= / ted as malpractice, 50, wi ion, appeal to evaluator and for equations written eg, 4248 USN 14MBA22 Second Semester MBA Degree Examination, Dec.2015/Jan.2016 Financial Management Time: 3 hrs. Max. Marks. ide SECTION -A Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1 State the three types of financial decisions. (3 now 2 What do you mean by Angel investing? (03 Marke: 3. Define cost of capital. (03 Marks) 4 What do you mean by derivatives? (03 Marks) 5 State the meaning of mergers and acquisitions. (03 Marks) 6 What is Stock dividend? (03 Marks) 7 What do you mean by discounted pay back period? (03 Marks) SECTION - B Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1 Explain any seven factors affecting dividend policy of an organisation (07 Marks) 2. Distinguish between capital market and money market. (07 Marks) 3 Explain the changing role of finance managers. 4 Calculate operating, financial and combined leverage from the following data Share capital (shares of 100 each) 10,00,000 8% Debentures 5,00,000 Sales 5,00,000 Variable cost 40% of sales. Fixed cost % 1,00,000 Tax Rate 30%. (07 Marks) 5 ABC Ltd issues 12% debentures of & 6,00,000. The tax rate applicable is 30%. Compute the cost of debt capital i) at par ii) at 10% premium and iii) at 10% discount (07 Marks) 6 Compute MIRR of the following project Year 0 1 2 3 4 5 6 | Cash flow () | 4,85,000 | 85.400 | 96,500 | 1,32,600 | 2,16,000 | 7,24.000 | 98,500 | Cost of capital 12%. (07 Marks) 7 Write a note on Capital Asset Pricing Model (CAPM).14MBA22 SECTION - C Note : Answer any FOUR questions from Q.No.1 t0 Q.No.7. Compute the following a. A company raised a loan of 2 50,00,000 from a bank @ 9% interest p.a. The amount has to be paid back in 5 equal annual installments. Calculate the installment amount. b. A person wishes to go on world tour after 10 years. The expected cost of which is % 20,00,000. How much amount he should have every year at 10% p.a. to fulfill his dream? c. Mr. X deposited % 1000 at 10% interest with half yearly compounding. He wants to know the effective ROI. If the interest is compounded quarterly, what is the effective rate of interest? (10 Marks) ‘A company plans to undertake a project for placing a new product in the market. The ‘company cut off rate is 12%. It was estimated that the project would cost % 40.00,000 in plant and machinery in addition to working capital % 10,00,000 at the end of life of the project. Scrap value ~ 10%. After tax, profits were estimated as follows ‘Year 1 2 3 4 5 PAT (%) | 3,00,000 | 8,00,000 | 13,00,000 | 5,00,000 | 4,00,000 DF12%| 0.893 | 0.797 | 0.712 | 0.636 | 0.567 Evaluate the project under: i) PBP ii) ARR iii) NPV. (10 Marks) On the basis of following information, determine the weighted average cost of capital. (Assume tax rate is 40%). (10 Marks) Capital component | Details @) Equity share capital | 10,00,000 equity shares of € 100 market value per share € 250. Growth rate of dividend ~ 6%. Dividend per equity share & 25. b) Retained eamings | % 5 crores. ©) Debentures 1,00,000 debentures of € 100 each. Interest rate 15%, Current market value & 110 each. @) Preference capital | 50,000 shares of & 100 each dividend rate 11% current market f price % 90 each. Discuss the dangers of excess working capital and inadequate working capital. (10 Marks) Chandra Ltd has a capital of % 10,00,000 divided into 1,00,000 equity shares of @ 10 each. The management desires to raise another 10,00,000 to finance a major expansion programme. There are four possible financial plans : a, Allequity shares. b. All Debentures carrying 8% interest. c. 2 5,00,000 in equity shares and 2 5,00,000 in debentures carrying 10% interest. d. 2 5,00,000 in equity shares and % 5,00,000 in 10% preference shares. You are required to calculate EPS if the EBIT is % 6,00,000. Assume tax rate 30%, (10 Marks) Briefly discuss the different sources of financing available for a company (10 Marks)14MBA22 7 A plastic manufacturing company is considering replacing old machine which was fully depreciated for tax purposes with a new machine costing % 40,000. The new machine will be depreciated over its eight year life. It is estimated that the new machine will reduce labour costs by & 8,000 per year. The management believes that there will be no change in other expenses and revenues of the firm due to the machine. The company requires an after tax return on investment of 10%. Its tax rate is 30%, The company’s income statement for the current year is given for other information. Income statement for the current year (2) Sales 5,00,000 Costs Materials & 1,50,000 | Labour 2,00,000 Factory & office exp. 40,000 Depreciation 40,000 | 4,30,000 | Profit before tax 70,000 Less Tax @ 30% | _ 21,000 Profit After Tax__| 49,000 | Should the company buy the new machine? You may assume the company follows SLM of depreciation. (10 Marks) SECTION -D CASE STUDY — [ Compulsory | 1. A company is currently operating at 60 percent level, producing 36,000 units of a product and proposes to increase. in capacity utilization in the coming year by 33.33% over the existing level of production. The following data has been supplied, Cost structure per unit_z Raw Materials 80. Wages (variables) | 40 ‘Overheads (variables) | 40 Fixed overheads 20 Profit 60. Selling price 240 Additional Information : a), Raw materials will remain in stores for | month before being issued for production, Materials will remain in process for further one month. Supplier grant 3 months credits to the company. b) Finished goods remain in stores for | month. ¢) Debtors are allowed credit for 2 month. 4) Average time lag in payment of wages and overheads is 1 month and these expenses accrue evenly throughout the production cycle. ©) Selling price is estimated to be increased by 10%. You are required to prepare : 1)_ Projected profitability statement. 2) _A statement showing working capital requirements at the new level assuming minimum cash balance of % 50,000. (20 Marks)usn [| {] Aly fae [alsa 14MBA22 Second Semester MBA Degree Examination, Dec.2016/Jan.2017 Financial Management ‘Time: 3 hrs. Max. Marks:100 SECTION -A Note : Answer any FOUR questions from Q.No.1 to O.No. 1 What do you understand by *Angel Investing? (03 Marks) 2 Mr. X makes a deposit of Rs 10,000 in a bank which pays 8% interest compounded annually for 8 years. You are required to find out the amount to be received by him alter 8 years. (03 Marks) i a q 2 se What is marginal cost of capital? (03 Marks) ee ‘A company is considering the purchase of a machinery costing Rs 36,000. The machine can fe reduce annual labour cost by Rs 6000. Calculate the payback period. (03 Marks) be ‘What is operating cycle? (03 Marks) a g ‘What is optimum capital structure? (03 Marks) ge Define financial engineering. (03 Marks) u SECTION -B ie Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 42 1 Biriely explain the functions of Financial Management. (07 Marks) 2% 2 What is private equity? Mention the advantages of private equity. (07 Marks) 3 3. Explain the capital budgeting process. (07 Marks) 52 4 Am investor deposits Rs 200 in a bank account for 5 years at 8% interest. Find out the amount eé which he will have in his account if interest is compounded Se i) Annually ii) Semi—annually (6 month) (07 Marks) 7. The following information is available in respect of a trading firm. : i) Onan average, debtors are collected after 15 days, inventories have an average holding, period of 25 days and creditors’ payment period on an average is 10 days. ii) The firm spends a total of Rs 40 lakh annually at a constant rate iii) Itcan earn 10% on investment. For the above information, compute a) The cash cycle ) Cash turn over and ©) Minimum amount of cash to be maintained to meet payments as they become due 4d) Savings by reducing the average inventory holding period by 10 days. (07 Marks) Lof3 ¢ § 8 iii) Quarterly. (07 Marks) £5 5 A-company issues Rs 10, 00,000, 10% redeemable debentures at a discount of 3%. The cost of oe floatation amounts to Rs 30,000. The debentures are redeemable after 5 years at par. Calculate gF after tax cost of debt assuming a tax rate of 50%. (07 Marks) e8 5 é 6 Calculate operating leverage, financial leverage and combined leverage from the following data z z Sales (1,00,000 units) Rs 2,00,000 2 ‘Variable cost per units Rs 0.70 or Fixed cost Rs 65,000 3 Interest charges Rs 15,000 i & £14MBA22 SECTION -C Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1 Write short note on the following : i) Lease financing, finance lease and operating lease (06 Marks) ii) Venture capital (04 Marks) 2. Explain the basic approaches to determine an appropriate current asset financing mix. (10 Marks) 3 Explain the type of mergers. Also explain the major economic advantages of a merger. (10 Marks) 4 Given below is the summary of the balance sheet of the company as at 31* March 2016. Liabilities ‘Amount | Assets | Amount Equity share capital _ 20,000 shares of Rs 10 each | 2:00.000 | Fixed asset | 4,00,000 Reserves and surplus 1,30,000 | Investment | 50,000 Se Sepeatines 1,70,000 | Current asset | 2,00,000 current liabilities Short term loans 1,00,000 ‘Trade creditors 50,000 6,50,000 6,50,000 You are required to calculate WACC of the company using Balance sheet valuation. The following additional information is also available : i) 8% debentures were issued at par ii) All interest payment is up to date and equity dividend is currently 12% iii) Short term loan carries interest 18% p.a iv) The shares and debentures of the company are all quoted on stock exchange and current market prices are as follows : Equity share Rs 14 each 8% debentures Rs 98 each ¥) The rate of tax for the company may be taken at 50%. (10 Marks) 5 The Directors of ABC Ltd., are contemplating the purchase of a machine: two alternative machines (old machine and new machine) are under consideration. Ignoring interest but considering tax at 50% of net earnings, calculate annual cash inflow from both the alternatives. ‘The following are the details : ‘Old machine | New machine Purchase prive Rs 40,000 | Rs 60,000 Estimated life of machine 10 years | 10 years ‘Machine running hours per annum | 2000 hrs | 2000 hrs Units per hour 24 36 ‘Wages per running hour Rs3 S525 Power per annum, Rs2,000 | Rs 4,500 Consumable stores per annum | Rs6000 | Rs 7,500 ‘Allother charges per annum Rs 8,000 | Rs 9,000 “Material cost per unit Rs 0.50 Rs0.50 Selling price per unit Rs 1.25 Rsi.25 You may assume that the above information regarding sales and cost of sales will hold well through the economic life of each of the machines. (10 Marks) 20f314MBA22 6 A company has an investment opportunity costing Rs 40,000 with the following expected net cash inflows Year | Net cash inflows 7.000 7,000 7,000 7,000 7,000 8,000 10,000 15,000 9 10,000 10 4,000) Determine the NPV and IRR of the investment opportunity. The cost of capital of the company is 10% (10 Marks) 7 If the discount/required rate is 10%, compute the present value of the cash flow streams detailed below a) Rs 100 at the end of year I (one) ; b) Rs 100 at the end of year 4; ©) Rs 100 at the end of i) year 3 and ii) year 5 and d) Rs 100 for the next 10 years (for years | through 10) (10 Marks) TION - D CASE STUDY —[ Compulsory | ‘The management of Arun Ltd has called for a statement showing the working capital needed to finance a level of activity of 3,00,000 units of output for the year. The cost structure for the company’s product, for the above mentioned activity level, is detailed below Per unit Rs Raw ~ materials 20 Direct labour 3 Over heads 15 Total 40 Profit| 10 Selling price/unit [50 ) Past experience indicates that raw materials are held in stock, on an average for two months, b) Work-in-progress (100% complete is regard to materials and 50% for labour and overheads) will approximately be to half a month's production, ©) Finished goods remain in warehouse, on an average for a month, 4) Suppliers of materials extend a month's credit. ©) Two months credit is allowed to debtors, calculation of debtors may be made at selling price, 1) A minimum cash balance of Rs 25,000 is expected to be maintained. 