupon interest rate. For example, ----------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------- debt will equal 8%.

Finding the after-tax cost of long-term debt After we found the --------------------------------------------------------------- debt. To do so all we need to do is to multiply the before-tax cost of long-term debt by (1-T), where T stands for the tax rate.

THEREFORE:

-----------------------------------------

EXAMPLE:

If the before-tax cost of long term debt is 10% and tax rate is 28% then the calculation will be as follows:

----------------------------------------

Ri =-------------------------------

Ri = 7.2%

------------------------------------------------------- CAPITAL’S FORMULA

Cost of pref. ----------------------------- given below. Cost of Pref. Share --------------------------------------- dividend/ Preference share capital Kp = ---------------------

If we have ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ and cost of floatation or add premium in par value of pref. share capital. In adjustment case cost ---------------------------------------------------------------------------- it with following way:- Kp -------------------------------------- D = ------------------------------------------------, NP = Net proceed = Par value of Pref. share capital – ------------------------------------

Or NP = Par value of pref. ------------------------ + Premium There will no adjustment of tax ---------------------------------------------------------------------------------------------------------------------------------------------------of tax for comparing it with cost of debt or cost of equity share capital . Some, time we issue ---------------------------------------- is payable after some time. At the time of --------------------------------------------------------------------------------------- with following formula

------------------------------- pref. share capital =

D = ----------------------------------------------------

MV = ----------------------------. shares

NP = Net --------------------------------------

N= number of years

This formula is ------------------------------------------------------------------------------------ to add, the benefit which we have given to

pref. share capital at the time of maturity.

Suppose, we have to ---------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

---------dividend is 10%.

Cost of pref. share capital = D + (----------------------------------------------- = 100,000 + ( ---------------------------- )/ ½ ( 10,50,000 + 9,80,000) x 100 = 100,000 + 7,000/ ------------------------------------ = 10.54% If we ----------------------------------- with following way Kp = D/P X 100 = -------------------------------------------------------- is more than Kp. So, Kpr will give you correct result.

WEIGHTED COST OF CAPITAL

Weighted cost of ------------------------------------------------------------------------------------------------------------------------------------------------------------------- by the firm, properly weighted by the proportion they hold in the capital structure of the firm.

Computation of the ----------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Define and explain the term, 'Capital Structure'. Critically examine the Net Income approach and Net Operating Income approach to capital structure theories.

Capital structure

A mix of ------------------------------------------------------------------------------------------------------------------- The capital structure is

how a firm finances its overall operations and growth by using different sources of funds.

Debt comes in the form of bond ------------------------------------------------------------------------------------------------------------------------------------------------ as working capital requirements is also considered to be part of the capital structure.

A company's ------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------- ratio, which provides insight into how risky a company

is. Usually a company more heavily financed by debt poses greater risk, as this firm is relatively highly levered.

Factors Determining Capital Structure

1. Trading on Equity- The ---------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

--------- which means a company should go for a judicious blend of preference shares, equity shares as well as

debentures. Trading on equity becomes more important when expectations of shareholders are high.

2. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to retain their voting rights in their hands, the capital structure consists of debenture holders and loans rather than equity shares.

3. Flexibility ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------loans.

4. Choice of investors- The --------------------------------------------------------------- for securities. Therefore, a capital

structure should give enough choice to all kind of investors to invest. Bold and adventurous investors generally go for

equity shares and loans and debentures are generally raised keeping into mind conscious investors.

5. Capital market condition- In the ------------------------------------------------------------------------------------------------------

--------------------------------------------- capital structure generally consists of debentures and loans. While in period of

boons and inflation, the company’s capital should consist of share capital generally equity shares.

6. Period of financing- When ------------------------------------------------------------------- from banks and other institutions;

while for long period it goes for issue of shares and debentures.

7. Cost of financing- In a -------------------------------------------------------------------------------------------------------------------

------------------------------------------ to be a cheaper source of finance as compared to equity shares where equity

shareholders demand an extra share in profits.

8. Stability of sales- An established ----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------. So, equity capital proves to be safe in such cases.

9. Sizes of a company- Small size --------------------------------------------------------------------------------------------------------

--------------------------------------------------- having goodwill, stability and an established profit can easily go for

issuance of shares and debentures as well as loans and borrowings from financial institutions. The bigger the size, the

wider is total capitalization.

i) Net Income (NI)

1. A company's total --------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------to calculate earnings per share.

Often referred to as "the bottom line" since net income is listed at the bottom of the income statement. In the U.K., net income is

known as "profit attributable to shareholders".

