Assignment Set - 1 Questions

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DRIVE SPRING 2017


PROGRAM MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER II
SUBJECT CODE & NAME MBA202 FINANCIAL MANAGEMENT
BOOK ID B1628
NUMBER OF ASSIGNMENTS, 2, 4 Credits, 30 marks each
CREDITS & MARKS

Note The Assignment is divided into 2 sets. You have to answer all questions in both sets.
Average score of both assignments scored by you will be considered as your IA score. Kindly
note that answers for 10 marks questions should be approximately of 400 words.

Q. Assignment Set -1 Marks Total


No Questions Marks
1. Explain the differences between wealth maximization and profit maximization. Explain
relation between finance and accounting
Differences between wealth maximization and profit maximization 5 10
Explanation of relation between finance and accounting 5
2. Explain about the doubling period and future value. Solve the below given problem:

Under the ABC Banks Cash Multiplier Scheme, deposits can be made for periods ranging
from 3 months to 5 years and for every quarter, interest is added to the principal. The
applicable rate of interest is 9% for deposits less than 23 months and 10% for periods more
than 24 months. What will be the amount of Rs. 1000 after 2 years?
Explanation of doubling period 2 10
Solving the problem 3
Explanation of future value 5
3. Write short notes on:
a) Irredeemable bonds
b) Zero coupon bonds
c) Valuation of Shares
Explanation of irredeemable bonds 3 10
Explanation of zero coupon bonds 3
Explanation on valuation of shares 4
Q. Assignment Set -2 Marks Total
No Questions Marks
1. Explain the factors affecting Capital Structure. Solve the below given problem:

Given below are two firms, A and B, which are identical in all aspects except the degree of
leverage employed by them. What is the average cost of capital of both firms?
Details of Firms A and B
Firm A Firm B
Net operating income EBIT Rs. 1, 00, 000 Rs. 1, 00, 000
Interest on debentures I Nil Rs. 25, 000
Equity earnings E Rs. 1, 00, 000 Rs. 75, 000
Cost of equity Ke 15% 15%
Cost of debentures Kd 10% 10%
Market value of equity S = E/Ke Rs. 6, 66, 667 Rs. 5,00, 000
Market value of debt B Nil Rs. 2, 50, 000
Total value of firm V Rs. 6, 66, 667 Rs. 7, 50, 000
Explanation of factors affecting capital structure 6 10
Solution for the problem 3
Interpretation 1
2. Explain the capital Budgeting process and its appraisals
Solve the below given problem:

Given below are the details on the cash flows of two projects A and B. Compute pay-back
period for A and B.
Cash flows of A and B
Year Project A cash flows (Rs.) Project B cash flows (Rs.)
0 (4,00,000) (5,00,000)
1 2,00,000 1,00,000
2 1,75,000 2,00,000
3 25,000 3,00,000
4 2,00,000 4,00,000
5 1,50,000 2,00,000
Explanation of capital budgeting process and its appraisals. 7 10
Solution for the problem 3
3. Explain the concepts of working capital. Explain the determinants of working capital.

Explanation of concepts of working capital 5 10


Explanation of determinants of working capital 5

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