8). The production pattern is assumed to be even during the year. Prepare the statement for working capital requirements, 20 Marks) 30f3@ be treated as malpractice written eg, 42+8 = 50, wi vm [TTT TTT i 14MBA22 Second Semester MBA Degree Examination, Dec.2018/Jan.2019 Financial Management Time: 3 hrs, Max. Marks:100 Note: Use of P.V.tables is permitted. SECTION - A Note : Answer any FOUR questions from Q.No.1 to Q.No. What d you mean by cumulative preference share? (03 Marks) Define the term financial leverage. (03 Marks) ‘What is the conservative approach to financing a firm’s funds requirements? (03 Marks) What is financial modeling? (03 Marks) An issue of 15% irredeemable debenture with face value of Rs.100, assume the rate of corporate tax is (i) zero (ii) 40%. Calculate the cost of debt. (03 Marks) What do you mean by capital rationing? (03 Marks) What is money market? (03 Marks) SECTION - B Note’: Answer any FOUR questions from Q.No.1 to Q.No.7. Describe the important steps involved if’ the capital budgeting process. (07 Marks) ‘What is merger? Explain in brief its types, (07 Marks) Explain the interface of financial management with other functional areas. (07 Marks) The Shares of a leather company are selling at'Rs.30 per share. The firm has paid dividend at the Tate Of Rs.3 per share last year. The estimated growth of the company is approximately 6% per year. i) Determine the cost of equity capital of the company. ii) Determine the new cost of equity capital if the anticipated growth rate of the firm (1) rises 10 9% (2) fills to 3%, (07 Marks) A firm is due to receive Rs:1,00,000 a year for the next 5 years and Rs.1,40,000 at the end of the sixth year. Money is worth 12%. What is the present value of the stream? (07 Marks) What is meant by lease-financing? Briefly explain its types, (07 Marks) 1 of314MBA22 7 Calculate the operating cycle of Anand Ltd. The enterprise gets 30 days credit from its suppliers. All sales are based on credit. Assume 365 days in a year. (07 Marks) Raw materials consumption per annum | 8,42,000 Annual cost of production 14,25,000 Annual cost of sales 15,30,000 Annual sales 19,50,000 Current assets: Raw material 1,24,000 Work in progress 72,000 Debtors 2,60,000 Finished goods 1,50,000 SECTION -C Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1 What are the primary objectives of financial management? Explain (10 Marks) 2. Briefly explain the factors affecting dividend policies. (10 Marks) 3. Differentiate between primary and secondary market (10 Marks) 4° Three financing plans are available to Ahuja Products, which ‘needs Rs,10,00,000 for construction of a new plant. Ahuja wants to maximize EPS, Currently the equity share is selling for Rs.30 per share, The EBIT resulting from the plant operation is Rs.1,50,000 per year. Ahuja’s marginal tax-rate is 50%. Money can be borrowed at the rates indicated. Up to Rs.1,00,000 at-10% Over Rs.1,00,000 to Rs.5,00,000 at 14% Over Rs.5,00,000 at 18%. ‘The three financing plans are as follows: Plan X: Use Rs. 100,000 debt; expected EBIT = Rs.2,50,000 Plan Y: Use of Rs.3,00,000 debt; expected EBIT = RS.3,50,000 Plan Z: Use of Rs.6,00,000 debt; expected EBIT = Rs.5,00,000 Determine the EPS for these three plans and indicate the financing plan which will result in the highest EPS. (10 Marks) 5 The following data are available for X Ltd. Selling price per unit Rs.120 Variable cost per unit Rs.70 Total fixed cost Rs.2,00,000, i) What is operating leverage when X Ltd, produces and sells 6000 units? ii) What is the percentage change that will occur in the EBIT of X Ltd, if output increases by 5%? (10 Marks) 20f314MBA22 A proforma cost sheet of a company provides the following particulars: Elements of cost | Amount per unit Materials 50% Direct labour 15% Overheads | 15% ‘The following further particulars are a i) Itis proposed to maintain a level of activity of 3,00,000 units. ii) Selling price is Rs.20 per unit iii) Raw materials are expected to be in the stores for an average of 2 ionths. iv) Material will be in process on average of one month, v) Finished goods are required to be in stock for an average of 2 months. vi) Credit allowed to debtors is 2 months. vii) Credit allowed by suppliers is 2 months. Estimate the working capital requirements. (10 Marks) Sushma Corporation has the following book value of capital structure. Securities Amount (Rs.) | After tax cost | Equity capital (15,00,000 shares at Rs.10 each) | 1,50,00,000 10% preference shares 50,00,000| 10% Retained earnings 1,00,00,000 13% debentures 60,00,000} 13% ‘Term loan (12%) 70,00,000| 12% - a 4,30, 00 Expected dividend is Rs.2 per share. Calculate weighted average cost. (10 Marks) SECTION -D CASE STUDY —[ Compulsory | Following is the data regarding two projects being considered, The required rate of return is 10%. Tax rate is 50%, depreciation which is charged on straight line method. [ Project Aj] Project B Initial outlay (RS) 1,00,000) 1,40,000 Salvage value (Rs.) 20,000 Earnings before depreciation and taxes, Year i 25,000} 40,000 2 25,000} 40,000 | 3 20,000 | 40,000 4 20,000] 40,000 SS 5 25,000 | 40,000 Evaluate the projects with regard to their viability by NPV method. Which of the two projects = should be accepted? (20 Marks) seats 3 0f350, will be treated as malpractice son the remaining blank pages. s written eg. 42+8 draw diagonal cross Important Note: 1. On completing your answers, compulsor 2. Any revealing usw [1 [py zw E mel Ala [sl 14MBA22 Second Semester MBA Degree Examination, Dec.2017/Jan.2018 Financial Management e: 3 hrs. Max. Marks:100 Note: Use of Time value table is permitted. SECTION - A Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1 What do you mean by seed capital? \ (03 Marks) 2. Define cost of capital, Se < (03 Marks) 3° What is factoring? 9) (03 Marks) 4 Ifthe interest rate is 12%, what are the doubling periods as per rule of 72. and 692 (03 Marks) 5 Name the various kinds of financial derivatives! (03 Marks) 6 What do you mean by behavioural finance? (03 Marks) 7 What is ietter of credit? (03 Marks) SECTION - 8 Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1A company offers 12% rate of interest on deposits. What is the effective rate of interest if itis compound (i half yearly, (ii) quarterly, (iii) monthly? (07 Marks) 2 Write a note on long term: soutces of funds which can be raised within India, (07 Marks) 3. The balance sheet of « company is as under: Liabilitios ‘Amt Asset ‘Amt Equity capital (Rs.10) | 60,000 | Fixed Assets | 1,75,000 80,000 | Current assets | 25,000 Retaihed ¢amings 20,000 Cufrent liabilities 40,000 2 2,00,000 | 2,00,000 ‘The company’s total assets turnover is 3 times, its fixed operating cost is Rs.1,00,000 and its variable operating cost is 40% of sales, tax rate is 40%. Calculate the degree [3 |y 14MBA22 Second Semester MBA Degree Examination, June/July 2018 Financial Management Time: 3 hrs. Max. Marks:100 SECTION-A Note : 1. Answer any FOUR questions from Q.No.1 to 0.No. 2. Use of Time Vatue Tables is permitted. (Both Present and Future value tables). 1 What is Financial Management? + (03 Marks) 2 What is Primary Market? + (03 Marks) 3 > What do you mean by. time value of money? (03 Marks) 4 State the differences between Forward and Futures, (03 Marks) 5 What do you mean by Behavioral Finance? (03 Marks) 6 Whatis Dividend Policy? - (03 Marks) 7 Define Operating Cycle. (03 Marks) SECTION Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 1. Discuss the emerging role of Finance Managers.” (07 Marks) 2 Explain the factors affecting dividend policy decisions.” (07 Marks) + 3 What is Foreign Exchange Market? What are its features?" (07 Marks) 4° What are the discounted ‘Investment Evaluation Techniques”? Explain. (07 Marks) 5 Samarth Enterprises Ltd., is considering to distribute its profits of Rs 80,000 to its shareholders. Shareholders are expected to eam 18% on their investment, they are in 30% tax bracket and incur a brokerage cost of 3% on the)ré — investment of dividend receipt. The firm can earn 12% on the retained earnings. What is the cost of Retained Eamings? Should the firm distribute its profits to shareholders? (07 Marks) Suppose a firm borrows Rs 10,00,000 at an interest rate of 15% p.a and the loan is to be repaid in 5 equal installments payable at the end-of each of next $ years. Prepare loan amortization schedule (07 Marks) Hemakesh Ltd., is setting a project with a cost of Rs 50,00,000. It is considering the following three alternatives for financing the project. Capital Structure | Alterriative - [| Alternative - 11 | Altemative - Il Equity share capital] 50,00,000 | 40,00,000 20,00,000 (EV of Rs 10 each) 15% debentures. Nil 10,00,000 30,00,000 ‘Total 50,00,000) 50,00,000 '50,00,000 ‘The Company's estimated EBIT is Rs 20,00,000 p.a. and tax rate is 30%. Determine (EPS). Earnings. per share and suggest which alternative is better for financing the project. (07 Marks) 1of314MBA22 SECTION -C Note : Answer any FOUR questions from Q.No.1 to Q.No. Elucidate the various sources of Long ~ term funds: (oars) Explain the factors influencing working capital requirements of a firmy (10 Marks) What do you mean by derivatives? What are its types? Explain (10 Marks) Determine the following : i) Future value of Rs 1000 deposited in five year time deposit scheme in a bank, which eams 9.5% p.a. compounded semi — annually. ii) Future value of annuity of Rs 1000 p.m. deposited in two year RD A/c @ 9% pa. iii) Present value of Rs 1000 receivable 10 years hence, assume a discount rate of 10%. iv) Present value‘of'annuity of Rs 1000 p.a payable for a period of eight years. Interest rate prevailing in the market is 9% p.a. (10 Marks) A firm's. fier ~ tax cost of debt is 8%, cost of preference shares is 14% and equity shares are selling at Rs 20 per share, expected dividend per share is Rs 2 and it will grow (@7% p.a. The firm has the following capital structure. Debteapital Rs 300000 Pref. capital Rs 200000 Equity capital Rs 500000 Total Rs 10,00,000 ‘The firm wishes to raise Rs 500000 for expansion plan of its plant. It estimates Rs 100000 retained earnings and balance as follows. Long term debt Rs 300000 Pref. share capital Rs 100000 Determine Marginal cost of capital. (10 Marks) From the following details you are required to make an assessment of the average amount of working capital requirement of AB Ltd. 10 Marks) Ttems ‘Average Period of | Estimate for the first credit year (RS) Purchase of R.Ms Sweeks 26,00,000 ‘Wages 1.5 weeks 1950000 ‘Overheads : Rent & Rates 6 months 100000 Salaries T month 800000 ‘Other overheads 2 months 750000, Sales (Cash) & Nil 200000 Sales (Credit) Zmonths ‘6000000 ‘Average amount oF stock @ Nil 400000 Inventory ‘Average amount of undrawn Nil 300000 profit Itis assumed that all expenses and incomes were made at even rate for the year and a minimum cash balance of Rs 100000 is maintained. 20f314MBA22 4 7 A firm has sales of Rs 20,0000, variable cost.6fRs 1400000 and fixed cost of Rs 400000 and a debt of Rs 1000000 @ 10% interest p.a. What are operating , financial and combined leverages? If the firm wants to double its earnings before Interest and ‘Tax (EBIT), how much of rise in sales would be needed on a percentage basis? (10 Marks) SECTION. D ‘CASE STUDY — | Compulsory | marth Enterprises Ltd., is considering two projects, Project M & Project N, each of which requires an initial outlay of Rs 50 million, having life of 4 years and no salvage value. The expected flows from these projects are ‘Year | Project - M | Project — N (Amt Rs in Million) bt in 38 2 19 22 3 32 18 4 37 10 1. What is the discounted payback period for each of the projects if the cost of capital is 12%? (10 Marks) If the two projects are independent and the cost of capital is 12%, which project (s) should the firm invest in based on NPV method? (10 Marks) 30f314MBA22 - 1 LLL Second Semester MBA Degree Examination, June/July 2019 ancial Management brs, Max. Marks:100, Not Use of Interest factor table is permitted. SECTION - A identifica 3. Suppose a firm borrows Rs.10,00,000 at an interest rate of 15% and loan is to be repaid in 5 equal installments payable at the end of next 5 years. Determine equated annual installement? g Note : Answer any FOUR questions from Q.No.I to Q.No.7. i 1 What are the objectives of Financial Management? (03 Marks) % 2. If you have invested Rs.12000 at the rate of 8% interest? What will be the time required to double this money? (03 Marks) 3. Mention the techniques of investment decision. (03 Marks) 4) What is leverage? What are its types? (03 Marks) i 5 What is time value of money? (03 Marks) 2 6 What do you mean by operating cycle? (03 Marks) 27 Whats forex market? (03 Maris) 2 8 SECTION-B 4 q Note : Answer any FOUR questions from Q.No.1 to Q.No.7. 5 © 1 What is CAPM model? What are its assumptions? (07 Marks) i 2 Briefly explain the changing role of finance manager. (07 Marks) 2 ae Prepare loan amortization schedule. (07 Marks) ee 8&4 Enumerate the different types of working capital. (07 Marks) &2 = § From the following data compute operating cycle and cash cycle. Assume 360 days in a year g __ 4" (07 Marks) Z [ Stock of raw=miater 20000" | q Work in progress 14000 g Finished goods ~| 21000 . Purchases 96000 Cost of goods sold 140000 Sales 160000 Debtors | 32000 [ Creditors [16000 10f314MBA22 ‘The XYZ Ltd investment outlay of Rs.100000. The cash flow associated with an investment are given below: Year 1 2 Ba I ] CFAT and BD | 25000 | 40000 50000 40000 30000 | Calculate discounted pay back period at 10% discount rate. (07 Marks) Briefly explain the different forms of dividend, (07 Marks) SECTION -C Note : Answer any FOUR questions from Q.No.1 to Q.No.7. Briefly describe the different sources of finance. (10 Marks) For the following alternatives calculate amount at the end of the deposit period. (10 Marks) | Period Deposited | Interest | No. of years | amount Annually 6000. 