2. An individual’s income after deductions, credits and taxes are factored into gross income. Deductions and credits are

subtracted from gross income to arrive at taxable income, which is used to calculate income tax. Net income is income tax

subtracted from taxable income.

3. Net income is --------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------that were used to arrive at this value.

4. For example, -------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------- another $5,000 of income tax is subtracted; the remaining $25,000 will be your net income.

The critical ------------------- theory are-

(i) There are -------------------------------------------------------

(ii) The -------------------------------------------------------------- perception of the investors.

(iii) The ----------------------------------------------------- of equity.

The theory works like this.

“As the proposition --------------------------------------------------------------------------------------------------- of capital decreases and

approaches the cost of debt.

This theory recommends -------------------------------------- structure.

The following -------------------------------------------approach:

(i) It tries to explain --------------------------------------ll cost of capital.

(ii) It explains and --------------------------------- leverage.

(iii) ------------------------------------------------------.

ii) Net Operating ---------------------------

This approach, ----------------------------------------------------------------------- overall cost of capital and value of the firm are

independent of capital structure decision and change in degree of financial leverage does not bring about and change in value of

the firm and cost of capital.

Net Operating Income, or --------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------and interest) or other non-

operating expenses (depreciation, etc). Net Operating Income is a metric that you can use to determine the profitability of an

investment and it can be used to calculate the Cap Rate of an investment.

If Operating Expenses are -------------------------------- a negative Net Operating Income, or a Net Operating Loss.

The approach is ------------------------------------- assumptions:

(i) The overall cost of ---------------------------- of debt equity mix or leverage.

(ii) There are no corporate taxes.

(iii) The market ------------------------------------- whole.

(iv) The advantage of -------------------------- in the equity capitalization rate.

Thus, according to Net ----------------------------- capital structure will be optimum.

The following are ------------------------ approach:

(i) it emphasizes on the ---------------------------------------------------- value of the firm,

(ii) According to this theory, ------------------------------------ be based on NOI approach

This theory seems to ------------------------------------------------------------ management.

EXAMPLE:

You’ve figured out ------------------------------------------- in a particular neighborhood. The average price for a 3 bedroom, 2

bathroom single family home in this neighborhood ---------------------------- decent looking property listed for $59,700.00.

The property is being -------------------------------------------------------- roll from the property manager and see that the property

makes $795.00 a month in rent.

You also see that annual taxes are ---------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------------------month with the

property (and monthly cash-flow is what matters, right?).

You need to start by writing out what information you have (and converting everything to a monthly dollar figure):

Sales Price: $59,700.00

Gross Operating Monthly Income:

------------------------------------------------------------------------------

Total: $795.00

Gross Operating Monthly Expenses:

-------------------------------------------------)

Property ---------------------------------------- rent)

Insurance: $-----------------------/12 months)

-----------------------------------------------------

Total: $290.10

Because Gross ------------------------------- monthly totals by 12 and put them into the equation below:

Income: $-------------------------------------------

Expenses: --------------------------------------------

Gross Operating Income – ------------------------------------ = NOI

$9540.00 – $-------------------------------------------

It looks like this property will give you a --------------------------------------------------------

What does this value mean? Well, ---------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------------------you choose?

Knowing the Net Operating Income of a property leaves a lot of questions unanswered. By itself it doesn’t tell you much, but

you can use it to calculate your Cap Rate and cash-on-cash return, which should give you a better understanding of your

investment as a whole.

3. Discuss the various components of project planning. Explain the application of Work Breakdown structure in monitoring and controlling a project.

The term ‘project’ has a wider meaning to include a set of activities. For example, ------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------, normally with discrete time, financial and technical

performance goals.

Project Planning -------------------

Project planning as represents a set of six --------------------------------------------------------------------------------------------------------

-------------------------------------------------------- about what will be achieved (project objectives) and by whom.

Preliminary plans serve as the basis for ---------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------, the very act of engaging in the preliminary planning process increases

the members’ commitment to the project.

These work plans are used for the third and ----------------------------------------------------------------------------------------------------

------------------------------------ work plan, the detail description of projects tasks. The ---------------------------------------------------

----------------------eports, when they are to be produced, what they must contain, and to whom they will be sent.

