Friday 10 April 2020

NMIMS JUNE 2020 FINANCE PGDFM SOLVED ASSIGNMENTS


NMIMS SOLVED ASSIGNMENT JUNE 2020,
NMIMS SOLVED ASSIGNMENT SOLUTION,
NMIMS SOLVED ANSWERSHEET JUNE 2020
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Project Report & Thesis
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Taxation- Direct and Indirect

1. Ms. Ankita completed her MBA from DAVV, Indore. She joined an enterprise as an Accounts Manager at a CTC of Rs 650000. She invested Rs 150000 in PPF and paid mediclaim for herself Rs 15000 using cash as a mode of payment. Discuss and compute her tax liability assuming she is residential individual for the Assessment year 2019-20.
2. Ms. Urrjja is running successfully the business of supplying &selling woolens on the digital platform. She is keen to understand how business expenses are allowed under the Indian Income Tax Act 1961. However, these days she is more concerned about whether there is any provision under the Act which allows claiming deductions in relation to residuary expenses.
As a knowledgeable person in taxation, how will you address the worry of Ms. Urrjja. Is there any provision under the IT Act which allows to claim deductions of residual expenses? If yes, how can she avail the benefit of the said provision for her business?
3. Mr. Mohan, aged 65 years, derives Rs 7.5 lacs as salary from Amiir PanWala & Company for the year ended 31.03.2019. He supplies the following information to the accounts department of the employer. (Applicable Assessment year 2019-20)
Particulars
Amount
Loss from one of the Self - occupied property
Rs 200000
Loss from let out house property
Rs 360000
Interest from Flexi Fixed Deposits
Rs 150000

a. Explain and examine the applicability of TDS provision.
b. Compute total tax liability and monthly deduction for TDS.


Capital Market and Portfolio Management

1. Calculate the standard deviation and return of portfolio consisting of 60% of Security A and 40% of Security B.
TABLE BELOW
Year
Security A return(%)
Security B return(%)
2015
10
18
2016
12
15
2017
9
11
2018
10
9
2019
5
7

2. Calculate the return as per CAPM for each of the company’s stock, identify whether they are underpriced, overpriced or correctly priced and advise accordingly. Returns of T- Bill is 9%.
Stock
Expected Return
Beta
Titan
24%
1.8
Nestle
30%
1.5
Eicher Motors
12%
1.2
HDFC
25.9%
1.3
Sensex
22%


3. An investor was tracking SBI and HDFC mutual funds whose return and beta are as given below:

Observed Return
Beta
Portfolio SBI
18%
0.75
Portfolio HDFC
25%
1.25

Return on the market portfolio is 11%, while the risk-free return is 8%. Assume standard Deviation of the market to be 7%.
a. Compute the Jensen index for each of the funds and comment which one is better.
b. Compute the Treynor index for each of the funds and comment which one is better.

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Corporate Finance

1. Alpha Ltd is expecting an annual earnings before interest and tax of ₹ 1.5 Lakhs. The company has 10% debentures of ₹ 4 lakhs and cost of Equity capital is 12%. Calculate the total value of the firm and the overall cost of capital of the firm according to Net Income Approach. Also comment what will happen to the value of the firm and the overall cost of capital if debt is increased in the capital structure.
2. The Capital structure of ABC Ltd, is as under:
Equity share capital
₹ 100 Lacs
10% Debentures
₹ 50 Lacs

·         The sales for the year 2019 are 1.5 Lac units@ ₹ 40per unit
·         Also, the variable cost per unit is 20 % of sales revenue
·         ₹ 12 Lacs is the fixed operating cost.
·         Assume Income tax rate as 40 %
Calculate Operating, Financial and Combined Leverage of the firm and interpret the result.
3. Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires. Assume a return of 7% per annum on her retirement funds and if her planning is for 25 years after retirement, Calculate:
a. How much lumpsum she should deposit in her account today so that she has enough funds for retirement?
b. How much she should deposit each year so that she has enough funds for retirement?

Cost & Management Accounting

1. Given the slowdown in the auto sector, Fast Automobile company, a car manufacturing company wants to go in for an overhaul of its operations. The Management wants to review the cost of all its product lines i.e. types of cars it has in various segments and the way they value their closing stock given the inventory pile up, to take some strategic decisions.
The Management accountant is asked to prepare a summary of costs to enable the top team to decide which product to manufacture, discontinue some segments etc. What are the various types of ways the Management accountant can classify the costs by Management decisions. Describe any 5. Also, discuss the different ways in which the company can value its closing stock?
2. Traditional Managerial accounting was all about managing costs whereas Management accounting has undergone a sea change, given the change in the overall Global environment. Discuss and describe in relation to the following –
·         Growth of E-Commerce and e-business. Share atleast 2 practical examples.
·         Focus on cross-functional Groups
·         Total Quality management concept
How these impacted global management accounting practices.
3. Fancy Bag company purchases Ladies Bags from a wholesaler @ Rs 1100/- per piece. They add accessories and packaging and sell each bag for Rs 1800/- per piece. They incur certain fixed expenses.
The company wants to understand how many pieces they must sell in order to be profitable. They seek the help of a Management accountant to:
a. Ascertain Contribution per piece and as a % of Sales Price.
b. Prepare the Profit / Loss account for sale of 200 pieces 300 pieces
Details provided:
Purchase Cost                                     1100                per pc
Sale                                                     1800                per pc
Expenses                                                                    Per Month
Rent                                                                            50000
Staff Salary                                                                 75000
Commission per pc                                                      100



