Introduction to Financial Management

1) Mr Aman is considering purchasing a financial asset that is expected to pay $1250 per year
for four years, with the first payment one year from now. The required rate of return is
9.35% per annum. How much should he pay for this asset?
2) Mr Ramesh is considering purchasing a financial asset that promises to pay $1500 per year
for four years, with the first payment today. The required rate of return is 9% per annum.
How much should he pay for this asset?
3) Calculate the value in 5 years of Rs.1,00,000 invested today at a stated annual interest rate
of 8.5% compounded monthly, quarterly, semi-annually, yearly and continuously and also
calculate the effective rate in each case
4) Ms Adya makes an investment of €1,000,000 investment for three years with an annual rate
of 6% compounded continuously. What is the difference in its interest earnings compared
with the same investment compounded daily?
5) Ms Aparna can choose between receiving 10 annual $250,000 retirement payments, starting
one year from today, or receiving a lump sum today. Knowing that she can invest at a rate
of 7 percent annually, she has decided to take the lump sum. What lump sum today will be
equivalent to the future annual payments.
6) Mr and Mrs Gowtham plan to fund a newborn’s future university tuition costs, estimated
at Rs.2,20,000/year for four years, with the first payment due as a lump sum in 15 years.
Calculate the required deposit today assuming a 5.5% annual rate.
7) Ms Hackett made a deposit of Rs. 2,50,000 on 1st January, 2010 and her deposit grew to
Rs. 7,90,00,000 at the end of 31st December, 2022. Calculate the effective interest rate on
her investment.
8) Parents plan to fund their daughter’s future university tuition costs, estimated at
Rs.5,00,000/year for five years, with the first payment due as a lump sum in 12years.
Calculate the required deposit today assuming a 6% annual rate.
9) Calculate the worth of a bond when it promises to make a payment of $250 in perpetuity if
the required rate of return is 7%
10) Ms Muskan is planning to purchase a Rs.9,80,000 house by making a down payment of
Rs.40,000 and borrowing the remainder to be paid in 22 years with monthly payments and
the first payment is due in 1 month from now. If interest rates are quoted at 6 percent with
monthly compounding. What will be his monthly mortgage payments?
11) Mr Dutta is planning to purchase a Rs.17,70,000 house by making a down payment of
Rs.1,50,000 and borrowing the remainder to be paid in 28 years with monthly payments
and the first payment is due in 1 month from now. If interest rates are quoted at 9 percent
with monthly compounding. What will be his monthly mortgage payments?
12) Mr Solanki contemplates to invest Rs. 17,50,000 in a project and interested in knowing the
payback period, when the cash inflows during the project period are Rs.7,00,000,
Rs.6,25,000, 3,75,000, Rs. 2,95,000 and Rs. 6,87,000.
13) Mr Shah contemplates to invest Rs. 14,50,000 in a project and interested in knowing the
discounted payback period, when the cash inflows during the project period are
Rs.5,00,000, Rs.4,25,000, 3,75,000, Rs. 3,95,000 and Rs. 2,87,000. The minimum rate of
return on the project is 11%
14) Mr Rawat contemplates to invest Rs. 19,50,000 in a project and interested in knowing the
discounted payback period, when the cash inflows during the project period are
 Rs.5,70,000, Rs.4,95,000, 2,75,000, Rs. 5,95,000 and Rs. 3,87,000. The minimum rate of
return on the project is 9%.
15) Ms Banerjee contemplates to invest Rs. 27,25,000 in a project and interested in knowing
the payback period, when the cash inflows during the project period are Rs.7,70,000,
Rs.6,25,000, 8,55,000, Rs. 4,95,000 and Rs. 3,87,000
16) Mr Rawat contemplates to invest Rs. 19,50,000 in a project and interested in knowing the
discounted payback period, when the cash inflows during the project period are
Rs.5,70,000, Rs.4,95,000, 2,75,000, Rs. 5,95,000 and Rs. 3,87,000. The minimum rate of
return on the project is 9%.
17) Mr Raj, after considering various investment proposals, decides to invest Rs.6,50,000 in a
project with an estimated cash inflows after tax over the next 5 years are Rs.2,10,000,
Rs.1,95,000, 2,20,000, Rs. 1,35,000 and Rs. 88,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project
18) Ms Garg, after considering various investment proposals, decides to invest Rs.7,75,000 in
a project with an estimated cash inflows after tax over the next 5 years are Rs.2,75,000,
Rs.2,25,000, 2,46,000, Rs. 1,67,000 and Rs. 1,02,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project
19) Ms Sharma, after considering various investment proposals, decides to invest Rs.9,75,000
in a project with an estimated cash inflows after tax over the next 5 years are Rs.3,75,000,
Rs.2,75,000, 2,96,000, Rs. 1,97,000 and Rs. 105,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project
20) Calculate ARR with the following information:
Initial investment – Rs. 12,00,000, Salvage Value – 0, Estimated life of the project – 5
years, operating profit for the 5 years stood at – Rs.4,00,000, Rs. 3,75,000, Rs. 4,25,000,
Rs. 4,75,000 and Rs.1,75,000 respectively. The company falls in the tax bracket of 30%.
21) Estimate ARR with the following information:
Initial investment – Rs. 10,00,000, Salvage Value – 0, Estimated life of the project – 4
years, operating profit for the 4 years stood at – Rs.3,00,000, Rs. 2,75,000, Rs. 3,35,000,
Rs. 2,75,000 and Rs.1,50,000 respectively. The company falls in the tax bracket of 27%.
22) Estimate beta of UPL from the following information:
Return of Market 12% 19% 18% -18% -13%
Return of UPL -8% 28% 12% -11% 2%

