Illustration-4

XLtd., capitalized with 10,00,000 divided in to 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 financing plans:
1. All Equity Shares
2. 75,00,000 in Equity Shares and 5,00,000 in Debentures carrying 10% interest.
3. Alldebentures carrying 8% interest.
4. 5,00,000 in Equity Shares and 5,00,000 in Preference Shares carrying 10%
Dividend.
The existing EBIT amounts to?1,20,000 per annum.
1. You are required to calculate carnings per Equity Share under each of the above four
financial plans. Assuming a corporate tax rate of 50%.
2. Calculate the earnings per equity share, if on account of expansion the level of EBIT
is doubled.
 LIBRARY
SHVAMOGGA
Q.P. Code - 18541

Fifth Semester B.Com. Degree Examination, MAY/JUNE 2016

(2013-14 Syllabus)
Commerce
(CME 410) FINANCIAL MANAGEMENT
Time :3 Hours] |Max. Marks : 80

SECTION - A/3JYrt
Answer any THREE questions. 5 marks each : 3 x 5 = 15

aipjoYddo shedo aaien g o 3eY 5 odrido :

1. What are the functions of Financial Management?

2 What is Time value of Money?

3 Calculate the compound value ofR 10,000 at the end of 3 year at 12% rate of interest
when interest is calculated on yearly basis and quarterly basis.

4. From the following information, calculate the percentage change in earnings per share
(EPS) if sales are increased by 5%.
R in lakhs)
EBIT 1,120
PBT 320

Fixed cost 700

(da. eddeo)
QP CODE 18541 Page No.. 1

Fifth Semester B.Com. Degree Examinations

October/November 2018
(2013- 14 Sylabus)
COMMERCE
Paper CME 410: FINANCIAL MANAGEMENT
Tiume: 3 hrs.] [Max. Marks: 80

SECTION - A

I. Answer any TIHREE questions. FIVE marks each: 3x5= 15

What is Capital Budgeting?

Write a note on Weighted average cost of capital.
3. From the following data calculate the operating leverage:
Sales 8,00,000
Variable cost ? 3,50,000
Fixed cost 2,00,000
4. Sthuthi Co. Ltd issues 1,000, 12% debentures of 100 cach, at discount of 5%. The
underwriting commission payable is ? S,000. The debentures are payable after 5
years. Compute the cost of debt after tax at 50%.
5. You are required to calculate EPS from the following information:
Profit ? 1,50,000
Tax 30%
Equity capital 1,00,000
Equity share at 10 each.
 of Rs. 100
14) Shrikanth Ltd has equity share capital of Rs. 5,00,000 divide into Sharcs
cach. It desires to raise additional Rs. 5,00,000 further expansion of the business. The
company's financial plans are as bellow.
a. All cquity shares
b. Rs. 4,00,000 10% debentures and remaining in equity shares.
c. Rs. 2,00,000 cquity shares and remaining 3,00,000 in 16% preference share.
The company's EBIT is Rs. 2,40,000 and tax rate is 30%. Determine EPS in each
plan and suggest suitable plan.
o sotNo D, Becbrtd A, do. 5,00,000 s , wo aeorn do. 100do3
o t . Ad oai do b, do. 5,00,000 wodtd, OzeD (adc,)

a. dogorF o a , osR Bedoris shoe.