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Marketing of Financial Services

1. Explain the concept of Online Marketing of financial services. How is it changing the way financial products and services are sold in India?
2. One week ago you bought a ULIP policy from a private Life Insurance company. On receiving the policy copy, you realize that the Life Insurance policy was mis-sold. Would it be possible for you to return the policy? What strategy would you follow to settle the matter with the insurance company?
3. You are a Financial Planner. Your client Ashwin Aswani aged 37 years, married with 1 child requires your help to make few financial decisions. (You can make any assumptions to further build up your case.)
a. Ashwin wants to buy a Pure Risk Life Insurance cover. He is confused whether he should buy a ULIP or a Term Plan. Recommend the product best suited for him giving valid reasons.
b. Ashwin wants to purchase a holiday home by liquidating his retirement savings and taking a home loan for the next 10 to 15 years. Ashwin wants your opinion whether this is an appropriate strategy for a Retirement Plan.

Strategic Cost Management

1. A company has a contribution/sales ratio of 50%. It maintains a MOS of 25%. If its annual fixed cost is Rs. 50 lakhs, calculate:
BE sales, MOS, Total Sales, Total Variable Cost and Profit.
2. The following information is available from the records of Alpha Ltd. For the year 2019:

Rs.
Sales of product A
25.0     Lakhs
Sales of product B
75.0     Lakhs
Material cost
  55% of sales
Direct wages
50,000 per month per worker

Factory Overheads:
Indirect Labor:

Works Manager
10,000.0   per month
Foreman
5,000.0     per month
         Stores and spares
       5.0% of sales
Depreciation of machinery
150,000.00
Light and power
100,000.00
Repairs and maintenance
150,000.00
Other expenses
       15% of direct wages
Administration expenses
200,000.0 per annum

You are required to prepare a master budget.
3. You are a consultant hired to advise ABC Limited on ROI and help with decision making for additional order. The company has provided you following information:
Particulars
Amount (Rs.)
Sales (2,00,000 units at Rs. 20)
4,000,000
Less: Variable costs @ Rs. 15 per unit
3,000,000
Contribution Margin
1,000,000
Less: Fixed costs
750,000
Division Profit
250,000

The amount of division investment is Rs. 15,00,000 and the target rate of return on investment is 20%
a. Based on the information provided calculate ROI and Residual income of ABC Limited.
b. Assume that division has offer to sell 50,000 units at Rs. 25 per unit. If additional order is accepted, the variable cost per unit will remain the same. However, fixed costs would increase by Rs. 250,000. A further additional investment of Rs. 10,00,000 would also be required. Analyze the impact on residual income.



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International Finance

1. CQS plc is a UK company that sells goods solely within UK. CQS plc has recently tried a foreign supplier in Netherland for the first time and need to pay €250,000 to the supplier in six months’ time. You as financial manager are concerned that the cost of these supplies may rise in Pound Sterling terms and has decided to hedge the currency risk of this account payable. The following information has been provided by the company’s bank:
Spot rate (€ per £):                                                      1·998 ± 0·002
Six months’ forward rate (€ per £):                            1·979 ± 0·004
Money market rates available to CQS plc:
Borrowing Deposit
One-year Pound Sterling interest rates:                      6·1% 5·4%
One-year Euro interest rates:                                      4·0% 3·5%
Assuming CQS plc has no surplus cash at the present time you are required to evaluate whether a money market hedge, a forward market hedge or a lead payment should be used to hedge the foreign account payable.
2. On 30th June 2009 when a forward contract matured for execution you are asked by an importer customer to extend the validity of the forward sale contract for US$ 10,000 for a further period of three months.
Contracted Rate US$1 = Rs.41.87
The US Dollar quoted on 30.6.2009
Spot                                                     Rs. 40.4800/Rs. 40.4900
Premium July                                      0.1100/0.1300
Premium August                                 0.2300/0.2500
Premium September                            0.3500/0.3750
Calculate the cost for your customer in respect of the extension of the forward contract.
Rupee values to be rounded off to the nearest Rupee.
Margin 0.080% for Buying Rate
Margin 0.25% for Selling Rate
3. Wenden Co is a Dutch-based company which has the following expected transactions.
One month: Expected receipt of                                             £2,40,000
One month: Expected payment of                                          £1,40,000
Three months: Expected receipts of                                       £3,00,000
The finance manager has collected the following information:
Spot rate (£ per €):                                                                  1.7820 ± 0.0002
One month forward rate (£ per €):                                          1.7829 ± 0.0003
Three months forward rate (£ per €):                                      1.7846 ± 0.0004
Money market rates for Wenden Co:
Borrowing Deposit
One year Euro interest rate:                                                    4.9%                            4.6%
One year Sterling interest rate:                                               5.4%                            5.1%
Assume that it is now 1 April.
Required:
a. Calculate the expected Euro receipts in one month and in three months using the forward market.
b. Calculate the expected Euro receipts in three months using a money-market hedge and recommend whether a forward market hedge or a money market hedge should be used.