10% [7 ‘Semi-annually [4000 16% [6 | Quarterly 5000 12% [4 Monthly 3000 12% [3 [Bi-monthly™ | 2000 10% [5 A company has to choose between 2:projects namely A and B. The initial capital outlay of 2 Projects are Rs. 135000 and Rs, 2,40,000 respectively for A and B. The cost of capital of the company is 16%. The annual cash flows after tax and before depreciation as follows: Year 1 2 3 4 3 ] Project A ~ 30000 132000 84000 84000 | [Project B_|'60000 84000 96000 102000 ‘90000 | You are required to calculate the NPV for each project. (10 Marks) Explain the factors influencing an dividend policy. (10 Marks) While preparing a project report on behalf of a client you have collected the following facts Estimate the:net working capital: Raw-material ~80 Direct labour =30 ‘Overheads (exclusive depr of Rs..10) ~ 60 Total Cost = Rs 170 Additional information (i) Selling price/PU — Rs.200, (ii) No. of units produced 104000 units. (iti) Raw ~ material in stock — 4 weeks (iv) Workin progress (50%) ~ 2 weeks (¥) Finished goods in stock - 4 weeks (vi) Credit allowed by suppliers - 4 weeks (vil) Credit allowed by debtors ~ 8 weeks (viii) Lag in payment of wages ~ 1.5 weeks. (ix) Cash at bank — Rs, 25000 (10 Marks) 20f3“SAVE 0, ge SZ 6) “Briefly explain the different factors influencing in capital structure, ‘ iF Ro Lh QS, Explain the following terms: (i) Derivatives (ii) Merger and Acquistions (iii) Hybrid finance. (iv) Private equity SECTION - D CASE STUDY ~ [ Compulsory | From the following prepare income statement of A, B and C. [A Bic Financial leverage eY 3:1 (41/24 Interest (Rs.) 200 [300 | 1000 | Operating leverage 4:1 [5:1[ 321 Variable cost as.a% of sales | 66.67% | 75% | 50% Income tax rate 45% | 45% | 45% 30f3 14MBA22 (40 Marks) (10 Marks) (20 Marks)ages, 50, willbe treated as malpractice, of, 8 = iagonal cross lines on the remaining blank ps peal {o evaluator and /or equations written e npulsorily draw di ing your answers, com g oF identification, a % uss |] [LE 14MBA22 Second Semester MBA. Degree Examination, June/July 2016 Financial Management Time: 3 brs, Max. Mark: 1a SECTION - A te Note : Answer any FOUR questions from Q.No.1 to O.No. 1 What is time value of Money? &® (03 Marks) 2 Whatis Money Market? . (03 Marks) 3 What do you mean by Capital budgeting? (03 Marks) 4 What is Dividend Policy? (03 Marks) 5 What do you mean by Behavioral finance? (03 Marks) 6 What is meant by Cost of Capital? (03 Marks) 7 What is Hybridge Financing? (03 Marks) segtion. « Note : Answer any Ee ‘questions from Q.No.1 to O.No.7. 1 Explain the types of derivatives. (07 Marks) 2 Explain the factors intepe Gapital structure decisions. (07 Marks) 3° What are the Principles gm flow estimation? (07 Marks) 4° Write a note on Ss ‘market. (07 Marks) ofRs 1,000 deposited in five years in a bank which ems interest 9 S%pa ded semi annually. value ofan annuity of Rs 1000 P.M which deposited in a two year RD Ale at 9% P.a sent value of Rs 1000 receivable 10 ‘years hence, assume a discount rate of 10%. Yesent value of an annuity of Rs 1000 P.a payable for aperiod of eight years, Interest rate is MPa, (07 Marks) Z 6 ARC has currently equity capita! consisting of 15,000 equity shares of Rs 100 each, The Management is planning to raise Rs 25,00,000 to finance a major program of expansion and is considering 3 alternative method of financing, i) To issue 25,000 equity shares of Rs 100 each. ii) To issue 25,000 8% debentures of Rs 100 each, ’ fii) To issue 25,000 8% preference shares of Rs 100 each. ‘The Company's EBIT is Rs 8,00,000. Assume a corporate rate 50%, determine EPS in each altemative and comment on the results. . (07 Marks)14MBA22 7 Zenith Ltd has provided the following data : Profit and Loss Account data : Sales Rs 500 lacs, cost of goods sold Rs 360 lacs. Balance sheet Data (Amount Rs in lacs). [Particulars Beginning of 2014 | End of 2014 S Inventories 60 64 ye Accounts receivables 80 88 Accounts payables 40 46 Ko) What is the length of the operating cycle and cash cycle? Assume 360 day eo) @year for calculation. WO Coratans) SECTION - C oe Note : Answer any FOUR questions from O.No.KW0.No.7. 1 Elucidate the factors influencing working capital requirements We (10 Marks) 2 Discuss the various long term sources of funds. o (10 Marks) 3 “Wealth maximization objective is superior to pgofit maximization objective”. Do you j up RH agree? Y (10 Marks) 4 A firms after ~ tax cost of capital of the specific sources is as follows : Cost of debt 8%, Cost of equity 17% Egst of preference shares 14%. (10 Marks) Ithas the following capital struc! E Debt capital Rs 3,00,000° Preference capital Rs 2,00,04 Equity capital Rs 5,01 000 Total Rs Firm wishes to aS sso for expansion of its plan. It estimates Rs 1,00,000 retained earniphyg hd balance as : Long term debt Rs 3,00,000 and Preference capital Rs 1,00,000,48@ermine the cost of capital (Ks) by using i) Histori@iWveights and ii) Marginal weights. 5 Whilefxtparing a project report on behalf of a client, you have collected the following f Se Estimated cost per unit of production : Raw Materials Rs 80.00 Direct labour Rs 30.00 Overheads (Depreciation of Rs 20 per unit included) Rs 70.00 Total cost. “Rs 180.00 Add profit Rs_20.00 Selling price Rs 200.00 Additional Information : i) Production is 1.04,000 units per annum. ii) Raw materials are in stock for 30 days. iii) WIP period is 15 days ; assume 100% completion in respect of raw materials and 50% in respect of conversion costs.NS) S 14MBA22 iv) Finished goods are in stock for 30 days. ¥)_ Credit allowed by suppliers is 30 days. vi) Credit allowed by debtors is 60 days vii) Lag in payment of overheads is 15 days. > Cash at bank is expected to be Rs 25,000. You may assume that production is eagriSg™ evenly throughout the year (360 days) and wages acre similarly. Estimate a working capital required for that project and add 10% to your computed figure {3 allow for contingencies. pO comms Suppose a firm borrows Rs 10,00,000 at an interest rate of 15% p.s ¢ loan is to be repaid in five equal installments payable at the end of each of. nea ‘years. i) Determine Equated Annual installment: Sy ii) Prepare loan Amortization schedule. NU (10 Marks) Calculate operating leverage, financial leverage and corked leverage for the firms. a (0 Marks) [ Particulars FirmP Ninn Q | Firm R Output (units) 3,00,0Q0.,_75,000_| 5,00,000 Fixed cost Rs 3,56,)90 | 7,00,000 [75,000 ‘Variable cost per unit wo 7.50 | 0.10 Interest expenses Rs =| 25,000 | 40,000 7 Selling price per unipl 3.00 25.00 0.50 ABC Ltd is, considegin}'s proposal of installing drying equipment. The equipment would involve a utlay of Rs 5,00,000 and working capital of Rs 80,000. The expected life of tee ment is 6 years without any salvage value, but working capital can be realize@y¥t its book value. The firms opportunist cost of capital is 12%. Assume straight lingQwthod for charging depreciation and a tax rate of 30%. The estimated “Cash Figfe before ‘Depreciations and Tax are given below : x Year es) 22ers s [(CEBDT | 210 | 180 [160 [7150 | 120 [100 lyse the case under Net present value method and suggest should the proposal be er (20 Marks) 30f3uprsfit cen GES Sones safe Ey 16/17MBA22 Second Semester MBA Degree Examination, Feb./Mar. 2022 Financial Management Time: 3 hrs. Max. Marks: 80 g Note: 1. Answer any FOUR full questions from QT to Q7. z 2. Question No.8 is compulsory. E 3. Present and Future value tables may be allowed. é 2 1 a Define Risk Management. (02 Marks) i b. Someone promises to give you Rs.10,000 after 10, years in exchange for Rs.1000 today. & ‘What interest rate is implicit in this offer? (06 Marks) z c. Explain the Factors influencing on dividend policy of the firm, (08 Marks) e 2 a, What is Sweat Equity Shares? (02 Marks) : b. Briefly explain the different approach to ealeulate cost of equity ca (06 Marks) E ¢, Wealth maximization objective is superior than profit maximization objective. Explain. 2 (08 Marks) 3 3 3° a, What is time value of money? (02 Marks) 4 b. What are the factors affecting on working capital of the firm? (06 Marks) 5 c. The lease rentals for a-S-year contract are Rs300/Rs.1000 payable annually in arrears, Assuming no salvage ‘value. Compute the rate of interest implied by the contract and develop a Lease amortization schedule. (08 Marks) 4° a. What is Private Equity? (02 Marks) b. The beta coefficient of Target Ltd:, is 1.4. The company has been maintaining 8% rate of Growth in dividend and earnings. The last dividend paid was Rs.4 per share. The return on Government securities is 10% while the return on market portfolio is 15%. The current market price of one share of Target Ltd., is Rs.36. What will be the equilibrium price per share of Target Ltd.? (06 Marks) c. “Explain the various Long term sources of finance to the firm, (08 Marks) 5 a. Define cost of capital (02 Marks) E b. The expected cash flows of a project are as follows: & Year | Cash flow = 0 |-1,00,000 2 1 [30,000 z 2 [30,000 = 3 40,000 & 4 50,000 | “ S| 30,000. Ifthe cost of capital is 12%. Calculate modified internal rate of return (06 Marks) 1of316/17MBA22 ‘The Elu Ltd. is contemplating a debenture issue on the following terms: Face value : Rs.100 per debenture Term of maturity : 7 years ‘Yearly coupon rate of interest Year 1—2:9% 3-4:10% 5-7:11% The current market rate on similar debenture, is 11% per annum. ‘The company proposes to price the issue so as to yield a (compounded) return of 12% P.A. to the investors. Determine the issue price, Assume redumption at a premium of 5% on face value, (08 Marks) What is capital budgeting? (02 Marks) Briefly explain the challenging role of financial managers. (06 Marks) A firm’s sales, variable costs. and fixed cost amount to Rs.75,00,000, Rs.42,00,000 and Rs.6,00,000 respectively. It has borrowed Rs.45,00,000 at 9% and its equity capital totals Rs.55,00,000. (i) What is the firm’s ROI? (ii) Does it have fayourable financial leverage? (iii) If the firm belongs to an industry whose asset tum over is 3, does it have a high or low asset leverage, (08 Marks) Define working capital. (02 Marks) Calculate the operating leverage for each Of the firms, A, B and C from the following price and cost data, Assume number of unit sold is 5000. Firms Seen B c Sales price per unit | Rs.20 [°Rs.32 | Rs.50 Variable cost per unit | 6 16 20 Fixed operating cost _| 80,000 | 40,000 | 2,00,000 | (06 Marks) Naveen Enterprises is considering a capital project about which the following information is available ~The investment outlay on the project will be Rs.100'million. This consists of Rs.80 million on plant and machinery and Rs.20 million on net working capital. The entire outlay will be incurred at the beginning of the project. ~ The project will be financed with Rs.45 million of equity capital, Rs.5 million of preference capital, and Rs.50 million of debt capital. Preference capital will carry a dividend rate of 15%, debt capital will carry an interest rate of 15%. +” The life of the project is expected to be 5 years. At the end of 5 years, fixed assets will fetch a net salvage value of Rsi30,million whereas net working capital will be liquidated at its book value, - The project. is expected to ineréase the revenues of the firm by Rs.120 million per year. The incease in costs on alc of the project is expected to be Rs.80 million per year.-(This included all items cost other than depreciation, interest and tax). The effective tax rate will be 30%. = Plant and machinery will be depreciated at the rate of 25%. Per year as per the written down value method, Hence, the depreciation charges will be. First year: Rs.20.00 million Second year : Rs.15.00 million Third year : Rs.11.25 million Fourth year : Rs.8.44 million Fifth year : Rs.6.33 million Given the above detail, prepare the project cash flows. (08 Marks) 20f316/17MBA22 The board of directors of Nanak Engineering Company Private Ltd., requests you to prepare a statement showing the working capital requirements fora level of activity at 1,56,000 units of production, The following information is available for your calculation: Cost per unit (Rs.) A) Raw material 90 Direct labour 40 Overheads 15 Total 205 Profit 60 Selling price per unit 265 B) (i) Raw materials are in stock, an average for one month. (ii) Materials are in process (50% complete) an average for four weeks. Finished goods are in stock, an average for one month. Credit allowed by suppliers in one month (v) Time lag in payment from debtors is 2 months. (vi) Average lag in payment of wages is 1’ weeks. _ (vii) Average lag in payment of overheads is one month, 20% of the output is sold against cash.Cash in hand and in bank is expected to be Rs,60,000. It is to be assumed that produetion is eartied on evenly throughout the year, ‘wages and overheads occurs similarly and a time period of 4 weeks is equivalent to a month. (16 Marks) 3 0f3sn 16/17MBA22 Financial Management Time: 3 hrs, Max. Marks:80 q £ Note: J. Answer any FOUR full questions from QI to 07. i 2. Question Now8 is compulsory. f 3. PV and FV tables may be permitted. i = 1 a. What is financial management? (02 Marks) b. Explain the long term sources of funds. (06 Marks) #2 ©. What are the objectives of financial management? In what way wealth maximization 33 objective in superior to profit maximization objective? (08 Marks) 2 2 a, Whatis time value of money? (02 Marks) b. Calculate the following i) Caleulate the future value of an investment of Rs. 10,000 compounded semi annually for 10 years @ 10% P.a. ii) An executive in about to retire at the age of 60, this employer has offered him two post retirement option. i) Rs. 20,00,000 lump suxn’. ii) Rs. 2,50,000 for 10 years, assuming 10% interest. Which is a better option? iii) ABC Ltd has issued debentures of Rs, 50 lakhs to be repaid after 7 years. How much the company should invest in a sinking fund earning 12% in order to be able to repay debentures? (06 Marks) Prepare a loan amortization table from the following information. 