23) Estimate beta of TCS from the following information:

24) Estimate the overall cost of capital, when the company wants to raise Rs. 30 lakhs and
wants to adopt capital structure as 30% from debt at the cost of 10%, 25% from preference
at the cost of 12% and the cost of equity is 18%. The company falls in the tax bracket of
33%.
25) Estimate the WACC, when the company wants to raise Rs. 12 mn and wants to adopt
capital structure as 25% from debt at the cost of 9%, 35% from preference at the cost of
12% and the cost of equity is 15%. The company falls in the tax bracket of 33%.
26) Estimate the WACC, when the company wants to raise Rs. 15 mn and wants to adopt
capital structure as 52.5 mn from debt at the cost of 8%, 45 mn from preference at the cost
of 13% and the cost of equity is 16%. The company falls in the tax bracket of 28%.

27) Ms Rishi Steel has operating income of Rs.4.80 million at the end of 31st March, 2023. The
company wants to expand its business operations with an investment of Rs.7.50 million
which is expected to increase the operating income by Rs. 4.20 million. The company
contemplates to raise the required capital through two plans:
Plan A: 35% from Debt at the cost of 8.5%, 20% from Preference Shares at the cost of 9%
and the remaining from equity at the cost of 17.5%.
Plan B: 35% from Debt at the cost of 9%, 20% from Preference Shares at the cost of 10%
and the remaining from equity at the cost of 15%.
The company has an existing interest payment obligation of Rs.1.0 million and 15,000
shares outstanding with face value of Rs.100. The company falls in the tax bracket of 33%.
Please carry out EBIT-EPS analysis and advise which plan the company should adopt.

28) Ms Sushanth Steel has operating of Rs. 6.25 million at the end of 31st March, 2023. The
company wants to expand its business operations with an investment of Rs.6.50 million
which is expected to increase the operating income to Rs. 10.20 million. The company
contemplates to raise the required capital through two plans:
Plan A: 35% from Debt at the cost of 9%, 25% from Preference Shares at the cost of 10%
and the remaining from equity at the cost of 19%.
Plan B: 25% from Debt at the cost of 8%, 30% from Preference Shares at the cost of 9.5%
and the remaining from equity at the cost of 14%.
The company has an existing interest payment obligation of Rs.0.65 million, preference
dividend obligation of Rs.0.25 mn and 14,000 shares outstanding with face value of Rs.100.
The company falls in the tax bracket of 33%. Please carry out EBIT-EPS analysis and
advise which plan the company should adopt.

29) EPS = Rs. 45, Cost of Capital = 8%, Dividend payout ratio = 10%, 40%, 85%, Rate of
return = 14%, 12%, 8% and 6%. What is the value of stock in each of these cases.