Finally, plans must be developed that ---------------------------------------------- pieces will be redistributed once its purpose has

been completed.

But before we begin, we assume -------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------- here are intended to smooth the path from idea to accomplishment. It is a

complicated process to manage a project, and plans act as a map of this process. The map must have sufficient detail to

determine what must be done next but be simple enough that workers are not lost in a welter of minutiae.

Components -------------------------------

Problem and ------------------------------------------------------------------ the problem to solve. For example, -----------------------

--------------------------------------------------------------------------------- demands. A mission statement defines how to solve the

major problem plus many smaller related ones.

Objectives and Deliverables- --------------------------------------------------------------- must be specific, measurable and time-

bound.

Specifications- Provide specifications that --------------------------------------------- government regulations.

Work Breakdown Structure- The work -------------------------------------------------------- project objectives. These tasks

define the project scope, which indicates what activity is included in the project. The WBS also determines the sequence of

project tasks. This is known as task dependencies. For example, ----------------------------------------------------------------------------

-------- a dependent task.

Resources- Use the WBS to ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------available.

Schedule- Based on the ---------------------------------------------------------------------------------------------------------------------------------------------------- dependencies. It should take into account circumstances that affect the project schedule, such as political climate, bad weather, constraints related to other projects and the economy.

Application of Work ----------------------------------------- and controlling a project-

A work breakdown structure ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------this planning consistent and provides for effective project execution.

Tasks- The main ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Costs- Because --------------------------------------------------------------------------------------------------- budget into defined packages linked to the tasks and check to make sure that the task costs in total don't exceed the total project cost.

Schedule- The WBS is important for ---------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------- advanced the project is by

checking which of the tasks are finished. Even within each task, the project management can check for percent completion

because each task is measurable.

Scope- One of ------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------- is completed without carrying out any extra work. The WBS helps define scope by

listing individual tasks that make up the project. The project team completes all the listed tasks but no additional work.

Function- A major -------------------------------------------------------------------------------------------------------------------------------

------------------------- complete when it fulfils its partial function. When all tasks are finished, all the partial functions add up to a

fully functional project.

Responsibility- An ------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------- functionality intact.

There are three reasons to use a --------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------more precise and concrete so that the project team knows exactly what has to be accomplished within each

deliverable. This also allows for better estimating of cost, risk, and time because you can work from the smaller tasks back up to

the level of the entire project. Finally, it allows you double check all the deliverables' specifics with the stakeholders and make

sure there is nothing missing or overlapping.

4. What are the major global sources of financing? Distinguish between Foreign Direct Investment and Portfolio Investment.

Financing is needed to ----------------------------------------------------------------------------------------------- to consider when looking

for start-up financing. But first you need to consider how much money you need and when you will need it.

The financial needs of a business will vary according to the type and size of the business. For example, -----------------------------

-------------------------------------------------------------------------------------------- businesses usually require less capital.

Debt and equity are the two major sources of ----------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------- and/or encourage activities in particular industries.

1. Equity Financing

Equity financing means ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ allows the investor to share in the company’s profits. Equity involves a permanent investment in a company and is not repaid by the company at a later date.

The investment should be properly --------------------------------------------------------------- a company can be in the form of membership units, as in the case of a limited liability company or in the form of common or preferred stock as in a corporation.

Companies may establish different classes of stock to control voting rights among shareholders. Similarly, companies may use different types of preferred stock. For example, --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------receive a dividend.

----------------------------------------

The first -----------------------------------------------------. Personal resources can include profit-sharing or early retirement funds, real estate equity loans, or cash value insurance policies.

Life insurance policies - A ---------------------------------------------- to borrow against the cash value of the policy.

Home equity loans - A home equity loan is a loan backed by --------------------------------------------------------------------------, it can be used to generate funds from the entire value of your home.

Friends and Relatives

Founders ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ownership interest in the business. However, these investments should be made with the same formality that would be used with outside investors.

---------------------------------------------

Venture capital refers ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------from the founders and are already profitable.

Venture capital firms are ------------------------------------------------------------------------------------------------- resulting in high rates of returns. These businesses are often ------------------------------------------------------------------- of 25 to 30 percent on their overall investment portfolio.

Because these are usually high-risk -------------------------------------------------------------------------------------------------------------------------------------------------- while others will fail, it is hoped that the overall portfolio will return 25 to 30 percent.