2 Loan amount Rs. 15,00,000, rate of interest 20% loan period 5 years. (08 Marks) g 3° a, What is cost of capital? (02 Marks) a b. Discuss the problem in determination of cost of capital. (06 Marks) 3 ¢. The PQR company has the following capital structure in 31" March 2018. Bs ‘ordinary shares (2,00,000 shares) - 40,00,000 E 10% preference shares = 10,00,000 14% debenture =~ 30,00,000 Total _80,00,000 The share of company sells for Rs. 20. It is expected that company will pay next year a dividend of Rs. 2 per share which will grow at 7% forever. Assume 50% tax rate, You are required to i) Compute WACC using existing capital structure ii) Compute the new. WACC if the company raises an additional of Rs. 20,00,000 by issuing 15% debentures, This would result in increasing the expected dividend to Rs. 3 and leave the growth rate unchanged, but process of share will fall to Rs. 15 per share. (08 Marks) Important Note 1. On 1of316/17MBA22 What is meant by capital rationing? (02 Marks) ABC Lid is evaluating a project that has the following cash flow stream associated with it, Year 012354 5 6 Cash outflow (in millions) 120 80 Cash inflow (in millions) - 20 60 80 100 120 Calculate modified Rate of Return. The cost of capital of ABC Ltd is 15%, (06 Marks) ‘The expected cash flows of a project are as follows Year 0 1 2 3 4 5 Cash flow 1,00,000 20,000. 30,000 40,000 50,000 30,000 The cost of capital is 12%. Caleutate the following i) Net Present Value ii) Profitability Index iii) Payback Period iv) Discounted Payback Period. (08 Marks) Distinguish between gross working capital and net working capital. (02 Marks) From the following data, compute the duration of operating cycle and cash cycle of X Ltd., Stocks Raw Materials - 40,000 Work in process = 30,000 Finished goods - 25,000 purchase/consumption of Raw materials - 1,60,000 Cost of goods producedisold = 3,00,000 Sales (credit) =. 3,60,000 Debtors, =~ 72,000 Creditors = 20,000 ‘Assume 360 days per year for computational purpose (06 Marks) Explain the factors determining the working capital req (08 Marks) What is stock splits? (02 Marks) Kunal Industries most recent Balance Sheets is as follows Liabilities, Amout Assets Amt Equity Capital Net Fixed Assets 1,50,000 (Rs. 10 per share). » 69,000 10% Longterm Debt 80,000 Retained Earnings 20,000 Current Liabilities 40,000 200,000 Current assets 50,000 ‘The company’s total asset turnover ratio is 3. Its fixed cost are 1,00,000 and the variable cost ratio is 40%. The income tax rate is 35%. i) Calculate the three types of Leverages. ii) Determine the likely level of EBIT if EPS is Rs. 3 (06 Marks) 20f316/17MBA22 Oriental Ltd has currently an ordinary share capital of Rsv 25 lakhs, consisting of 25,000 shares of Rs. 100 each. The management is planning to raise another Rs. 20 lakhs to finance ‘major expansion programs, through one of four possible financial plans. i) Entirely through ordinary shares ii) Rs. 10 lakhs through ordinary shares and Rs10 lakhs in 8% long term loan iii) Rs. 5 lakhs through ordinary shares and Rs, 15 lakhs through 9% long term loan iv) Rs. 10 lakhs through ordinary shares-and Rs. 10 lakhs through preference shares with 5% dividend. The company expected earnings before interest and taxes will be’Rs, 8 lakhs. Assuming a corporate tax rate 50%. Determine the EPS in each alternative and comment which alternative is best and why? (08 Marks) What is Hybrid financing? (oa Marks) Explain Capital Budgeting Process. (06 Marks) Discuss the factors affecting dividend policy of a firm. (08 Marks) CASE STUDY [Compulsory] Nihal Industries provides the following Performa cost sheet Elements of cost. Amount per unit (Rs.) materials 80 Direct Labour 30 overheads 60 Total cost 170 Profit 30 Selling Price 200 ‘The following further particular are available: i) Raw materials are in stock on an average for one month ii). Raw materials are in process on an average of half a month iii) Finished goods are in stock on an average for one month iv) Credit allowed by supplies in one month v) _ Lag in payment of overheads is one month vi) Lag in payment wages is 1/4 weeks vii) J eufput is sold against cash viii) Cash in hand and at Bank in expected to be Rs. 25,000 ix)” Credit allowed to customers two months. ‘You are required to prepare a statement showing the working capital needed to finance level of activity of 1,04,000 units of production. ‘Your may assume that production is carried on evenly throughout the year, wages and ‘overhead occurs similarly and a time period of a week is equivalent to a month. (16 Marks) 3of3Important Note 1, On completing your nsw (368 SHEE ] | [J | | 16/17MBA22 ‘ond Semester MBA Degree Examination, July/August 2021 Financial Management Max. Marks : 80 Note : 1. Answer any Five full questions. 2. Use of P.V. Tables is permitted. Mr. Akash has opened PPF account and depositing Rs 4000 every year for 15 years at 8.1%. Find out the accumulated fund in his account. (02 Marks) What is Wealth Maximization? How it is different from profit maximization? (06 Marks) Sulabh Intemation is evaluating a project whose expected cash flows are as follows Year 0 1 z eee Cash flow | 10,60,000 | 100,000 | 2,00,000 | 3,00,000 | 6,00,000 | 3,00,000 What is the NPV of the project, ifthe discount rate is 12% for the year I and increases every year by 1%? (08 Marks) Define Angel Investing. (02 Marks) An investor deposits Rs 400 in a bank account for 6 years at 8% interest. Find out the amount which he will receive in his account if interest is compounded Annually, Semi — Annually and Quarterly. (06 Marks) Estimate the working capital required for the project. Add 10% to the computed figures 10 allow contingencies. A Estimated cost per unit 1. Raw material 2._ Direct labour Overhead, al cost of production Additional informati Selling price Rs 200 per unit, Level of capacity 1,04,000 units of production P.a. Raw materials in stock — Average 4 weeks. W.LP (100% of raw material, 50% of conversion cost) ~ Average 2 weeks. Finished goods in stock — Average 4 weeks. Credit allowed by supplied —4 weeks. Credit allowed to debtors ~ 8 weeks Lag in payment of wages ~ Average 1.5 weeks. Cash at Bank — Rs 25,000. Production is carried out evenly throughout the year. All sales are on credit basis (08 Marks) What do you mean by Permanent and Temporary working capital? (02 Marks) What are factors which influencing working capital? (06 Marks) Pentagon Lid is evaluating a project that has the following cash flow stream associated with it [Year - 0 [1]2/3[4|/5]6 [[Cash flow (Rs. in millions) | -120 | -80 | 20 [60 | 80 | 100 | 120 The cost of capital for pentagon is 15%. Calculate MIRR (08 Marks) 1of316/17MBA22 Calculate IRR for a project with initial investment of Rs 20,000 and provides annual cash flows of Rs 5430 for 6 years. (02 Marks) Briefly explain the factors affecting dividend policy of a company. (06 Marks) A Firm’s after tax cost of capital of the specific sources is as follows i) Cost ofdebt - 8%, ii) Cost of preference shares (Including dividend tax) - 14%, iii) Cost of Equity funds - 17%. The following is the capital structure. SI.No| Sources | Amount (in Rs) 1. | Debt —3,00,000 2. | Preference capital |" 2,00,000 3.__| Equity capital 5,00,000 Calculate the weighted Average cost of capital using Book value and market value, if Debt market value is Rs 2,70,000, preference capital is Rs 2,30,000 and Equity capital is Rs 7,50,000. (08 Marks) What is Behavioral Finance? (02 Marks) Mis Tejasvini Lid., needs Rs 10 lakh, For expansion is expected to yield 16% on investment (Before interest and the tax payment). Firm is planning to raise funds through debt and equity’and: the objective is to maximize the EPS. If the firm borrows in excess of Rs 4,00,000, the cost of debt would go up to 12% from 10% and the market price per share would drop from Rs 25 to Rs 20. The tax rate applicable is 50%. Determine EPS at three alternatives of Financing mix i) Rs 3,00,000 debt ii) Rs 5,00,000 debt Rs 7,00,000 debt in the capital structure, (06 Marks) . The capital structure of the Progressive Ltd, consists of ordinary shate capital of Rs 10,00,000 (share of Rs 100 each) and Rs 10,00,000 of 10% debenture. The selling price is Rs 10 per unit, variable costs amounts to Rs 6 per unit and. fixed expenses amount to Rs 2,00,000. The income tax rate is assumed to be 50%. The sales level is expected to increase from 1,00,000 units to 1,20,000 units. You are required to calculate Financial and Operating leverage at (1,00,000 units and 1,20,000 units).. (08 Marks) . What are the assumptions of CAPM model? (02 Marks) From the following data, compute the duration of the operating cycle for each of the two years. Assume 360 days per year for computing purposes. | Year—I(in Rs) | Year — Il (in Rs) * Raw materials 20,000 27,000 * Work - in ~ progress 14,000 18,000 * Finished goods 21,000 24,000 Purchase of Raw materials 96,000 135,000 Cost of goods sold 1,40,000 1,80,000 Sales 2,00,000_ Debtors 50,000 [ Creditors 18,000 (06 Marks) ._A Firm’s sale, Variable costs and Fixed costs amount to Rs 75,00,000, Rs 42,00,000 and Rs 6,00,000 respectively. It has borrowed Rs 45,00,000 at 9% and its equity capital total Rs 55,00,000. i) Whatis the Firm’s ROI? ii) Does the Firm have favorable Financial leverage? 2of316/17MBA22 Ifthe Firm belongs to industry whose assets tumover is 3, does it have a high or low Asset leverage? iv) What are the Operating , Financial and Combined leverages? ¥) If the sales drop to Rs 50,00,000, what will be the new EBIT? (08 Marks) a, What is Marginal Cost of Capital? (02 Marks) b. Briefly explain the sources of Finance. (06 Marks) ¢. Asan Investment Manager, you are given the following informat Investment in | Initial price | Dividend | Year — end Mkt | B Equity shares of - price __| ‘A. Cement Lid | R825 Rs2 Rs 50 0.80 SteelLid | R835 Rs2 Rs 60 0.70 LiquorLtd_| Rs45 | Rs2_| Rst35_ | so |B. Govt. India. [Rs 1,000 [Rs 140 | Rs 1,005 0.99 Bonds | Risk free retum is 8%. You are required to calculate i) Expected rate of retum of market portfolio. ii) Expected retum in each security using CAPM. (08 Marks) ‘A Company is currently considering modernization of a machine originally costing Rs 1,00,000 that has current book value of zero, However, it is in good working condition and can be sold for Rs 50,000. Two choices are available one is to rehabilitate the existing machine at a total cost of Rs 3,60,000 and the other is to replace the existing machine with anew machine costing Rs 4,20,000 and requiring Rs 60,000 to install, The rehabilitated machine as well as the new machine would have a six year life and no salvage value. The Firm’s projected after tax profits under various alternatives are as follows : Year Expected after tax |__| Bxisting Machine | Rehabilitated Machine | Profits of New Machine | 1 | Rs4,00,000 Rs 4,40,000 Rs 4,80,000 2 | Rs5,00,000 Rs 5,80,000 Rs4,40,000 [3s 6,20,000. Rs 7,00,000 Rs 7,00,000 4 [Rs 7,20,000 Rs 8,00,000 Rs 8,20,000 S| Rs8,20,000 Rs 9,00,000 Rs 8,60,000 6 Rs 10,00,000 | Rs 10,20,000 The Firm is taxed at 5$% of income. The Company uses Straight line depreciation. The company's cost of capital is 12%. Advise the Company, whether , it should rehabilitate the existing machine or replace it with a new machine by using Net Present Value Method, 30f3 (16 Marks)1s on the remaining blank 1. On competing your answers, compulsorily draw diagonal cross 50, willbe treated as malpractice. ion, appetl to evaluator and for equations writen ep, 42+8 CCS Sename USN 16/17MBA22 Second Semester MBA Degree Examination, June/July 2018 Financial Management Time: 3 hrs. 2 Max. Marks:80 Note: 1. Answer any Four questions from Q.No. 1 to Q.No. 7. 2. Question No. 8 is compulsory. 3. Interest factor tables are permitted. 1 Name any two aimis of finance function. (02 Marks) State the different kinds of Capital budgeting proposals, (06 Marks) Briefly explain the role of Finance Manager. (08 Marks) 2 Name any two assumptions of CAPM model. (02 Marks) ‘What sum will be getting if Rs 5000 in 6 years time at 8.5% per annum invested. Calculate the amount by using yearly, half yearly and quarterly interest rates. (06 Marks) | ‘The Sanika Ltd., has the following capital structure G ‘Common shares (20,000 shares) 40,00,000 10% preference shares 10,00,000 14% debentures 30,00,000 Total 80,00,000 The share of the company sells for Rs 20. It is expected that the company-will pay next year a dividend of Rs 2 per share which will grow @ 7%. Assume 50% tax rate. Compute the weighted average cost of capital based on the existing capital structure. (08 Marks) 3 ‘Twenty year 12.5% debenture of a firm are sold at a rate of RS 75. The face value of each debenture is Rs 100 and the tax rate is $0%. You are requited to compute the cost of debt capital. (02 Marks) Briefly explain the steps for risk management. (06 Marks) ‘A firm whose cost of capital is 10% is considering two project X and Y each cost Rs 1,00,000 respectively. Following are the ash inflows (08 Marks) Year | Project | Project Y 1 | 20,000 |” 45,000 2,<[730,000 | 40,000 3| 740,000 [30,000 4~ | 50,000 | 10,000 S| 60,000 | 8,000 Compute the NPV@ 10% and IRR for two projects separately, Project X by 20 and 29% and Project Y by 9 and 15%. 