30) M/s Arya Steels has operating income of Rs. 3.95 million at the end of 31st March, 2023.
The company wants to expand its business operations with an investment of Rs. 9.00
million which is expected to increase the operating income by Rs. 7.50 million. The
company contemplates to raise the required capital through two plans:
Plan A: 30% from Debt at the cost of 7.5%, 20% from Preference Shares at the cost of 8.5%
and the remaining from equity at the cost of 13.75%.
Plan A: 25% from Debt at the cost of 7%, 25% from Preference Shares at the cost of 8%
and the remaining from equity at the cost of 14.25%.
The company has an existing interest payment obligation of Rs.0.45 million and 12,500
shares outstanding with face value of Rs.100. The company falls in the tax bracket of 30%.
Please carry out EBIT-EPS analysis and advise which plan the company should adopt.

31) Mr Suryan is interested to calculate the value of M/s Vedanta Ltd as per Walter Dividend
Model, and procured the following information from the credible sources: EPS of Rs. 30,
 cost of capital of 12%, risk free rate of 5%. He wishes to estimate the value of the stock
with various assumption rates which include: rate of return – 12%, 14% and 9%, dividend
payout ratio – 1/3rd, 2/3rd and 90%.

32) M/s Prajwal Refineries Ltd has sales of Rs.10,00,000 by producing 10,000 units, variable
cost of Rs.70 per unit and fixed costs of Rs.2,00,000 and debt of Rs.5,00,000 at 10% rate
of interest. Calculate the operating, financial and combined leverages? It the firm wants to
double its Earnings before interest and tax (EBIT), how much of a rise in sales would be
needed on a percentage basis?

33) Mr Sumedh is interested to calculate the value of M/s Vedant Ltd as per Gordon Dividend
Model and procured the following information from the credible sources: EPS of Rs. 70,
cost of capital of 11%, risk free rate of 5%. He wishes to estimate the value of the stock
with various assumption rates which include: rate of return – 11%, 14% and 9%, retention
ratio – 1/4th, 2/4th and 3/4th.

34) M/s Gowtham Refineries Ltd has sales of Rs.14,00,000 by producing 14,000 units, variable
cost of Rs.6 per unit and fixed costs of Rs.1,40,000 and debt of Rs.6,00,000 at 10% rate of
interest. Calculate the operating, financial and combined leverages? It the firm wants to
increase its Earnings before interest and tax (EBIT) by 60%, how much of a rise in sales
would be needed on a percentage basis?

35) Ms Kawam Exports Ltd has operating income of Rs. 5.75 million at the end of 31st March,
2023. The company wants to expand its business operations with an investment of Rs. 4.20
million which is expected to increase the operating income to Rs. 7.90 million. The
company contemplates to raise the required capital through two plans:
Plan A: 20% from Debt at the cost of 6%, 25% from Preference Shares at the cost of 7%
and the remaining from equity at the cost of 13.75%.
Plan A: 30% from Debt at the cost of 7.5%, 25% from Preference Shares at the cost of 8.5%
and the remaining from equity at the cost of 15%.
The company has an existing preference dividend obligation of Rs.0.05 million and 14,500
shares outstanding with face value of Rs.100. The company falls in the tax bracket of 30%.
Please carry out EBIT-EPS analysis and advise which plan the company should adopt.

36) M/s Vaishnavi Garments Ltd has sales of Rs.18,00,000, variable cost of Rs 9,00,000 and
fixed costs of Rs.2,60,000 and debt of Rs.2,00,000 at 9% rate of interest. Calculate the
operating, financial and combined leverages? It the firm wants to increase its Earnings
before interest and tax (EBIT) by 75%, how much of a rise in sales would be needed on a
percentage basis?

37) Ms Kavitha is interested to calculate the value of M/s Vedansh Ltd as per Walter Dividend
Model, and procured the following information from the credible sources: EPS of Rs. 60,
cost of capital of 12%, risk free rate of 5%. He wishes to estimate the value of the stock
with various assumption rates which include: rate of return –12%, 15% and 10%, dividend
payout ratio – 1/3rd, 2/3rd and 3/4th.
38) Ms Lalit Fibre Ltd has operating income of Rs. 8.25 million at the end of 31st March, 2023.
The company wants to expand its business operations with an investment of Rs. 15.0
million which is expected to increase the operating income to Rs. 13.75 million. The
company contemplates to raise the required capital through two plans:
Plan A: 25% from Debt at the cost of 7%, 25% from Preference Shares at the cost of 8.5%
and the remaining from equity at the cost of 14.75%.
Plan A: 30% from Debt at the cost of 7.5%, 20% from Preference Shares at the cost of 8%
and the remaining from equity at the cost of 15.5%.
The company has an existing interest obligation of Rs.1.0 million and 18,000 shares
outstanding with face value of Rs.100. The company falls in the tax bracket of 30%. Please
carry out EBIT-EPS analysis and advise which plan the company should adopt.