b. do. 4,00,000 J , Best 10adoo nd sboet , eved do. 1,00,000

#otNo ad aBo do. 2,40,000 b , sorio dd de 30 dd EPS o

11. Maanvi Ltd., is capitalized with 5,00,000 consisting of 5,000 equity shares of
7 100 each. The Management under its Cxpansion plans desires to raise
additional 3,00,000through one of the following financial plans:
a) All equity capital
b) 1,00,000 equity capital and 2,00,000, 10% debentures.
c) All in 10% Debentures.
d) ?1,00,000 equity capital and 2,00,000, 8% preference share capital.
The EBIT of the firm is 1,50,000. The Company is under 50% tax bracke.
Recommend which plan would be suitable from the point of view of
Shareholders ?
11. A Company has a capital structure (all equity) amounting to Rs. 10,00,000 of
Rs. 10 each. The Company wants to raise an additional capital of Rs. 5,00,000
from the external sources. The company has the following four alternatives to raise
the funds:
1) Raise the entire amount in the form of equity capital.
2 Raise 40% of the amount required from equityy and remaining 60% using 10% debt.
3) Raise the entire amount as 12% debt.
4) Raise 50% using equity capital ànd remaining through Preference share capital
with dividend rate of 8%,
If the firm is able to earn an operating profit.of Rs. 1,60,000 after additional investment
and lax rate is 50%, Suggest the best financlal plan.
 7 Ananya Company Limited has cquity share eapital of RS,00,000 dividend into shares
orz100 each. Ii wislhes to raise further? 3,00,000 lor expansion cum modernization
plans. The company plans thc following financing schemes.

Contd........2.

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QP CODE 18501 Page No.....2

a) All common stock
b) 1,00,000 in common stock and 2,00,000 in 109% dcbenturcs.
c) All debt at 10% p.a
d) ? 1,00,000 in common stock and ? 2,00,000 in
dividend at 8%.
preferencc capital with the ratc of
The company's cxpectcd lEBIT arc ? 1,50,000. Thc
corporate rate of tax is 50%.
You arc requircd to detcrminc the carnings per sharc [EPS] in
cach plan and
comment on the result.
 SECTION - C
III. Answer any THREE questions. FIFTEEN marks each. (3x15=45)
10. Define Financial Management. Explain the goals of Financial Management.
11. Apoorva Co. Ltd. is capitalised with Rs. 10,00,000 of 10,000 equity shares of Rs.
100 each. The management under its expansion plan desires to raise additional
of Rs. 10,00,000 through one of the following financial plans.
a) All Equity Capital.
b) Rs. 5,00,000 equity capital and Rs. 5,00,000, 10% detbentures.
c) All debentures at 12% [Twelve]
d) Rs. 5,00,000 equity capital of Rs. 5,00,000, 10% preference capital
The EBIT of the firm is Rs. 3,00,000. The company is under 50% tax bracket.
Calculate EPS in each case and comments as to which capital structure suitable?
10. What do you mean by dividend policy ? Explain the tactors intluencing dividend policy.
11. A company's capital structure consists of the following:
Equity Share Capital of Rs. 100 each Rs. 20 lakhs
Retained Earnings Rs. 10 lakhs
9% Preference Shares Rs. 12 lakhs
7% debentures Rs. 08 lakhs
Total Rs. 50 lakhs
The Company earns an EBIT of Rs. 9,00,000. The income tax rate is 50% The
company requires a sum of Rs. 25 lakhs to finance its expansion programme for
which the following alternatives are available to it:
(i) Issue of 20,000 Equity Shares at a premium of Rs. 25 per share
(0) Issue of 10% Prelerence Shares
(ii) issue of 8% debentures
Which of the three financing alternatives would you recommend and why?
2
 O.P. Code: 18501

FIfth Semester B.Com.Degree Examination, March/April2023

(2018-19 Scheme)
COMMERCE
(COE 410) Flnanclal Management
LIDAARY3
9raA
Tlme :3 Hours Max. Marks : 80
SECTION A
Answor any THREE questlons. FIVE marks each. (3x5=15)
.
Write a note on Time Value of Money.
2 Differentiate betwoen operatingg leverage and financial leverage.
3. From the following calculate Operating Leverage, financial leverage and Combined
leverage.
Sales 10,000 unts Rs. 25 per unit as selling price
Variable CostRs. 5 per unit
Fixed cost Rs. 30,000
Interest cost Rs. 15,000
4 Calculate Pay Back Period from the following:
Cost of the Machine Rs. 50,000
Year 1 2 3 4
Cash Inflow (Rs.) 15,000 20,000 25,000 15,000 20,000
5. Mr. X deposited Rs. 9,000 at the end of each year in an investment account for
4 years. Calculate the future value of annuity if the rate of interest is 10%.
SECTION -B
II. Answer any TWO questions. TEN marks each. (2x10=20)
6 What do you mean by Working Capital? Explain the factors influencing the working
capltal of an organization.
7. X LId. has a capital structure (all equity) amounting to Rs. 5,00,000 of Rs. 10 each.
The firm wants to raise an additional capital of Rs. 2,50,000 from external sources.
The firm has the following 4 alternatives to raise the funds.
1) Raise the entire amount in the form of equity capital
2) Raise Rs. 1,00,000 from equity capital and Rs. 1,50,000 from 10% debt
3) Raise the entire amount from 12% debt
4) Raise Rs. 1,25,000 from Equity Capital and Rs. 1,25,000 from preference share
capital with 8% dividend
The firm ls able to earn an operating profit of Rs. 80,000 after additional investment
and the rate of tax is 50%. Suggest the best financial plan.
1
 Excellent Ltd., has currently Equity Share capital of ? 25,00,000, consisting of 25,00,
shares of 100 each. The management is planning to raise another 20,00,000 to financ:
major programme of expansion through one of the four possible financial plans. The optior
are:

1. Allthrough Equity Shares.

2. 10,00,000 through Equity Shares and 10,00,000 throughlong-termborrowings
8% interest per annum.
3. 7 5,00,000 through Equity Shares and 15,00,000 through long-term borrowings:
9% interest per annum.
4. 10,00,000 through Equity Sh£res and 10,00,000 through Preference Shares wit
5% Dividend.
The company's expected earnings before interest and tax (EBIT) will be8,00,000. Assumn
commer
a corporate tax rate of 50%, determine the earnings per share in each alternative and
which alternative is best and why?
 Acompany needs ? 12,00,000 for installation of a new factory, which
annual EBIT of 2,00,000. The company has the would yield
objective of maximizing the EPS. It
considering the possibility of issuing equity shares plus raising debt of 2,00, 000, or 6,00,00
or 10,00,000. The current market price per share is 40, which is
expected to drop to 2:
per share. If the market borrowings were to exceed ? 7,50, 000. Cost of borrowings is indicate
as under:
Up to 2,50,000, @10% p.a.
72,50,001 -6,25,000 @ 14% p.a.
76,25,001 10,00,000 @ 16% p.a.
which would meet the objective
Assuming a tax rate of 50%, workout the EPS and scheme
of the management.
 AB Limnited needs 50,00,0(0 for the installation of a new factory, the new factory is
expected to yield annual Earnings Before Interest and Tax (BBIT) of? 10,00,000. In choosing
a financial plan AB Limited has an objective of maximizing earnings per share. It is considering
the possibilities of issuing ordinary shares and raising debt of ?5,00,000 or 20,00,000 or
30,00,000.
The current market price per share is 300 which is expected to drop to 7250 ifthe funds
are borrowed in excess of 20,00,000. Funds can be raised at the following rates:
Upto 5,00,000 at 10%
Over 5,00,000 to 20,00,000 at 15%
Over 20,00,000 at 20%
Assuming a tax rate of 50%, advise the company.
 Acompany's capital structure consists of the following:
|Equity shares of R100 each 20 lakhs
Retained earnings 7 10lakhs
9% Preference Shares ? 12 lakhs
7% Debentures ?8 lakhs
Total ? 50 lakhs
The company earns 12% on its capital. The income-tax rate is 50%. The company requires
asum of 25 lakh to finance its expansion programme for which the following alternatives are
available to it:

a) Issueof 20,000 equity shares at a premium of 25 per share

b) Issue of 10% preference shares
c) Issue of 8% debentures
It is estimated that the P/B ratios in the cases of equity, preference and debenture financing
would be 21.4, 17 and 15.7 respectively.
Which of the three financing alternatives would you recommend and why?
(BU B.Com 2011)
 Illustration-11
The existing capital structure of ABC Limited is as follows:
Equity shares of100 each 40 lakhs
Retained earnings 10 lakhs
9% Preference Shares 725 lakhs
7% Debentures 25 lakhs
The company earns 129% on its capital. The income-tax rate is 50%. The company requrts
a sum of 25 lakh to finance its expansion project for which the following alternatives a
available to it:
a) Issue of 20,000 equity shares at a premium of 25 per share
b) Issue of 10% preference shares
c) Issue of 9% debentures