22100108
22100108
22100108
Name : .....................
B7FB7FED
Instructions to Private candidates only: This question paper contains two sections. Answer SECTION I questions in the
answer-book provided. SECTION II, Internal examination questions must be answered in the question paper itself. Follow
the detailed instructions given under SECTION II
SECTION I
Part A
Answer any ten questions.
Each question carries 2 marks.
4. XYZ Ltd. issues 50000, 10 % debentures of Rs.100 each at a discount of 5 %. The debentures are
redeemable at premium of 5% after 10 years. The tax rate applicable to the company is 50%.
Compute cost of debt.
5. Tisco Ltd issued 150000, 20% preference shares of Rs 75/- each. Calculate the cost of preference
capital if the shares are issued at discount of 9% and the cost of issue is Rs 5per share.
9. From the following information you are required to calculate expected working capital requirement
using operating cycle method.
Operating cycle 15 days
Cost of goods sold 12,00,000
Minimum desired level of cash to be maintained 18,750
Assume 360 days in a year
11. The return on investment of B Ltd. is 20% and its retention ratio is 60%. Find out growth rate?
14. A company made an issue of 50000, Rs 20 equity shares, with expectation of payment of dividend
at the rate of 25% per share after five years. The issuing expenses are estimated at 4% of its face
value. The company earned a profit of Rs 100000/- and decided to retain 1/2 of its profits for future
capital need. Compute cost of retained earnings; assume the brokerage is 2% of its face value. The
underwriting commission is 2.5% of its issue price.
16. A project under consideration by X Ltd requires a capital investment of Rs. 60 lakhs. Interest on term
loan is 10% per annum and tax rate is 50%. Calculate the point of indifference for the project if the
debt –equity ratio insisted by the financing agencies is 2:1.
17. Bajaj Ltd issues 10000, 12% debentures of Rs 50/- each at a discount of 25%. The cost of floatation
is 5%. The rate of tax is applicable to the company is 45%. Compute the cost of debt capital.
18. Write Short Notes on the following: (1).Capital Budgeting (2) Cut-off point (3) Pay-Back period (4)
Risk and Uncertainty (5) NPV and IRR.
19. What are the sources used for financing temporary requirement of working capital?
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21. What do you mean by bonus share? Explain effects of issue of bonus shares.
(6×5=30)
Part C
Answer any two questions.
Each question carries 15 marks.
22. A company has to make a choice between three possible investments. Project A, B and C, the
immediate capital outlay on each being Rs.11,000. Each will continue for 8 Years and it has been
decided that a discount rate of 10% is acceptable for all three. The cash flows for the three projects
are as follows:
Year 1 2 3 4 5
A Rs.1,000 Rs 2,000 Rs.3,000 Rs.4,000 Rs.5,000
B Rs.3,000 Rs 2,000 Rs.3,000 Rs 2,000 Rs.5,000
C Rs.1,000 Rs.3,000 Rs.3,000 Rs 2,000 Rs.4,000
PV Factor at 0.909 0.826 0.683 0.751 0.621
10%
Which project would you recommend and why?
23. Atm Ltd Has a sale of Rs 500000/-. The variable costs are 45% the sales, while the fixed operating
cost amounts to Rs 100000/- and the amount on interest on long term debt is Rs 60000/-. Calculate
the combined leverage and find out the impact if sales decreased by 10%.
From the following details calculate weighted average cost of capital of MM Ltd assuming tax rate of
24.
25%. The total liability of the company includes 10000 equity shares of Rs 10 each, reserves of Rs
20000/- and 10% borrowed fund amounting Rs 75000/- . The firms total profit after interest and
taxes for the current year is Rs 15000/- , the current market price of share is Rs 15/-.
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