39) Mr Salman wants invest into Reliance and interested to know beta of it and found the
following information on the market return and stock’s return for the last 5 years:
Return of Market 9% -5% 6% 12% -3%
Return of Reliance 6% 2% 4% 16% -5%

40) Ms Goyal contemplates to invest Rs. 14,50,000 in a project and interested in knowing the
payback period, when the cash inflows during the project period are Rs.5,00,000,
Rs.4,25,000, 3,75,000, Rs. 2,95,000 and Rs. 1,87,000. The minimum rate of return on the
project is 11%.

41) Mr Raj, after considering various investment proposals, decides to invest Rs.6,25,000 in a
project with an estimated cash inflows after tax over the next 5 years are Rs.2,10,000,
Rs.1,95,000, 2,20,000, Rs. 1,35,000 and Rs. 88,000. The minimum rate of return on the
project is 11%. Calculate Net Present Value and Internal Rate of Return of the project

42) Mr Jha wants invest into Hero Motocorp and interested to know beta of it and found the
following information on the market return and stock’s return for the last 5 years:
Return of Market -6% 8% 10% -2% 13%
Return of Hero -7% 9% 19% -6% 11%

43) Ms Goyal contemplates to invest Rs. 19,50,000 in a project and interested in knowing the
payback period, when the cash inflows during the project period are Rs.5,70,000,
Rs.4,95,000, 2,75,000, Rs. 5,95,000 and Rs. 3,87,000. The minimum rate of return on the
project is 9%.

44) Mr Bhat, after considering various investment proposals, decides to invest Rs.7,50,000 in
a project with an estimated cash inflows after tax over the next 5 years are Rs.2,75,000,
Rs.2,25,000, 2,46,000, Rs. 1,67,000 and Rs. 1,02,000. The minimum rate of return on the
project is 11%. Calculate Net Present Value and Internal Rate of Return of the projec

45) Mr Kumar wants invest into Eicher Motors and interested to know beta of it and found the
following information on the market return and stock’s return for the last 5 years:
 Return of Market 10% -9% 13% -8% 12%
Return of Eicher -3% 14% 17% -11% 9%

46) Ms Goyal contemplates to invest Rs. 27,25,000 in a project and interested in knowing the
payback period, when the cash inflows during the project period are Rs.7,70,000,
Rs.6,25,000, 8,55,000, Rs. 4,95,000 and Rs. 3,87,000. The minimum rate of return on the
project is 11%.

47) Mr Raj, after considering various investment proposals, decides to invest Rs.9,50,000 in a
project with an estimated cash inflows after tax over the next 5 years are Rs.3,75,000,
Rs.2,75,000, 2,96,000, Rs. 1,97,000 and Rs. 105,000. The minimum rate of return on the
project is 11%. Calculate Net Present Value and Internal Rate of Return of the project

48) Mr Raj, after considering various investment proposals, decides to invest Rs.6,50,000 in a
project with an estimated cash inflows after tax over the next 5 years are Rs.2,10,000,
Rs.1,95,000, 2,20,000, Rs. 1,35,000 and Rs. 88,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project

49) Mr Bhat, after considering various investment proposals, decides to invest Rs.7,75,000 in
a project with an estimated cash inflows after tax over the next 5 years are Rs.2,75,000,
Rs.2,25,000, 2,46,000, Rs. 1,67,000 and Rs. 1,02,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project

50) Mr Raj, after considering various investment proposals, decides to invest Rs.9,75,000 in a
project with an estimated cash inflows after tax over the next 5 years are Rs.3,75,000,
Rs.2,75,000, 2,96,000, Rs. 1,97,000 and Rs. 105,000. The minimum rate of return on the
project is 10%. Calculate Net Present Value and Internal Rate of Return of the project

51) Mr Yashwanth wants invest into Tata Steel and interested to know the risk associated with
it and wants to estimate beta with the following information for the last 5 years
Return of Market 6.75% 11% -6% 9% 2%
Return of Tata Steel 9% 9.75% -8% 12% -2%

