PROJECT SYNOPSIS

ON

COMPARISON OF WEIGHTED AVERAGE COST OF CAPITAL AND DETERMINING THE CAPITAL STRUCTURE OF NESTLE INDIA AND CADBURY INDIA LTD.

Submitted for partial fulfilment for the award of the Degree of:MASTER OF BUSINESS ADMINISTRATION (MBA 2011-2013) Under the supervision of (Ms. Sandeepa Kaur)

Submitted by Anika Munjal 174 Gautam Baswal 160

GITARATTAN INTERNATIONAL BUSINESS SCHOOL (Affiliated to Guru Gobind Singh Indraprastha University)

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GITARATTAN INTERNATIONAL BUSINESS SCHOOL
NOTE: Group Project Report will not be accepted without the cover page. Use A4 size paper with appropriate margins on left and right side. Only printed project reports will be accepted.

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EVALUATION AND FEEDBACK REPORT FROM FACULTY Subject/ Project Knowledge (10) Marks Research Data Analysis and Presentation Methodology Representation(10) (10) (10) Total (10) Converted Marks (10)

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SYNOPSIS
Title:
Comparison of weighted average Cost of capital and determining the capital structure of Nestle India and Cadbury India Ltd.

Group members:
Anika Munjal (174) Gautam Baswal (160)

Statement of the problem or Hypothesis:

The project is structured for the purpose of getting good insight of, Capital Structure and Cost of Capital, theory and its implication. The project focuses on cost of different Component of Capital and Optimal Capital Structure for minimizing the cost and risk. It will also discuss the different sources of funds, different approaches of cost of capital.

Objective/ Aim of the project :

Analysing the Financial statements of Nestle India and Cadbury India Ltd. for the year ending March 2011. Calculating the Weighted Average Cost of Capital. To compare the performance of both the companies by using Economic Value Added. To analyze optimum capital structure for both the companies.

Research Methodology:
Research methodology is a systematic way of solving a problem. It may be understood to study how research is done scientifically. Study design

The project will use a descriptive study design as it will be using the audited financial statements of Nestle India and Cadbury India Ltd. Sampling Sample size for this project will be the Balance Sheet, Income statement and additional information of both the companies Cadbury and Nestle India Ltd.

Sources of data Collection:

Data for this project has been collected from secondary sources: 1. 2. 3. 4. 5. Annual Report of the year 2011 Reference Books Internet Journals Magazines

Chapter Scheme:
The project will be presented in a number of chapters, starting with introduction and ending with conclusion. The tentative organization of the project is as under: Acknowledgement Certificate Declaration

Chapter 1: Introduction: The purpose of introduction would be to introduce the project to the readers in a short and concise manner. This introduction will contain: o Overview of the Industry as a whole o Profile of both the companies Chapter 2: Research Methodology:

The research methodology is a way to systematically solve the research problem. It will answer the questions like: o Why a research study has been undertaken?

o How the research problem has been defined? o What data have been collected? Chapter 3: Conceptual discussions

This chapter will explain all the theoretical concepts and terms being used in the project which will be referred from books, journals, magazines, newspapers etc. Attempts will be made to collect latest information by scanning articles published in periodicals, journals etc. Chapter 4: Data Analysis This chapter will present a detailed presentation of the analysis and findings of the study, with supporting data in the form of financial statements of both the companies. This will comprise the main body of the report and may extend over several sections. All the result would be presented in logical sequence and splited into readily identifiable sections. Chapter 5: Conclusion A statement of conclusion in non-technical language will be given so that all concerned can easily understand it. Based on data analysis presented in earlier chapters, relevant observations will be made and inferences will be drawn. Chapter 6: Bibliography Name of the reference books, journals, magazines, Annual report of the companies, website links will be mentioned here.

Usefulness:
The above analysis will be useful in: Getting the rate of return that Cadbury and Nestle India would receive if it invested its money someplace else with similar risk. Taking the decision that should the companies do business or should not do the business Getting the optimum capital structure. Deciding the cut-off rate for taking decisions relating to capital expenditure proposals.

Limitations:
Assigning the weights to different components of capital structure. The selection of capital structure to be used for determining the WACC is also not easy job.

 Comparison of weighted average cost of capital will be tough if there will be a huge difference between the profits of the two companies.