1of34 16/17MBA22 a. Name any two features of Pay back period. (02 Marks) b. From the following data, compute the duration of the operating cycle for each of the two years : 4 (06 Marks) ‘SVear1 | Year? ‘Stock of raw materials | 20,000 | 27,000 Work in progress | 14,000 | 18,000 Finished goods 21,000 [24,000 Purchases 96,000 | 1,35,000 Cost of goads sold | 1,40,000 | 1,80,000 Sales 1,60,000 | 200,000 Debtors 32,000 [50,000 {Creditors 16,000 | 18,000 ‘Assume 360 days per year for computational purposes. c. The data relatiag fo two companies are as given below SS CoA | Co.B Capital 6,00,000 | 3,50,000 12% debenture | 4,00,000 | 6,50,000, ‘Output (units) PA | 60,000 | 15,500 x Selling price / Unit | _Rs 30 Rs 250, S Fixed cost 7,00,000 | 14,00,000 Variable cost Rs 10 Rs 75 You ate required to calculate the operating leverage, financial and combined leverage of two companies. Assume 50% Tax. (08 Marks) a. What is Capital Structure? (02 Marks) b. Aryan and Co. is considering the purchase of 2 machines. Each costing Rs 50,000. Cash inflows are expected to be as under. Calculate Discounted pay back period using 10% discount. (06 Marks) ‘Year | Machine X | Machine V 1_|_15,000_[ 5,000) 2 | 20,000 | ~15.000°} 3__| 25.000 | 20,000 4 | 15,000 | 30,000 3 10,000 20,000 ¢. YADU company has a capital of Rs 1,00,000-divided into shares of Rs 10 each. It has expansion plans requiring an investment of another Rs $0,000. The management is considering following alternatives for raising this amount. * Issue of Rs 5000 shares of Rs 10 each. * Issue of Rs 5000, 12% preference share of Rs 10 each. * Issue of 10% debenture of R $0,000. ‘The company’s present eafnings before interest 4 tax (EBIT) are Rs 40,000 p.a. subject to tax @ 50%, You are required to calculate the effect of each of the above modes of financing ‘on the EPS presuming: 1, EBIT continues to be the same even after expansion. 2. EBIT increases by Rs 10,000 after the expansion (08 Marks) a. What is Time value of money? (02 Marks) b. What ate the factors influencing on dividend policy? Explain briefly. (06 Marks) 2of316/17MBA22 c. Priyanka and Co. is considering the purchase of 2 machine each costing Rs 3,00,000. Cash inflows are expected to_be as under (Rs in *000"). ‘Year 1] 2oN97] 4 [5 Machine X [20 | 65} 90_| 150] 175 Machine ¥ | 40) 110 | 120 [ 140 | 200 ‘The discount factor is @ 10% are 0,909 ; 0.826, 0.751 , 0.683 , 0.621 Evaluate NPV , PI, PBP and DPBP’for the two machine separately and suggest which machine is suitable. (08 Marks) a. List any two problems of Excessive Working Capital. (02 Marks) 'b. What are the factors influencing on working capital? Explain. (06 Marks) . Sridhar Company Ld has the following financing mix. (08 Marks) (Rs in lakh) Equity capital (0 lakh share @ par value) 100 12% preference shares capital (10,000 share @ par value) 10 Retained earnings 120 14% Non — convertible debentures (70,000 debentures @ par value) 70 14% term Toan 100 Total 400) ‘Tie equity shares of the company are trading @ Rs 25. The next expected dividend per share is Rs 20 and the DPS is expected to grow at a rate of 8%. The preference shares-Are redeemable after 7 years at par and are currently quoted at Rs 75 per share on the) stock exchange. The debentures are redeemable after 6 years’at par and their current matket price is Rs 90/share. The tax rate applicable to the firm is 50%. What is the WACC of the Co? ishes to know the amount of they have planned for the On 1* Jan 2017, the board of directors of Yadu Aryan Co. Ltd., working capital that will be required to meet the program of acti year. The following information are available. i) Issue and paid up capital Rs 2,00,000. 5% debentures Rs 50,000. Fixed assets values ar Rs 1,25,000 on 31/12/2017. Production during the previous year was 60,000 units; Ibis planned that the level of activity should be maintained during the current year. ¥) The ratios of cost to selling price are Raw'miierial 60% , Direct wages 10% and Overheads 20%, vi) Raw materials are expected to remain in storés for an average of two months before these are issued for production. vii) Each unit of production is expected. to‘be in process for one month and is assumed to be consisting of 100% Raw materials, Direct wages and Overheads. i) Finished goods will stay in warehouse for approximately three months, ix) Creditors allow credit for. 2° months from the date of delivery of raw materials, x) Creditallowed to debtors in)3 months from the date of dispatch. xi) Selling price per unit is Rs 5. xii) There is a regular production and sale cycle. Prepare schedule of working capital requirement and Balance sheet. (16 Marks) 30f3(EB) CBCSISCHEME A) 16/17MBA22 z + “Second Semester MBA Degree Examination, June/July 2019 “AP i * ANDAL ORE. Ss rs ancial Management 3. Max. Marks:80 Note: 1. Answer any FOUR full questions from.Q.No.1 to Q.No.7. 50, will be treated as malpractice appeal to evaluator and for equations written eg, 42°8 Important Note: 1. On completing your answers, compulsorily draw diagonal cross lines on the remaining blank pages 2. Any revealing of identifica 2. Question No. 8 is compulsory. 3. Present values table should be allowed. a. What is hybrid financing? (02 Marks) b. The relevant financial information for “X” Ltd for the year ended 31/3/2017 is given below: P&LAC Balance Sheet | ‘Amount 174 2.017 [3132017 Sales 30__| Inventory 9 12 Cost of goods sold] 56 | A/C receivables |" 12 16 ‘AlC payable | 7 10 What is the length of thé operating eycle and cash cycle? Assume 365 days in a year. (06 Marks) ¢. SLS Trading company prepares to increase the production of the company. They are willing to purchase a new machine. There are 3 types in the market. The following details are available. a on _ Particulars [Fype = P | Type- Q | Type-R. Cost of machine 17500 |" 12500 | 9000 Estimated savings in serap 400 750 250 ‘Wages per operative 250 300 250 [Cost of indirect material - 400 =250__| Expected savings in indirect material hi oe ‘Additional cost of maintenance 500 ‘Additional cost of suspension e 800 E ‘Operative not required (number) 11 20 9 Estimated life of machine 10 6 5 Taxation is S0%}of the profit. you ar€ tequired to advice the management which type of the machine should be purchased under PBP method and post PBP. (08 Marks) a. What are the assumptions of CAPM model? (02 Marks) Briefly explain the determinants of capital structute?, (06 Marks) c. Keerthan’Ltd., wishes to raise’additional finance of Rs.10 lakh for meeting its investment plans. It has Rs. 2,10,000 in the form of retained earnings available for investment purposes. The following are the further details: + Debt-equity mix 30 : 70 Cost of debt tipta’Rs.1,80,000, 10% (before tax) beyond Rs. 1,80,000, 12% (Before tax) Earning per share Rs.4 Dividend payout 50% of earnings. Expected growth rate in dividend 10% Current market price per share Rs.44 © Tax rate 35% You are required (i) To determine the pattern for raising the additional finance, assuming the firm intends to maintain-existing debt/equity mix. (ii) To determine the post tax cost of additional debt. (ii) to determine the cost of retained earning and cost of equity. (iv) Compute the WACC of additional finance. (08 Marks) 1of316/17MBA22 What are the steps involved in capital budgeting process? (02 Marks) MJ Ltd is evaluating a project which involves initial investment of Rs.1,20,000. After tax cash flows from the project are given below: Year 1 2 3 4 5 16 Cash flow | 85000 | 96500 | 132600 | 216000 | 124000 | 98500 ‘What is the MIRR if the cash flows are reinvested @ 12%. (06 Marks) Mr. Danvik borrows Rs.1,60,000 for a musical-system @ a monthly interest of 2.5%, The loan is to be repaid in 12 equal monthly installment payable @ the end of the month. Prepare Joan amortization schedule for Mr. Danvik, (08 Marks) If the interest rate is 11%, what is the doiibling period as per rule 72.and the rule of 69? (02 Marks) Explain the changing role of Finance Managers in India. (06 Marks) Calculate the following: (i) Compute the future value of an investment of Rs.12000 compounded semi-annually and quarterly for 8 years @ 12%. (ii) A company has issued’debentures of Rs.60 lakhs to be repaid after 8 years. How much the company should invest in a sinking fund earning 13% in order to be able to repay debenture. (iii) Mr.Vishal deposits Rs.8500 at the beginning of each year for 5 years in a bank and earn returt’an investment. Determine how much money he will have at the end of 5" year. (08 Marks) ‘What is optimal capital structure? (02 Marks) Mr. Keérthan is the winner of the, Competition is offered any one of the following 4 prizes. Which are should he choose if he expects 12% return. (i) Rs. 100000 today. i) Rs.200000 after 5 years (iii) Rs.25000 for 8-years. (iv) Rs.14600 every year forever. (06 Marks) ‘A proforma cost-sheet of'a XYZ company provides the following particulars: Element of cost | Amount per unit | Material 30 Direct labour 30 ‘Overheads| 60 Total cost om 1) | Profit 30 Selling price 200 Additional information (i) Raw-materials are in stock ofan average for 1 month. (ii) Raw-materials are in process (Completion stage 50%) an average ’4 month. (ii) Finished goods are in stock on an average for | month. (iv) Credit allowed by suppliers is 1 month. () (Lag in payment of wages 1 and '4 weeks. (wi) t of the output sold against cash (vii) Lag in payment of overhead 1 month. (viii) Cash in hand and bank is expected to be Rs.25000. (ix) Credit allowed to customer 2 months. You are required to prepare a statement showing the working capital needed to finance level of activity of 1,04,000 units of production. ‘You may assumed that production is carried an evenly throughout the year, wages and overheadsaccure similarly and a time period of 4 weeks is equivalent to a month. (08 Marks) 20f3oe. S\40070) 16/17MBA22 ‘What do you mean by operating cycle? (02 Marks) PQR Lid has currently on an all equity capital structure consisting of 15000 equity shares of Rs.100 each. The management is planning to raise another Rs.25 lakh to finance a major expansion programme and is considering 3 alternatives method of finance. (To issue 25000 equity shares of Rs.100 each, (ii) To issue 25000, 8% debentures of Rs. 100'each, (iii) To issue 25000, 8% preference shares of Rs.100 each. ‘The company expected EBIT will be Rs.8 lakh. Assuming a corporate tax rate of 45%. Determine the EPS of each of the financing plan, (06 Marks) Briefly explain the different sources of finance’ (08 Marks) Mention the different forms of dividend? (02 Marks) Consider the following information to risk free rate of securities and market retum of securities of Anand Ltd., during last.6 years. Year | Rr | Rn | Rj(Security return) 1 [0.06 [0.14 0,08 2_| 0.05 | 0.03 Ou 3_[0.07 [0.21 0.29 4 [0.08 | 0.26 0.25 5 [0.09 | 0.03 0.107 using CAPM approach. (06 Marks) From the:following prepare income statements of A, B and C. Briefly comment on each firm’s performance. Particulars Firm A | Firm B Financial leverage 3:1 [4:1 Interest 200 [300 Operating leverage 4:1 [521 Variable cost as a% of sales | 66.67% | 75% | 50% [Income tax rate 45% [45% | 45% (08 Marks) After conducting a survey that cost'Rs.200000, SLS industries Ltd. decided to underforce a project for putting a new product in the market, The Co’s cut off rate is 12%. It was estimated that the project would have a life of 5 yeats. The project would cost Rs. 40 lakhs in plant and machinery in addition to working capital of Rs.10 lakh, which will recover in full when projects 5 years life is over. The'scrap value of P and M at the end of 5 years was estimated at Rs.500000. After providing-depreciation an SLM basis, profit after tax were estimated as follow: Year [1 RP 4 5 [PAT | 300000 | 800000 | 130000 | 500000 [ 400000 Ascertain the NPV of the project and suggests LLS the accepting decision of the project. (16 Marks) 30f3eting your answers, compulsorily draw diagonal cross lines on the remaining blank pa sportant Note 1. On Librarian qanaya netives” QYCS SOLEME Ss eon i] 16/17MBA22 Second Semester MBA Degree Examination, July/August 2022 ancial Management Time: 3 hrs. Max. Marks:80 Note: 1. Answer any Four questions from Q.No. 1 to Q.No. 7. 2. Question No. 8 is compulsory. 