52) Mr Singh invests Rs 4.5 Million, for a period of 5 years with salvage value of nil. The
expected operating profit for the period are Rs 1.25 mn, Rs 1.1 mn, Rs 0.9 mn, Rs 1.3 mn
and Rs 0.75 respectively and the interest obligation during the period include Rs 0. 15 mn
every year. The company operates in the tax bracket of 25%

53) Ms Piyush Metals wants to raise Rs. 18 lakhs and wants to adopt capital structure as:
30% from Debt with effective cost of debt of 9%, 25% from Preference Shares at 14% and
the rest from equity at the cost of 16%. The company is in the tax bracket of 25%.
You are required to calculate weighted average cost of capital

54) Mr Yashranth wants invest into GAIL and interested to know the risk associated with it and
wants to estimate beta with the following information for the last 5 years
Return of Market 12.75% 5% -4% 9% 3%
Return of GAIL 14% 7% -2% 6% -3%
55) Ms Sushanth Steel has operating of Rs. 6.25 million at the end of 31st March, 2023. The
company wants to expand its business operations with an investment of Rs.6.50 million
which is expected to increase the operating income to Rs. 10.20 million. The company
contemplates to raise the required capital through two plans:
Plan A: 35% from Debt at the cost of 9%, 25% from Preference Shares at the cost of 10%
and the remaining from equity at the cost of 19%.
Plan B: 25% from Debt at the cost of 8%, 30% from Preference Shares at the cost of 9.5%
and the remaining from equity at the cost of 14%.
The company has an existing interest payment obligation of Rs.0.65 million and 14,000
shares outstanding with face value of Rs.100. The company falls in the tax bracket of 33%.
Please carry out EBIT-EPS analysis and advise which plan the company should adopt.

56) Mr Sinha invests Rs 5.5 Million, for a period of 5 years with salvage value of nil. The
expected operating profit for the period are Rs 1.35 mn, Rs 1.15 mn, Rs 0.95 mn, Rs 1.5
mn and Rs 0.95 respectively and the interest obligation during the period include Rs 0. 25
mn every year. The company operates in the tax bracket of 28%

57) Ms Piyush Metals wants to raise Rs. 35 lakhs and wants to adopt capital structure as:
25% from Debt with effective cost of debt of 8%, 35% from Preference Shares at 15% and
the rest from equity at the cost of 18%. The company is in the tax bracket of 33.33%.
You are required to calculate weighted average cost of capital

58) Mr Yashwardhan wants invest into NTPC and interested to know the risk associated with
it and wants to estimate beta with the following information for the last 5 years
Return of Market 11.75% 7% -3% 6% -2%
Return of NTPC 8% 6.75% -2% 8% 3%

59) Ms Sumanth Steela has operating of Rs. 2.95 million at the end of 31st March, 2023. The
company wants to expand its business operations with an investment of Rs. 2.50 million
which is expected to increase the operating income to Rs. 4.25 million. The company
contemplates to raise the required capital through two plans:
Plan A: 25% from Debt at the cost of 7%, 25% from Preference Shares at the cost of 8%
and the remaining from equity at the cost of 12%.
Plan A: 35% from Debt at the cost of 8%, 15% from Preference Shares at the cost of 9%
and the remaining from equity at the cost of 15%.
The company has an existing interest payment obligation of Rs.0.35 million and 10,000
shares outstanding with face value of Rs.100. The company falls in the tax bracket of 30%.
Please carry out EBIT-EPS analysis and advise which plan the company should adopt.

60) Mr Ram invests Rs 6.75 Million, for a period of 5 years with salvage value of nil. The
expected operating profit for the period are Rs 1.50 mn, Rs 1.65 mn, Rs 1.05 mn, Rs 1.0
mn and Rs 0.85 respectively and the interest obligation during the period include Rs 0. 25
mn every year. The company operates in the tax bracket of 26%
61) Ms Piyush Metals wants to raise Rs. 58 lakhs and wants to adopt capital structure as:
40% from Debt with effective cost of debt of 10%, 20% from Preference Shares at 14%
and the rest from equity at the cost of 18%. The company is in the tax bracket of 20%.
You are required to calculate weighted average cost of capital