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BBC 422

decision technique exam prepration note

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32 views3 pages

BBC 422

decision technique exam prepration note

Uploaded by

Saheel Razz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Date: 03/06/2023 Enrolment No.

:___________________

RK UNIVERSITY
BBA/SEM-IV/SUPPLEMENTARY/REMEDIAL/MAY-2023

BBC422: PRINCIPLE OF FINANCE

Time: 01:30 PM TO 04:30 PM Total Marks: 100

Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
4. Programmable calculator is not permissible.

SECTION – I

Q.1 (a) “Financial Management is all about Acquisition, Allocation and 08


Utilization of Funds.” Discuss in light of Importance of Finance
function for organization.
(b) Explain the different types of leverage, its use and importance. 08

Q.2 (a) Differentiate between Profit and Wealth maximization 08


(b) Suppose you have been appointed as a Finance Manager and
company needs your inputs on sources of finance. Explain it in 08
your words.
OR
Q.2 (a) Wealth Maximization Objective can overcome the weaknesses of
08
Profit Maximization Objective.” Comment
(b) How Role of Finance Manager has changed as compared to
08
Traditional times? Explain with relevant examples.

Q.3 (a) From the following information calculate operating leverage, 09


financial leverage and combined leverage and also write the
comments.
Particulars X Y Z
Output (Units) 1,50,000 37,500 2,50,000
Fixed Costs (₹) 1,00,000 1,50,000 37,500
Variable Costs (Per Unit) 0.5 3.75 0.05
Interest Expenses (₹) 12,500 20,000 -
Selling price (Per Unit) 1.50 12.50 0.25

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(b) The capital structure of Mohan ltd. Consists of an ordinary share 09
capital of ₹ 20,00,000 (₹ 100 Par value) ₹ 10,00,000 of 10%
debentures. Sales increased by 1,00,000 units to 1,20,000 units. The
selling price is ₹ 10 per unit, variable cost ₹ 6 per unit and fixed
expenses amounted to ₹ 2,00,000. The tax rate is 40%. You are required
to calculate the following.
1) Financial leverage and Operating leverage at 1,00,000 and
1,20,000 units.
2) Percentage of Increase in EPS
3) Comment on the behavior of operating and financial leverages in
relation to increase in production from 1,00,000 units to 1,20,000
units.
OR
Q.3 (a) 1. An investor deposits ₹ 10,000 at the end of each year for 5 years 09
at the rate of 8% per annum interest, compounded half yearly.
Find out the present value of the annuity.
2. Calculate the future value at the end of the 4 years of the
following series of payments at 9% rate of interest.
1. ₹ 1,000 at the end of the first year
2. ₹ 2,000 at the end of the second year
3. ₹ 3,000 at the end of the third year
4. ₹ 4,000 at the end of the fourth year
3. Calculate future value of an annuity of ₹ 4,000 deposited at the
end of each year at 6% for a period of 5 years.
(b) Find out the amount of EMI and also prepare loan amortization 09
schedule for 12 years from the following data.
Loan amount ₹ 35000
Present value factor of annuity is 5.421.

SECTION – II

Q.4 (a) Define the capital budgeting and also enumerate the
08
importance of capital budgeting.
(b) Explain Major Components and Types of Working Capital in
08
detail.

Q.5 (a) Write the meaning of Investment decision and its techniques for
08
selecting the project.
(b) Discuss various determinants for Dividend Policy Decisions. 08

OR
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Q.5 (a) A company is considering whether to purchase a new machine. 08
Machines A and B are available for ₹80,000 each. Earnings after
taxation are as follows:
Year Machine A Machine B
₹ ₹
1 24,000 8,000
2 32,000 24,000
3 40,000 32,000
4 24,000 48,000
5 16,000 32,000
Evaluate the two alternatives using the following: (a) payback method,
(b) Net Present Value. You should use discount rate as 10%.

(b) “Different business is having different policies for meeting its 08


working capital requirements” Discuss.

Q.6 (a) Beta Ltd. is considering the purchase of a new machine. Two 09
alternative machines A and B are suggested each costing ₹ 4,00,000.
Earnings after taxation are expected to be as follows:
Years PV of ₹ 1 @ Machine A (₹) Machine B (₹)
10%
1 0.91 40,000 1,20,000
2 0.83 1,20,000 1,60,000
3 0.75 1,60,000 2,00,000
4 0.68 2,40,000 1,20,000
5 0.62 1,60,000 80,000

The cost target return on capital is 10%. You are required to


compare the profit ability of machines and state which alternative of
the machines you consider financially preferable.

(b) Differentiate between Payback period and Discounting Payback 09


period with suitable example.
OR
Q.6 (a) Aggrotech Company Ltd. is considering two alternative machines, 09
first machine costs are ₹ 15,00,000 and estimated annual cash inflow
from it amounts to ₹ 5,00,000. The second machine costs ₹ 20,00,000
and its estimated cash inflow ₹ 5,50,000. Both the machines economic
life is 6 years. Suggest the management with the best alternative by
using payback period.
(b) Why dividend decision is so important for a business? Discuss 09
the rationale behind the same.
*************

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