AFM End term Assignment Guidelines

AFM End term Assignment Guidelines

Task 1: (60 marks)

1. Students need to discuss the meaning, process and importance of Financial planning for a Company. (200 words)

2. Discussions should be provided for the meaning, formula and importance of debt-equity ratio for a company. Calculate the debt-equity ratio to measure the capital structure of the company. Comment on the calculations. (200 words)

3. Students need to discuss what is capital Structure, importance, the types of the capital structure of the Company, factors affecting the choice of capital structure and optimal capital structure required for the company. Analyse the optimal capital structure of Sara ltd with the discussion of high or low leverage investment dynamics. (300 words)

4. Students are required to discuss the Financial decision involved when the Company decides to raise capital from different sources of funds.

(Financial decisions are taken under financial management, Financial decisions are three types – Investment decisions, Financing decisions and Dividend decisions. Discuss the meaning of three decisions and the factors affecting investment, financial and dividend decisions) (300 words)

5. Discussions must be provided for the meaning, importance, types of dividend policy and different factors affecting the dividend policy of a company. (300 words)

6. Students need to discuss the meaning, methods formula and examples of various Share valuation techniques. (300 words)

Task 2: (40 marks)

1. a. Calculate the cost of capital for individual components of capital and calculate the Company’s WACC. (need to provide the formula and workings for each calculation of the cost of capital) (300 words)

b. Discussion must be provided for the assumptions of cost of capital. (discuss how the cost of capital calculated for each component) (400 words)

c. Discuss the Criticisms and any other relevant points for assessing the investment.

(The existing company WACC reflects the company’s current gearing level and its existing k_e and k_{d. So, the factors need to be discussed for the current WACC} considered for project appraisal.) (300 words)

d. Based on the above discussions, conclude your discussion on the importance and uses WACC. (200 words)

References

At least ten (10) references in Harvard Referencing style.

1. Financial Management – IM Pandey.
2. Portfolio theory and financial analysis exercises – Robert Allan Hill
3. Introduction to Investment and Finance – Laris Woldike Peterson.
4. Fundamentals of financial management – James c. Van and John M. Wachowicz Jr.
5. Problems in the theory of optimal capital structure – Robichek and myers.
6. Cost of capital, capital structure and theory of investment – Modigliani and millar.