Business Ethics, Governance & Risk

1. Read up on the ICICI Bank-Videocon Loan Case from credible public sources (website, newspaper, magazines) and answer the following questions. (Kindly mention only the facts and not speculations or rumors). You can refer to chapter 9 & 10 to understand the scope of the questions.
Explain the TWO ethical issues or concern in the ICICI Bank case and the negative impacts of these issues on the bank?
2. In 2015 India’s food regulator had banned Maggi Noodles (of Nestle India) after tests showed that it contained excessive lead and for alleged mislabelling over flavour enhancer MSG. The product returned to stores after a court lifted the restriction. NestlĂ© has since then removed the claim “No added MSG.” You can refer to chapter 4 and answer the following question.
According to you, which all internal departments worked together to overcome the allegation and relaunch the same product in a way that it would earn the trust of its key consumers and stakeholders? What contributions were made by each of these departments while work together for this common business objective?
3. a. As an employee if you become a whistle blower, are you being disloyal towards your employer? Yes or No? What is/are the ethical reason/s for becoming a whistle blower?
3. b. Explain any two reasons to showcase that study and understanding of ethics makes for a better manager, good business and happy society?


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Strategic Financial Management

1. From the following information of the two projects calculate the net present value and suggest which of the two projects should be acepted assuming a discount rate of 10%.
TABLE GIVEN BELOW


Project X
Project Y
Initial Investment
₹ 25,000
₹ 30,000
Estimated Life
5 years
5 years
Scrap Value
₹ 1,500
₹ 2,000

The profits before depreciation and after taxes are as follows:
Years
1
2
3
4
5
Project X (₹)
5,000
10,000
12,000
7,000
3,000
Project Y (₹)
20,000
10,000
7,000
5,000
2,000

2. Nisha has completed her MBA and has joined a company which was going to raise fund from long term sources such as Debt and Equity. Nisha was asked by her manager to prepare a report on which could be a better source of funding for the firm mentioning the advantages of each to be presented to the Management so that it is easy for them to take the decision. Help her to prepare the report.
3 The following information is given for Delta Ltd.
Earnings per share
₹ 15
Dividend per share
₹ 5
Cost of capital
15%
Internal Rate of Return on Investment
20%
Retention Ratio
65%

Calculate the market price per share using
a. Gordon's Dividend Model
b. Walter's Dividend Model

Project Management

1. Your organization is looking for procuring project management software. You are asked to prepare a file note describing how this software will help your organization. You are required to list at least three project management software tools with details such as salient features, cost, etc. You are also asked to recommend a specific software tool with proper justification. Please introduce your organization before sharing your file note.
2. You are celebrating the successful completion of a project. During the party, the Vice President of Projects in your organization pulled you aside and asked you the secret of the success of the project. You shared few points, which seemed to have impressed her. Next day, you got an email from her to submit a brief report describing the key factors that led to successful completion of your project. The report is also expected to provide top two recommendations to other project managers. Please introduce your organization before sharing your brief report.
3. “No! I have worked on this concept for so long and I don’t want some bean counters coming and telling me to stop working on it” Natasha was very upset since the Head of Accounting & Finance department have told her boss to immediately stop the work as his department didn’t find the proposed project financially viable.
“Don’t get emotional!” Jaywant started talking to Natasha. Being a good friend, Jaywant wanted to help her. “First of all, tell me how the NPV and IRR figures looked for your proposed project.” “I am not sure,” Natasha was candid. “I didn’t do those calculations since I was busy with other parts of the project proposal.”
“That’s a great mistake, I must say. You must do these calculations and then get them verified by our Accounting & Finance department. I can help but I would suggest you take help of Manish. He is not only expert is this type of analysis but he also respects your engineering abilities and will surely like to find the way out to save your proposed project” Jaywant’s words helped Natasha to get out of her chair as she moved to her phone for calling Manish.
a. How will Manish explain the concept of NPV to Natasha?
b. How will Manish explain the concept of IRR to Natasha?



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Financial Institutions and Markets

1. “Primary Market helps to facilitate capital growth by enabling individuals to convert savings into investments. Describe in details the techniques that companies uses to raise the fresh capital from the primary market.
2. Explain why insurance sectors are considered as financial intermediary. Discuss any four types of insurance plans that are available in the market.
3. Ms. Goyal, after completing her graduation, recently joined a bank. With a steady income and good growth prospects for her career, she intends to save regularly and increase the amount of savings gradually over the years. Her colleagues in the bank have advised her investing in Mutual Funds (MFs), as a suitable option for her. However, Ms. Goyal is not at all familiar with MFs. Advise Ms.Goyal with the below queries:
a. Explain brief on Mutual Funds and its features.
b. Enumerate any four types of Mutual Fund to Ms.Goyal.

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