3. Use of PV Table , Annuity Tables are permitted. a. What is Venture Capital? (02 Marks) b. You want to take a World tour which costs Rs 10,00,000, the cost of which is expected to remain unchanged in nominal terms. You are willing.to save annually Rs 80,000 to fullfill your desire. How long will have to wait if your savings earn a return of 14% p.a? (06 Marks) c. Discuss in detail the sources of Long — Term Funds. (08 Marks) a. What is Time Value of Money? (02 Marks) b. Discuss in detail the objectives of Financial Management. (06 Marks) c. Determine the following i) Future value of Rs. 1,000 deposited in five years in bank which earns interest 9.5% p.a. compounded Semi ~ annually. ii) Future value of an annuity of Rs 1,000 P.m. whicli deposited in a two years RD account at 9% pa iii) Present value of Rs 1,000 receivable 10-years, hence assume a discount rate of 10%. iv) Present value of an annuity of Rs 1,000°p.a. payable for a period of eight years. Interest rate is 9% p.a, (08 Marks) a. What is meant by Cost of Capital? (02 Marks) b. A.Company has 10% perpetual debt of Rs 1,00,000, The tax rate is 35%, Determine the cost of capital (before tax as well as after tax) assuming the debt is issued at i) Par~ ii) 10%discount» iii) 10% premium. (06 Marks) c. Suppose a Firm borrows Rs 10,00,000 at an interest rate of 15% and the loan is to be repaid in 5 equal installments payable at the end ofeach next five years. Prepare loan Amortisation schedule. (08 Marks) a. What is Accounting Rate of Return? (02 Marks) Explain the factors which influences the Investment Decision. (06 Marks) ©. Compute weighted Average cost Of capital under each of the following three financing plans. If Ke = 5% , Kp = 10% and Kg= 8%. — (08 Marks) [Plans | WEC | WPC | WDC [1 J 050 | 0.30 | 0.20 2_| 0.30 [0.40 [0.30 a, What is Behaviotiral Finance? (02 Marks) 1of216/17MBA22 b. Following are the expected cash inflows of the Company..The cost of capital is 10%. The scrap value at the end of 4" year is Rs 2000. ‘Years | Cash out flows | Cash Inflows 0 10,000 - 1 2,000 3,000 2 - 5,000 3 a 5,000 C4 = 5,000 Calculate Net Present value. (06 Marks) c. Describe the factors influencing working capital requirements of a firm. (08 Marks) ‘a, What is Dividend Policy? (02 Marks) b. Explain the factors influencing the Capital structure of an Organisation. (06 Marks) c. Zenith Ltd has provided the following data Profit and Loss Account Data _ Sales Rs. 500 Lac’ Cost of goods sold Rs : 360 Lac. Balance sheet Data (in Lac) Particulars Beginning of 2016 | End of 2017 . Tnventories 60 | 64 ‘Aecount Receivable 80 | 88 ‘Account Payable 40 [46 ‘What is the length of the Operating Cycle? Assume 360 days in a year for calculation. (08 Marks) a, What is Net Working Capital? (02 Marks) Explain the types of Divided in detail. (06 Marks) c. Calculate Operating leverage , Financial levetage and Total leverage from the following information = Particulars | X Company Ltd | ¥ Company Ltd Sales 25,00,000 35,00,000 Variable Cost 7,00,000, —_11,00,000 Fixed Cost 8,00,000 10,00,000 Interest 3,00,000 4,00,000 (08 Marks) Compulsory ‘A Company is considering an investment proposal to install a new milling control at a cost OfRs 50,000. The facility, has @ life expectancy of 5 years without any salvage value. The firm uses SLM of depreciation and the same is‘used for tax purposes. The tax rate is assumed to be 35%, The estimated cash inflows before depreciation and tax (CFBDT) from the investment proposal are as follows ‘Years T 2 3 4 see CEBDT (Rs) | 10,000 | 10,692 | 12,769 | 13,462 | 20,385 | Compute 1. Payback period. 2. Average rate of return. 3. NPV at 10% discount rate. 4. Profitability index at 10% discount rate (16 Marks) 30f3ly draw diagonal cross lines on the remaining blank pages. Important Note : 1, On completing your answers, compu eg, 424850, wll be treated as malpractice. f 16/17MBA22 apes USN Time: 1a. b. c 2a b. c 3a b, ©. Second Semester MBA Degree Examination, Dec.2018/Jan.2019 Financial Management 3 hrs. Max. Marks:80 Note: 1. Answer any FOUR full questions from Q.No.1 to Q.No.7. 2. Question No. 8 is compulsory. 3. P.V table may be used. What do you mean by Capital Rationing? (02 Marks) Amit equipment has a capital structure target of 60% equity, 15% of preference and 25% of long-term debt. Amit’s financial analysts have estimated the after-tax cost of debt, preference cost and cost to equity to be 9%, 15%, and 18% respectively. What is the weighted average cost of capital of Amit Equipment? (06 Marks) Briefly explain the. various sources of financing, (08 Marks) Differentiate between explicit cost and implicit cost. (02 Marks) Briefly explain different factors affecting dividend policy. (06 Marks) The Moon company’s most recent balance sheet is as follows: c Liabilities Amount Assets | Amount | Equity capital (Rs.10 per share) | 60,000 | Net fixed assets | 1,50,000 10% long-term debt | 80,000, Cutrent assets | . ‘50,000 | Retained earnings | 20,000 |Current liabilities 40,000 r 2,00,000 2,00,000 | ‘The company’s total assets turnover ratio-is 3 times, its fixed operating costs are Rs. 100,000 and the variable operating costs ratio is 40%. The income tax i8 35% i) Calculate all the three types of leverages. ii) Determine the likely level of EBLT if EPS is Re.1 and Rs.3. (08 Marks) Compute operating leverage of a firm. Sales 1,50,000 units @ Rs.1,20 per unit. Variable cost 40%. Fixed cost Rs.36,000. (02 Marks) A company issues-a new 10% debentures*of Rs.1000 face value to be redeemed after 10 years. The debenture is expected to be sold at 5% discount. It will also involve floatation costs of 5% of face value. The company’s tax rate is 35%. What would be the after tax cost of debt? (06 Marks) A proforma cost sheet of a company provides the following particulars: Amount per unit Raw material cost 100 Direct labour 37.50 Overheads cost 78 | Total cost 212.50 Profit | 37.50 Selling price 250 1o0f3oe 16/17MBA22 ‘The company keeps raw material in stock, on an average for onf@ month; work in progress on an average for one week; and finished goods in stock on anaVerage for two weeks. The credit allowed by suppliers is three weeks and company allows four weeks credit to its customers. The lag in payment of wages is one week and lag in payment of overheads expenses is two weeks. The company sells one-fifth of the output against cash and maintains cash-in-hand and bank put together at Rs.37,500. Required: Prepare a statement showing estimate of working capital-needed to finance an activity level of 1,30,000 units of production. Work-in-progress is 80% complete in all respects. Time period of 4 weeks in equivalent to a month, Assume 52-weeks in a year. (08 Marks) What do you mean by a Warrant? (02 Marks) ‘What is meant by CAPM? Outline its different assumptions (06 Marks) i) Mr. Raman needs Rs.1,00,000 for his daughter marriage in 10 years. How much must be deposited at the end of each year in the bank at 10% compound interest in order to have marriage money ready? ii) If Rs. 30000 is putsin a saving account yielding 6% compounded annually and other Rs. 10,000 is added each year, how much it will have accrued in ten years? iii) What is the present value of cash flows of Rs.750 per year forever at an interest rate of 8% and at an interest rate of 10%? (08 Marks) What is meant by the term financial risk? (02 Marks) Compute the operating cycle of Alpha Ltd, from the following: Particulars Amount (Rs.) Stocks * Raw materials 38,000 * Work in progress | 25,000 “Finished goods 18,000 Purchase of raw materials |-1,50,000 Cost of goods sold 2,20,000 Sales 3,50,000 Debtors 50,000 [Creditors 25,000 Assume 360 days in a year (06 Marks) What are the objectives of financial management? (08 Marks) What is the hedging approach of finaneing Working capital funds requirements? (02 Marks) What do you mean by payback period? Enumerate its limitations (06 Marks) A project costing, Rs.6,50,000 is expected to generate the following cash flows over its useful life. Depreciation is to be provided using straight line method, Calculate Accounting Rate of Return (ARR). Cash out flow | Cash in flow Initial Investment | _(6,50,000) 0 7,50,000 2,20,000 3,00,000 Salvage value (08 Marks) 20f316/17MBA22 7 a What is meant by cash cycle? (02 Marks) b. A project involve initial investment of Rs.5,20,000, cost.of capital is 8%. What is the Modified Internal Rate of Return (MIRR) if yearly cash inflows are reinvested at the rate of 14%? wr | Cash in Flow 95,000 1,10,000° 148,000 2,50,000 2,00,000 1,50,000 1 2 3 4 5 6 (06 Marks) c. Determine the EPS (Earning Per Share) of a company which has operating profit (EBIT) of Rs.1,60,000. Its capital structure consists of the following securities. 10% Debentures of Rs.5,00,000. 12% Preference share capital of Rs. 100,000, Equity shares of Rs,100 each of Rs.4,00,000. ‘The company is in the 55% tax bracket. i) Determine the company’s EPS. ii) Determine the percentage change’ in EPS, associated with 30% increase and 30% decrease in EBIT (08 Marks) 8 CASE STUDY (compulsory): ‘A company is manufacturing a consumer product, the demand for which at current price is in excess of its ability (0 produce. The capacity of a particulat-machine, now due for replacement, is the limiting factor on production. The possibilities exist either of acquiring a similar machine (Project X) or of purchasing a more expensive machine with greater capacity (Project Y). The cash flows under each alternative have been estimated and given below. The company’s opportunity cost of capital is 10% after tax. In deciding between the ‘two alternatives. the Managing Director (MD) favors the ‘Pay Back Period’. The Chie Accountant, however, thinks that a more specific. method should be used and he has caleulated for each project i) The Net Present Value ii) The Profitability Index ‘The discounted Pay Back Period Having made these calculations, however’ he finds himself still uncertain about which project to recommend, You are required to make these calculations and to discuss their relevance to the decision to be taken. The relevant cash flows are: Year | Project X [Project Y 0 | (27,000) | (40,000) 1 = 10,000 2) 5000 | 14,000 3 22,000 | 16,000 4 14,000 | 17,000 =o 14,000 | _ 15,000 (16 Marks) 3 0f324 CBOSS CnENE ] | | 16/17MBA22 nd Semester MBA Degree Examination, Dec.2019/Jan.2020 Financial Management Max. Marks:80 Note: 1. Answer any FOUR full questions from Q.No.* to Q.No.7. 2. Question No. 8 is compulsory. 3. Use of PV tables is permitted, State the difference between present and future value. (02 Marks) Explain the factors affecting capital budgeting decision. (06 Marks) Beta Ltd has 10% perpetual debentures of Rs.1,00,000. The tax rate is 35%. Determine the cost of debenture capital-assuming the debentures are issued at (i) par, (ii) 10% discount (iii) 10% premium, (08 Marks) Mention sweat equity shares in India, (02 Marks) Write a note on’ lease financing, (06 Marks) As a financial analyst of a large electronic company, you are required to determine the weighted average cost of capital of the company using (i) Book value weights (ii) Market value weights. The company’s present book value capital structure is Debentures (Rs.100 per debenture) | 8,00,000 Preference shares (Rs.100 per share) | 2,00,000 Equity shares (Rs.10 per share) 10,00,000 - 20,00,000 | All these securities are traded in the capital markets. Recent prices are: (i Debentures Rs.110 per debenture (ii) Preference shares Rs.120 per share (iii) Equity shates Rs.22 per share. Anticipated external financing opportunities are: (i) Rs.100, per debenture redeemable at par; 10 years maturity, 11% coupon rate, 4% floatation cost, sale price Rs.100. (ii) Rs.100 per preference redeemable at par; 10 years maturity, 12% dividend rate, 5% floatation costs, Sale price Rs.100 Equity shares: Rs.2 per share floatation costs, sale price Rs.22. in addition, the dividend expected on the equity share at the end of the year is Rs.2 per share; the anticipated growth rate in dividends is 7% and the firm has the practice of paying all its earnings in the form of dividends. The corporate tax rate is 35%. (08 Marks) What is Wealth maximization? (02 Marks) Explain the three different approaches of financing the working capital. (06 Marks) The expected cash flow of ABC is as follows: ‘Year 0 1 2 [3 4 5 ‘Cash flow Rs. | 1,00,000 | 20,000 | 30,000 | 40,000 | 50,000 | 30,000 The cost of capital is 12%, calculate the following: (i) Net Present Value (ii) Benefit Cost Ratio (iil) Internal Rate of Return (08 Marks) 1of34 a, b ©, a b. e 16/17MBA22 What is hybrid financing? (02 Marks) Explain the organization of finance function. (06 Marks) The following data is extracted from the financial statements of selected companies for the ;ncial year ended 2015. Analyse the working capital policy of the companies. Financial data of selected companies (Rs. in crore) Hero Moto Cor Current liabilities 3883 4477 2244 Current assets 5281 9526 2028 Fixed assets 5240, 6036 2576 EBIT | 394 4432 484 Sales 27,585 21,612 | 10,098 State any three difference between debt and equity. Explain the emerging role of financial manager in India. Alpha Ltd has following details: [Sources of Finance | Book Value Rs. | Market Value Rs. | Specific Cost % Debt 4,00,000 3,80,000 5 Preference 1,00,000 1,10,000 8 Retained earnings | 6,00,000 - 1s Equity capital 2,00,000 12,00,000 13, (08 Marks) (02 Marks) (06 Marks) Determine the weighted average cost of capital using (i) Book value weights (ii) Market value weight. How are they different? Can you think of a situation where the weighted average cost of capital would be the same using either of the weights? (08 Marks) What do you mean by cost of capital? (02 Marks) ‘An investor deposits Rs.100 in a bank account for 5 years at 8% interest. Find out the amount which he will have in its account if interest rate compounded will have in its account if interest rate compounded (i) Anntally (ii) Semiannually. (06 Marks) Explain the basic reasons why profit maximizations fails to be consistent with wealth maximization. What is internal rate of return? Explain the different types of Investment Equalization Techniques. (08 Marks) (02 Marks) (06 Marks) Selected financial data for company A and B for the year ended 31° March are as follows: rticulars [Company A | Company B Variable expenses as a percentage of sales | 66.67 5 Interest expenses 200 300 Degree of operating leverage 3 6 Degree as financial leverage 3 4 Income Tax Rate 035 0.35 (i) Prepare income statements for A and B companies. (ii) Comment on the financial position and structure of these companies. 