More specifically, many venture ----------------------------------------------------------------------------------------- investments will yield high returns, six will yield moderate returns (or just return their original investment), and two will fail.

-------------------------------------------

Angel investors are --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------capitalist.

Angel investors may be interested in the economic development of a specific geographic area in which they are located. Angel investors may focus on earlier stage financing and smaller financing amounts than venture capitalists.

Government Grants

Federal and state ---------------------------------------------------------- for start-up or expanding businesses.

Equity Offerings

In this situation-------------------------------------------------------------------, equity offerings can raise substantial amounts of funds. The structure of the offering can take many forms and requires careful oversight by the company’s legal representative.

---------------------------------

Initial Public Offerings (----------------------------------------------------- stability, and strong demand for their products or services. This generally doesn’t happen until companies have ---------------------------------------------- get to this point, they usually will raise funds privately one or more times.

----------------------------

Warrants are a special type of instrument used for long-term financing. They are useful for start-up companies to encourage investment by minimizing downside risk while providing upside potential. For example, -------------------------------------------------------------------------------------------------------------

A warrant is a security that grants the owner ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------price.

2. Debt Financing Debt financing ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (those lending the funds to the business), the reward for providing the debt financing is the interest on the amount lent to the borrower.

Debt financing may be secured or --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, unsecured debt does not have collateral and places the lender in a less secure position relative to repayment in case of default.

Debt financing (loans) may be short --------------------------------------------------------------------, short-term debt is used to finance current activities such as operations while long-term debt is used to finance assets such as buildings and equipment.

----------------------------------------------

Founders of start-up ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------based on the projected cash flow of the start-up business), and collateral in case of default.

Banks and --------------------------------

Banks and other --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------borrow additional funds.

Commercial Finance Companies

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------company money is usually higher than other commercial lenders.

------------------------------------------

Federal, state, and -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Rural Development programs.

-------------

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------its face value.

When a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------------------------of equity holders for company assets.

Lease A lease is a -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is purchased.

A lease may have an advantage --------------------------------------------------------------. It is often compared to purchasing an asset with debt financing where the debt repayment is spread over a period of years. However, lease payments often come at the beginning of the year --------------------------------------------------------------, the business may have more time to generate funds for debt payments, although a down payment is usually required at the beginning of the loan period.

Distinguish between ------------------------ and Portfolio Investment-

FDI is an -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of those financial holdings.

FDI typically involves -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of their foreign interests or at least making major strategic decisions.

FPI usually -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------foreign investments.

Unlike FPI, FDI --------------------------------------------- this type of investment in short term changing conditions whereas FPI

can easily be adjusted as the business conditions fluctuate.

Summary:

1. FDI -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------other than bigger returns.

2. FDI and FPI investment calculations are determined by the amount of investments made in a single year, which is the ‘flow’,

or as ‘stock’, which is the amount of investment massed in a year. It is therefore harder to make estimates for FPI portfolio flows

especially if a FPI investment is made for one year or less as they contain various instruments, so a definite value is hard to

estimate.

3. However on ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.

5. What is Financial Engineering? Explain the factors which motivate the finance manager to undertake financial engineering.

Financial Engineering is a multidisciplinary field drawing from finance and economics, mathematics, statistics, engineering

and computational methods. The ------------------------------------------------------------------------------------ securities in various

asset classes including equities, fixed income, credit and mortgage-backed securities.

In general, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and the implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance". The users of financially engineered products include investors including institutional investors like pension funds, banks and financial institutions, corporates, suppliers, consumers, employees and government.

Financial engineering is a -------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------engineering.

Financial engineering draws on tools from applied mathematics, computer science, statistics and economic theory. In broadest

definition, anyone who uses technical tools in finance could be called a financial engineer, for example any ------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------s.

Computational finance and ------------------------------------------------------------------------------------------------------------------ that

arise in financial modeling. Mathematical finance is the application of theoretical mathematics to finance.

Factors which motivate the finance manager to undertake financial engineering-

As stated -----------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------

These factors are briefly discussed below:

1. Tax Advantage: If there -------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

---------------- (it is 30% for individuals and 35% for corporate entities), it make sense for companies to issue zero-coupon bonds.

