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IGNOU MMPF-02 (July 2025 – January 2026) Assignment Questions
1. The Rising Sun Company requires Rs. 24 crores for installing a new assembly line. This investment is expected to yield an annual EBIT of Rs. 4 crores. The objective of investment by the company is to maximise the Earnings Per Share. Various alternatives which the company is considering are issuing of equity shares and raising a debt of either Rs. 4 crores, 6 crores or 20
crores. The current market price per share is Rs. 80. Which is expected to drop to Rs. 50 per share if the borrowing is in excess of Rs. 7.5 crores. Cost of borrowing are as follows:
Up to Rs. 2.5 crores 9% p.a
Above Rs. 2.5 crores to 6 crores 12% p.a
Above Rs. 6 crores to 20 crores 14% p.a.
Assuming a tax rate of 35% work out EPS and the scheme which would meet the objectives of investment.
2. How are cash flows for Capital Budgeting estimated? Describe the different method used for evaluating investment proposals.
3. What is Project Risk? Describe the various techniques used for measuring and evaluating project risk.
4. Describe various non-traditional sources of Long Term Financing. Discuss their advantage over traditional sources of financing.
5. Discuss the factors contributing to Financial Engineering and describe Financial Engineering process.
IGNOU MMPF-02 (July 2024 – January 2025) Assignment Questions
1. ABC Ltd. has the following book value capital structure as on March, 31, 2024
The equity share of the company sells at Rs. 30. It is expected that the company will pay next year a dividend of Rs. 3 per equity share which is expected to grow at 5% p.a. forever, Assume 40% corporate tax rates.
Based on the above information calculate.
(a) Weighted average cost of capital (WACC) of the company based on the existing capital structure.
(b) Compute the new WACC if the company raises an additional 40 Lakh debt by issuing 13% debentures. This would result in increasing the expected dividend to Rs. 3.60 and leave the growth rate unchanged but the price of the equity share will fall to Rs.24.
2. How are the Cash Flows for Capital Budgeting estimated? Describe the various methods used for evaluating investment proposals.
3. What do you understand by Certainty and Risk? Describe the techniques used for measurement of Project Risk.
4. Explain the following:
(a) Leasing and Hire Purchase. Discuss the difference between these two.
(b) Asset Securitization
5. What is Financial Engineering? Discuss the factors contributing to Financial Engineering.