20f3 (08 Marks)16/17MBA22 ae Chse Study: Compulsory Calculate the amount of working capital requirement for SRCC Ltd from the following information: Particulars _ | Price per Unit (Rs.) | Raw materials 160 Direct labour 60 Overheads 120 Total cost 340 Profit 60 Selling price _| 400 ‘The duration at various stages of the operating cycle is expected to be as follows: (i) Raw materials and finished goods are held in stock on an average for one month. (ji) Materials are in process on an average for half'a month, (iii) Credit allowed by suppliers is one month and credit allowed to debtors is two months. (iv) Time lag is payment of wages is 1% weeks, overhead expenses in one month. (v) One fourth of the sales are made on cash basis. (vi). Minimum cash to be maintained is Rs.50,000. (vii) The expected level of production is 1,04,000 units for a year of 52 weeks. ‘You may assume that production is carried on evenly throughout the year and a time period of four weeks is equivalent to a month. (16 Marks) 30f3i z Z valuator and for equations writ GAGS Scheie USN Time: eal b, 0! 27 ia b. c 3a b. « Oop b. c 5a. b e | | | ] 16MBA22 Second Semester MBA Degree Examination, Dec.2017/Jan.2018 K Financial Management 3 hrs. “ Max. Marks:80 Note: 1, Aaswer any Four questions from Q.No. 1 to Q.No. 7. 2. Question No. 8 is compulsory. 3. Annuity table may be used. Define Financial Management, (02 Marks) ABC Ltd., has the following eapital structure nce Source Rs Equity (Expected dividend 12%) |10,00,000 10% Preference 5,00,000 8% Loan. 15,00,000 Calculate the weighted average cost of capital, assuming 50% as the rate of income tax, before and after tax. (06 Marks) A company issues 10,000, 10% preference shares of Rs 100 each. Cost of issue is Rs 2 per share. Calculate cost of preference capitabif-these shares are issued i) at par ii) at a premium of 10% iii) ata discount of 5%. (08 Marks) Explain the term CAPM. % (2 Marks) ‘Wealth maximization objective ig Superior than profit maximization, explain, (06 Marks) A project involves initial investment for $ 5,000,000,’ The net cash inflow during the first , second and third year is expected respectively $ 3,000,000; , $ 3,500,000 and $ 2,000,000. At the ertd of third year the Scrap value (salvage value) is indicated at $ 1,000,000. The risk —adjusted discount rate is 10%, calculate the NPV. (08 Marks) ‘What are the two important characteristics of current ~ assets? (02 Marks) ‘What is the difference between operating leverage and financial leverage? (06 Marks) A firm purchases: amachinery for Rs 800,000 by making a down payment of Rs 150,000 and remainder in equal installments of Rs 150,000 for six years. What is the rate of interest to the firm? (08 Marks) Define Working Capital (02 Marks) Describe the’ features of equity shares. What is the difference between equity share and debentures? (06 Marks) Mr. Longmari borrow Rs 10,00,000 at an interest rate of 15% and the loan is to be paid in 5 sequal. installments payable at the end of each of the next 5 years. Prepare. the: loan ‘amortization schedule. (08 Marks) . How long will it take to double your money if it grows at 12% annually? (02 Marks) A company has Rs 100,000 , 10% debentures and 5,000 equity shares outstanding, It is in the 35% tax bracket, Assuming three level of EBIT : i) Rs 50,000 ii) Rs 30,000 i) Rs 70,000. Calculate the change in EPS, assuming base level of EBIT = Rs 50,000 (06 Marks) Explain the factors affecting the cost of capital (08 Marks) 1of216MBA22 6 a, What is Sinking Fund Factor? (02 Marks) b. What is Annuity? Explain different type of annuity with example (06 Marks) ihe teleyant financial information for XYZ. Lid, for the year ended 2012 is given below. (Profit and Loss account Rs in million) ‘ (08 Marks) Particulars hea Sales 80 4 | Cost of goods sold_| 56 Taventory 9 iz [Account Receivable 12 i6 Account Payable iz io l ‘What is the length of Operating cycle and the cash cycle? Assume 36 days to a year. 7 a. What do you mean by Capitabbiudgeting? ZN (02 Marks) b. Explain different approaches of working capital (current assets) financing policy. (06 Marks) Calculate Operating leverage, Financial leverage and Combined leverage rom she following information : (08 Marks) Parsculars [Disha Compaay Cid. (Rs) | Gagan Company Lid (Rs) Sales 25,00,000) 35,00,000 Variable cost 7,00,000 11,00,000 ed cost 8,00,000 T0,00.000 Interest 3,00,000 4,00,000 8 A Company is considering the following investment projets: Projects ‘Cash flows (Rs). S Ci G G - A=) =10,000 | + 10,000 BJ '10,000 [17,500 [+ 7.500] — C= 10,000 | 12,000 | 4,000} + 13,000 D~ |= 10,000 [+ 10,000 | + 3,000 ‘613,000 a Rank the project according to each of the following methods = ') Payback i)\ARR ii) IRR and iv) NPV; assuming discount rates of 10 and 30 percent. b. Assuming the-projects are independent , which one should be accepted?If the projects are ‘mutually exclusive, which project isthe best and why? (16 Marks) 2of2ines on the remaining blank pages. and or equations written eg, 4248 = 50, willbe treated as malpractice, ion, appeal to eval e é 2. Any revealing | Important Note: 1. On com ve sl COS SCHEME 18MBA22 d Semester MBA Degree Examination, Dec.7019/Jan.2020 Financial Management Max. Marks:100 Note: 1. Answer any FOUR full questions from Q.No.1 to Q.No.7. 2. Question No. 8 is compulsory. Define Financial Management. (03 Marks) Briefly explain the various objectives of financial management. (07 Marks) XYZ, company borrows Rs.10,00,000,at the rate of interest 15%, the loan is to be repaid 5 equal installments paid at the end of each year. Calculate the loan amortization, (10 Marks) What do you mean by marginal cost of capital? (03 Marks) Briefly explain the interface of financial management with other functional areas. (07 Marks) Explain in detail the Indian Pinancial System according to functional classification. (10 Marks) What do you mean by leasing? State the types of leasing. (03 Marks) Briefly explain the various short term sources of finance, (07 Marks) (i) Calculate:the compound value of Rs.15000 at the end of 3 years at 12% interest rate, when interest is calculated on the basis, Yearly, Half yearly, Quarterly and Monthly. (06 Marks) ii) If we deposit of Rs.1,00,000 at 7% rate of interest in how many years this amount be double according to 72 rule and 69 rule (04 Marks) What is the meaning of Time Value of Money? (03 Marks) Mr. Ganesh deposited at the end of each year Rs.5000, Rs.10,000, Rs:15,000, Rs.20,000 and Rs.25,000 in his Saving Bank account in year 1:to $ years respectively: Interest rate of 6%. He wants to know his future value of deposits at the end of 5 years. (07 Marks) ABC company has, on its book the following amounts and specific cost of each types of capital [Type of capital Book value Market value Specific cost in (%) | _ after tax [Debs 4,00,000 3,80,000 5 Preference share 100.000 1,10,000 8 Equity share 6,00,000 9,00,000 15 Retained earnin; 200,000 3,00,000 13 13,00,000 16,90,000 z| Determine the WACC using Book Value Weight and Market Value Weight. (10 Marks) ‘What is CAPM? (03 Marks) Briefly explain the variety factors which are influencing working capital requirements. (C Marks) Miss Spoorti paper mills providing the following information and requested you to calculate cash conversion cycle. (10 Marks) fit and data (Rs. in lakhs) - Sales 800 Cost of goods sold 720 Balance sheet data (Rs. in lakhs) Particulars | Opening | Closing | Inventory [96 102 Receivables | 86 90 Payables [56 0 Tof218MBA22 What do you mean by optimum capital structure? (03 Marks) Explain in brief the various factors affecting Dividend Policy. (07 Marks) From the following information calculate the working capital requirement for a company (Annual sales 2,00,000 units. (ii) Selling price Rs.8 per unit. Gill) Percentage net profit on sales 25%, (iv) Average credit period allowed to customers 8 weeks. (v) Average credit period allowed by suppliers 4 weeks. (vi) Average stock holding in terms of sales requirements 12 weeks, (vii) Allow 10% for contingencies. (10 Marks) Compute NPV of the project which requires an initial investment of Rs.1,60,000 and a net cash inflow of Rs.48,000 each for 6 years. The cost of funds is 8%. (03 Marks) Distinguish between primary and secondary market. (07 Marks) A firms sales, variable cost and fixed cost amouint to Rs.75,00,000, Rs.42,00,000 and Rs.6,00,000 respectively. Ithas borrowed Rs.45,00,000 at 9% and its equity capital total Rs.55,00,000. (i) What is the firm’s ROI? (ii) Is ita favourable financial leverage? (iii) Ifthe firm belongs to an industry whose asset turnover is 3, does it have a high or low asset leverage. (iv) What are the operating, financial and combined leverage of the firm? (10 Marks) Case Study : Compulsory Vivek Enterprises is considering a project proposal for replacement of an old machine by a new machine. The old machine bought few years ago as/a book value of Rs-4,00,000 and it can be sold to realize a post tax salvage value of Rs.5,00,000. It has remaining life of 3 years after which its net salvage value is expected to. be Rs.1,60,000. It is being depreciated annually at the rate of 25% under the WDV method. Working capital required for the old machine is Rs.4,00,000. The new machine cost Rs.16,00,000, it is expected to be net salvage value of Rs. 8,00,000 afier 5 years. When it will no longer be required. The depreciation rate applicable to it is 25% under the WDV method. The net working capital required for the new machine is Rs.5,00,000. The new machine is expected to bring a saving of Rs.3,00,000 annually on manufacturing cost (other than depreciation). ‘Tax rate applicable to firm is 40%. (20 Marks) 2of2pages. eg, 42+8~ 50, will be treated as malpractice. eal to evaluator and fr equa Important Note : 1. On completing your answers, compulsorily draw diagonal cross CBCSISCHEN E = Laborer |_| | TW 18MBA22 "#1 Segond Semester MBA Degree Examination, Feb./Mar. 2022 Financial Management Time: 3 hrs. Max. Marks: 100 Note: 1, Answer any FOUR full questions from Q.No:1 to Q.No.7. 2. Question No. 8 is compulsory. 3. Use of Time Value table is permitted. 1a, What is Financing decision? (03 Marks) b. Compute the following i) Mr. Dharshan deposits-Rs 10,000 at the end of every year for 6 years at 6% interest. Determine how much money will be there at the end of 6" year in the hands of Mr. Dharshan. ii) Mr. X makes a deposit of Rs 20,000 in Canara Bank, which pays 8% interest compounded annually for 8 years. You are required to find out the amount to be received by him after 8 years. (07 Marks) c. Anand Ltd., has currently on all equity structure consisting of 10000 equity shares of Rs 100 each, The management is planning to raise another Rs 20,00,000 to finance a major expansion programme and is considering 3 alternative methods of financing : i) Toissue 20000 equity shares of Rs 100 each. ii) To issue 20000, 7% debentures of Rs 100 each. iii) To issue 20000, 8% preference shares of Rs 100 each Anand Ltd,, is expecting an operating profit of Rs 12,00,000 for-the above financing, Assuming a corporate tax of 42%, Determine: the EPS in each alternative and comment which alternative is best and why? (10 Marks) 2 a. Distinguish between Annuity and Annuity due (03 Marks) b. Briefly explain the factors that influence the dividend policy ofa Company externally. (07 Marks) c. A Company is planning to raise Equity , Preference and debt capital in the following proportion : Equity 50% , Preference capital 20% and debt capital 30%. The cost of the sources of finance for different levels of usage has been estimated as follows ‘Source of Finance Range of Financing (Rs in lakhs) | Costs (%) Equity share capital 0-15 16 15-25 17 ae 25 & above Ig Preference share capital 0-3 14 ) of 3 & above 15 Debenture capi 1-20 8 20 & above 10 Prepare Weighted Marginal cost of capital schedule. (10 Marks) 3 a. Distinguish between Independent and Mutually exclusive capital budgeting proposals, (03 Marks) b. “Debt is the cheapest sources of Funds”, Do you agree? Explain, (07 Marks) lof4oe 18MBA22 Mr. Omprakash borrows Rs 5,00,000 at an interest tate of 14% P.a to purchase a car. ‘The Bank provides him six annual installment facilities to repay the loan amount. You are required to calculate the following : i) Total amount repayable to Bank including interest at the end of 6"" year. Total interest amount payable by Mr. Omprakash. i) Prepare a Loan amortization schedule. (10 Marks) State any six merits of adequate working capital in business, (03 Marks) What is Risk Management? What are the ways of managing the risk in business? (07 Marks) Select the following project on the basis of NPV and MIRR using Terminal Value Method. Original Cash outlay: Rs 10000; Life of the project 5 years Cash in flow Rs 4000 each year for 5 years. Cost of Capital 10% Expected interest rates at which cash flows will be reinverted, (10 Marks) Year end | (°%) percentage 20|¢0) 0020] If you deposit Rs 50,000 on 1-6-2019 at 12% tate of interest , in how many years will this amount double? (03 Marks) The selected financial data for X, Y and Z companies for the year ended 31-12-2018 are as follows Particulars XY [Zz ‘Variable expenses as a % percentage of sales | 60 | 50 | 40 Interest (Rs) —_ 2000 | 3000 | 4000 | Operating Leverage | S-1/6-1|2- Financial Leverage PESILSIeS Income Tax“ 50% | 50% | 50% | Prepare Income statement for A, B and C Companies. (07 Marks) Explain in detail the determinants of working capital. (10 Marks) State any six principles of Capital Structure Planning (03 Marks) Briefly explain the steps involved in the Capital budgeting process. (07 Marks) Lalitha & Co, wants to estimate the circulating capital for the upcoming project and it secks your assistance. Add 15% to your computed figure to allow contingencies. Particulars Amount (Rs PV) | Estimated cost P.V. of production =| Raw materials | Direct labour 40, Overheads (Exclusive of depreciation of Rs 10 P.V) 50 Total Cost 190 | 2o0f418MBA22 Additional Information + i) Selling price Rs 225 P.V. ii) Level of activity 102000 units of production P.a. iii) Raw materials in stock — average 4 weeks. iv) WIP (assume 50% completion stag@'in respect of conversion costs and 100% completion of materials) ~ average 2 weeks. v) Finished goods in stock ~ average 4 weeks. vi) Credit allowed by suppliers — average 4 weeks. vii) Lag in payment of wages ~ average 1.5 weeks. viii) Cash at Bank is expected to be Rs 35000. ‘You may assume that production is carried on evenly throughout the year (52 weeks) and ‘wages and overheads similarly, Al sales are on credit basis only. (10 Marks) 7 a, Distinguish between Combined cost of capital and Marginal cost of capital. __(03 Marks) b. “Wealth maximization objective is supetior to profit maximization objective”. Do you agree? Elucidate (07 Marks) ©. Sachin Ltd., has the following capital structure : 4000 Equity shares of Rs 100 each -~ Rs 4,00,000 10% Preference shares Rs 1,00,000 11% Debentures Rs 5,00,000. ‘The current market price is Rs-102. The Company is expected to declare a dividend of Rs 10 at the end of the current year, with an expected growth rate of 10%, The tax rate is applicable to 50%, i) Calculate the cost of equity and WACC ‘Assuming that the Company can raise Rs 3,00,000, 12% debentures. Find out the new WACC if Dividend rate is increased from 10 to 12%. Growth rate is reduced from 10 to 8% Market price is reduced to Rs 98. (10 Marks) 8 CASE STUDY a. A Company intends to replace an old machine with a new machine. From the following information, you are required to determine the Net cash outflow for such replacement. Particulars: Rs / data Cost of old machine 50000 Life of the old machine y' Depreciation method followed ‘Remaining useful life Cost of new machine Installation charges ‘Additional working capital required ‘Amt. realized on sale of old machine a Income tax Capital gain tax Investment allowance on new machine purchased | (08 Marks) 30f418MBA22 b. A Company is considering an investment proposal.to install a new machine. The project will cost Rs 50,000 and will have a life of 5.years and no salvage value. Tax rate is 50%. Straight Line method of depreciation of providing depreciation is followed. Estimated Net Income before depreciation and tax from the proposed investment are : Year | Net Income before Depreciation and Tax (Rs) 10,000 11,000 14,000 15,000 25,000. Evaluate the project using : i) NPVat10% ~ ii) Plat 10%. (12. Marks) 4of4__ @BtS Sense TLL] 18MBA22 Financial Management —Pime: 3 hrs, Max. Marks: 100 Note: 1. Answer any FOUR full questions from Q.No.1 to Q.No.7. 2. Question No. 8 is'compulsory. 3. Use of P-V. tables is permitted, 1a, What do you mean by Hybrid financing? (03 Marks) Discuss in detail interface of financial management with other functional areas. (07 Marks) ©. You are given the following estimates and are instructed to compute working capital requirements of Honey Ld neg, 4248 50, willbe treated as malpractice i ______ Particulars [Amt (Rs) = Stocks of finished goods 5,000 2 Stocks of materials and stores 8,000 2. Average credit given a Domestic sales = 6 weeks credit. 3,12,000 5 Export sales = 1.5 weeks credit 78,000 a Average time lag in payment SE Wages = 1.5 weeks 2,60,000 a Materials = 1,5 months, 48,000, Rent = 6 months 10,000 Clerical staff= 0.5 month 62,400 Manager = 0.5 month 4,800 Other expenses-= 1.5 months 48,000 ‘Sundry expenses paid quarterly in advance | __ 8,000 ” (10 Marks) our answers, compulsorily draw diagonal eros 2a, Differentiate between forward and future contracts. (3 Marks) b Briefly explain different dividend policies, (07 Marks) 2 ©. Discuss in detail objective of financial management, (10 Mtarks) 3° a, “What is meant by capital rationing? (03 Marks) b. Arvind Ltd’s mostrecent balance sheet is as follows: ~ Liabilities ‘Amt Assets Am] 2 Equity capital (Rs.10 each) | 60,000 | Net fixed assets | 1,50,000 | q 10% Long term debt 80,000 | Current assets | 50,000 5 Retained eamings 20,000 é Current liabilities 40,000 | Fe | 00,000 2,00,000 2 The company’s total assets turnover ratio is 3 times, ils fixed operating cost are Rs.1,00,000 z and the variable cost ratio is 40%. Tax rate is 35%, Calculate all the three types of leverages. 5 (O7TMarks) i ©. Discuss in detail various sources of financing. (10 Marks) 4 a, What do you thean by gross working capital? (03 Marks) Discuss the key steps involved in capital budgeting process. (oT Marks) ©. Describe briefly various factors affecting working capital requirements. (10 Marks) 10f318MBA22 If the interest rate is 129%, what are the doubling periods as per the rule of 72 and the rule of 69 respectively? (03 Marks) PFC Ltd wishes to calculate its cost of equity capital. using CAPM approach. It is found that the risk-free rate of return is 10%, the firm’s beta is 1.5 and the retum on the market portfolio is 12.5%. Compute the cost of equity capital (OT Marks) Beta technology's present capital structure, consists of Rs.20,00,000 eqitity capital at Rs.100 each. It requires Rs.10,00,000 for expansion purpose. There are three altematives are available (Issue of 10,000 equity shares at RS:100 each. (i) Issue of 1000 equity shares'at RS.100 each and debenture Capital Rs.9,00,000 at 10% interest. ii). Tssue £5000 equity shares at Rs.100 each and preference capital of Rs.5,00,000 at 12% dividend rate The company's tax rate'is $0%, EBIT of Rs.8,00,000, What is the EPS in each altematives of financial plan? Recommend the best plan. (10 Marks) ‘What do you mean by pre-emptive right? (03 Marks) ‘Suppose a firm borrows Rs.10,00,000 at an interest rate of 15% and the loan is to be repaid in 5 equal, installments payable at the end of each of the next 5 years. Compute annual installment amount and also prepare foan amortization schedule. (07 Marks) ‘The expected cash flows of a project are as follows: Year | Cash flow 00,000 20,000 30,000 40,000 50,000 30,000. The cost of capital and reinvestment rate is 12%, Calculate! (i) NPV (ii) BCR (iii) MIR. (10 Marks) What do-you mean by weighted average cost of capital? (03 Marks) Discuss in brief different factors affecting the dividend policy, (07 Marks) ‘The NTPC has the following capital structure: Equity capital. (20,000 shares) | 40,00,000 10% Preference capital 10,00,000 14% Debentures 30,00,000 Total '80,00,000 The share of the company sells for RS.20, It is expected that the company will pay next year a dividend of Rs.2 per share which will grow at 7% forever. Assume a 50% tax rate (Compute the WACC based on existing capital structure. Gi) Compute the New" WACC, if the company raises an additional Rs.20,00,000 debt by issuing 15% debentures. This would increase the expected dividend to Rs.3 per share and leave the growth rate unchanged, but the price of share will fall to Rs.15 per share. (10 Marks) 20f318MBA22 CASE STUDY (compulsory) Jindal Enterprises is determine the cash flow for a'project involving replacement of an old ‘machine by a new machine, The old machine bOuight a few years ago has a book value of Rs.4,00,000 and it can be sold to realize a’post tax salvage value of Rs.5,00,000. It has a remaining life of S years after which its nétsalvage value is expected to be Rs.1,60,000. It is being depreciated annually at a rate of 25% under the WDV method. The working capital required for the old machine is Rs.4,00,000. The new machine costs Rs.16,00,000. It is expected to fetch a net salvage of Rs.8,00,000 after 5 years when it wilf'n6 longer be required. The depreciation rate is 25% under the WDV method. The net Working capital required for-the new machine is Rs.5,00,000. The new machine is expected to bring a saving of Rs,3,00,000 annually in manufacturing costs (other than depreciation). The tax rate is appliéable to the firm is 40%, ‘Compute cash flows for the replacement of éapital project. 20 Marks) 30f3CBCSISCHENE 18MBA22 & Second Semester MBA Degree Examination, July/August 2021 ae Financial Management TEAL OS ie: 3 hrs. Max. Marks:100 Note: 1. Answer any FIVE full questions. 4 2. Use of time value table is permitted. 2 1 a, What do you mean by Financial Market? (03 Marks) a Explain the objectives of Financial Management. (07 Marks) z ¢. Accompany raised a loan of Rs.10 lakh, rate of interest is 12%, loan is to be repaid in 5 equal 2 installments paid at the end of each year. Prepare loan amortization schedule. (10 Marks) gz £3 2a. What is time value of money? (03 Marks) ae b. Explain different sources of financing. (07 Marks) eal c. XYZ had the following capital structure: Be i) Equity shares of Rs.10 each amounting to Rs.3,00,000, the market price of the share i 2 was Rs.75 and the dividend was 10%. Be ii) 15% preference shares of Rs.100 each redeemable after 10 years at 10% premium, 2 Total preference share capital was Rs.2,00,000. . iii) — Rs.4,00,000 worth of 14% debentures of Rs.100 each redeemable at 5% premium after 2 5 years. The applicable tax rate was 30%. Calculate weighted average cost of capital (10 Marks) 3° a. What is CAPM? (03 Marks) b. Explain the factors influencing working capital requirements. (07 Marks) ©. A company is considering to install new machine at @ cost of Rs.10,00,000. The life expectancy of the machine is $ years and no salvage value. The tax rate is 30%. Firm uses straight line method of depreciation. The estimated cash inflows before depreciation and tax are as follows: Yea [Tay 2 37] 5 CFBDT | 4,00,000 | 3,00,000 | 5,00,000 | 2,00,000 | 3.00,000 Compute: i) PBP- ii) ARR ii) NPV _ iv) PI. Consider discount rate of 10%, (10 Marks) 5 a z 5 q 3 3 3 ie 4 a, What is capital rationing? (03 Marks) b. Explain the factors influencing dividend policy decisions of a company. (07 Marks) ¢. Calculate operating leverage, financial leverage, combined leverage and EPS from the following information: Output 20,000 units, selling price Rs.80 per unit, variable cost Rs.30 per unit, fixed cost Rs.2,00,000, interest on loan Rs.1,00,000, preference dividend Rs.1,50,000, tax rate 50%, number of equity shares 40,000 shares of Rs.10 cach. (10 Marks) 5 a, What do you mean by operating cycle? (03 Marks) b. X deposits at the end of each year Rs.5,000, Rs.10,000, Rs.15,000, Rs.20,000 and Rs.25,000 in savings bank account in I to 5 years respectively. Interest rate is 6%, compounded annually. Calculate the future value of the end of 5 years. (07 Marks) : a § i : 6 2 é z a Lof218MBA22 ABC Ltd. provides the following particulars for the year 2019-20. i) Average Debtors 7,00,000 ii) Average period of audit allowed 20 days iii) Raw materials consumed 48 lakh iv) Cost of production 1.08 crore v)_ Cost of goods sold 2.25 crores vi) Credit sales 2.10 crores Average inventory: Raw materials 4 lakh Work in progress 3 lakh Finished goods 5 lakh Calculate operating cycle in a year. Assume 360 days in a year. (10 Marks) What do you mean by Behavioural Finance? (03 Marks) ‘A company has issued 13% preference shares of Rs.200 each redeemable afler 5 years at a premium of 20%. Calculate. the cost of preference shares if they are issued i) at par and ii) at 10% discount. (07 Marks) Calculate i) Future value of 1,000 deposited for 5 years in a bank, which ears interest at 9.5% p.a ‘compounded semi-annually. Present value of Rs.1000 receivable after 10 years, assume discount rate at 10%. Present value of annuity of Rs.1,000 per annum for a period of 8 years, interest rate is 9% pa. iv) If we deposit Rs.50,000 at 7% rate of interest in how many years this amount will become double according to rule 72 and rule 69. (10 Marks) What do you mean by stable dividend? (03 Marks) XYZ Ltd. is considering the purchase of a machine costing Rs.3,00,000. Consider discount rate of 10% cash inflows are as follows: (Year 1 2>3 | 4 Cash in flow | 20,000 | 65,000 | 90,000 | 1,50,000 Calculate discounted payback period (07 Marks) Explain the emerging tole of Finance Manager (10 Marks) CASE STUDY A cost sheet ofa company provides following particulars: Element of cost Amount per unit (Rs.) Raw materials 70 Direct labour 30 Overheads 50 Profit 50. Selling price —_ 200 The following particulars are available: Raw materials will be in stock for one month, Materials are in process on an average for one month. Finished goods will be in stock for about two months. Credit allowed by creditors is two months Lag in payment of wages is one month. Lag in payment of overhead expenses 1/4 of the output is sold for cash viii) Cash in hand and at bank is expected to be Rs.50,000 You are required to prepare a statement showing working capital needed to finance a level of activity of $2,000 units of production. (20 Marks) teens 20f2 one month.