Small investors wanting to show the income as regular income will buy the same in primary market whereas high net worth

investors will buy from secondary market. -------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------n schemes. You can convert capital gains into dividend and vice versa.

Thus, mutual fund is a financially engineered structure to get tax advantage and of course, it is also a vehicle through which investors can achieve diversification at low investment. There are several other examples. -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------into non-convertible debenture on default of dividend.

2. Reduced Transaction Cost: Financial --------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------- will get truly financially engineered product to handle transaction cost. Mutual funds and several

products of derivative markets are aimed to reduce either transaction cost or at least recurring transaction cost to a large extent.

3. Reduced Agency Cost: Agency ----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

-------------------------institutions were not able to take action against defaulting companies except initiating time consuming

court action and in meanwhile productivity of assets are deteriorate further.

4. Risk Reallocation: Financial -------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------can shift such risk from company to counter party. Like this, you can create an environment in which you can

trade 'risk'!! We will see more examples in subsequent sections.

5. Increased Liquidity: Liquidity ----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

-------------------------, financial engineering can improve the liquidity. Another example, is openend mutual funds, which give

option to enter and exit at anytime and of course with certain cost (entry and exit load).

6. Regulatory or Legislative Factors: -----------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

------------------------------highly regulated industry but you can witness so many products offered by them. If regulation puts

certain restrictions, you have to be more innovative to keep the interests of investors. If regulation removes certain restrictions

and allows competition, you have to be equally innovative to compete and retain your investors. For instance, RBI puts lot of

restrictions on companies raising deposits from public.

7. Level and Volatility of Interest Rates: ------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

-----------------------------------of such volatile behaviour of interest rates.

8. Level and Volatility of Prices: -------------------------------------------------- are exposed to high level of price risk. Bonds

linked to commodity prices shift such price risk from those riskaverse players to those who are willing to take up such risk.

9. Academic Work: Sometime --------------------------------------------------------------------------------------------------------------------

------------------------------------------

10. Accounting Benefits: Accounting ------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------------------------------

-----------------------------in the future;

11. Technological Developments and other Factors: A ------------------------------------------------------------ nor life was as

complicated as today requiring such products. Technological development in computational finance today makes it possible to

develop such products and allow users to trade risk and return.

I am sending sample of MS-42 assignment. If you like then you can buy this assignment. We provide excellent

assignments.

Assignments Code Assignment Name Price (Rs.)

MS-42

Capital Investment and Financing Decisions

130

Following options are available in our below mentioned Account.

1. Click on below link and purchase online from web store

This method is very simple. In this method you can purchase assignments like anything you purchases online. Here you can directly pay using your debit card/ credit card/ net banking within seconds. This is a faster method and you will get assignments faster than any other method.

https://www.payumoney.com/store/buy/mba-jan-june-2016-solved-assignments

2. If you have Paytm App then you can send money direct to our Paytm wallet using our mail id ignousolvedassignmentsmba@gmail.com or mobile no 8604607390

3. If you have MobiKwik App then you can send money direct to our MobiKwik wallet using our mail id mobile no 8604607390

4. ONLINE TRANSFER USING NET BANKING: Bank details are given below along with IFSC code of the bank branch. You can transfer funds online conveniently from your home/office without any extra charges.

5. CASH DEPOSIT- You can directly walk-in to any nearest branch of bank and deposit cash directly in the given bank account.

6. IMPS TRANSFER- HDFC/CITI BANK ACCOUNT HOLDERS can transfer funds to our account instantly using their net banking. There is a new feature called IMPS transfer. This transfer happens instantly and is very simple

Bank Details

Bank Name ICICI Bank Account no. 628101546792

Account Type SAVING A/C Account Holder Name DHARAMENDRA KUMAR SINGH

IFSC code & branch address IFSC Code- ICIC0006281 Branch- HAZRAT GANJ, LUCKNOW

Note- Bank Transaction charges – No extra charge in case of Cash deposit

Bank Name STATE BANK OF INDIA Account no. 31436792295

Account Type SAVING A/C Account Holder Name DHARMENDRA KUMAR SINGH

IFSC code & branch address IFSC Code- SBIN0003085 Branch- TOWN HALL, SHAHJAHANPUR (UP)

Note- Bank Transaction charges – Rs. 50/- applicable for cash deposit/ATM /Cheque payment in SBI A/C. (Rs. 50/- extra on total amount).

DHARMENDRA KUMAR SINGH