This document contains instructions and questions for a financial management exam. It includes the following:
1) Instructions for candidates to attempt 4 of the 6 questions provided and that simple calculators are allowed.
2) The 6 questions cover various topics in financial management including financial decision making, project evaluation techniques like payback period, net present value, and internal rate of return, capital structure, cost of equity, dividend policy and the Walter model, and working capital requirements calculation.
3) The document provides relevant financial details and figures for students to reference when answering the questions.
This document contains instructions and questions for a financial management exam. It includes the following:
1) Instructions for candidates to attempt 4 of the 6 questions provided and that simple calculators are allowed.
2) The 6 questions cover various topics in financial management including financial decision making, project evaluation techniques like payback period, net present value, and internal rate of return, capital structure, cost of equity, dividend policy and the Walter model, and working capital requirements calculation.
3) The document provides relevant financial details and figures for students to reference when answering the questions.
This document contains instructions and questions for a financial management exam. It includes the following:
1) Instructions for candidates to attempt 4 of the 6 questions provided and that simple calculators are allowed.
2) The 6 questions cover various topics in financial management including financial decision making, project evaluation techniques like payback period, net present value, and internal rate of return, capital structure, cost of equity, dividend policy and the Walter model, and working capital requirements calculation.
3) The document provides relevant financial details and figures for students to reference when answering the questions.
This document contains instructions and questions for a financial management exam. It includes the following:
1) Instructions for candidates to attempt 4 of the 6 questions provided and that simple calculators are allowed.
2) The 6 questions cover various topics in financial management including financial decision making, project evaluation techniques like payback period, net present value, and internal rate of return, capital structure, cost of equity, dividend policy and the Walter model, and working capital requirements calculation.
3) The document provides relevant financial details and figures for students to reference when answering the questions.
Name of Course : B. Com (P) Part-III Semester/ Annual : Annual Duration : 2 hours Maximum Marks : 75 Instructions to Candidates: 1. Attempt any four questions. All questions carry equal marks. 2. Use of simple calculator is allowed
1. “The prominent areas of financial decision making today are considerably different from what they were few decades ago.” Explain.
2. A project requires an initial investment of Rs.5, 00,000. It is estimated to have a life of 6 years. The estimated net cash flows are as under: Year Net Cash Flow (Rs.) 1 60,000 2 80,000 3 1, 10,000 4 1, 20,000 5 1, 30,000 6 1, 00,000 Cost of capital is 10%. Calculate: a. Payback Period b. Net Present Value c. IRR of the project. Assume that the standard payback period is 4 years. Should the project be accepted as per each of the above measures? Why? [Discount factors at 10% are 0.909, 0.826, 0.751, 0.683, 0.621, 0.564 for 1 to 6 years.] 3. There are two firms which are identical in all respects except in terms of their capital structure as can be observed from the details given below: R Ltd. S Ltd. Levered Unlevered EBIT (Rs.) 2,00,000 2,00,000 Debt (Rs.) 6,00,000 0 Rate of Debt 15% __ Ke 20% 15%
Calculate the values of two firms and illustrate using MM approach how an investor holding 10% shares of R Ltd. will be benefitted by switching over his investment from R Ltd. to S Ltd. Why?
4. “There are different approaches to the computation of cost of equity capital and there is no explicit cost of retained earnings” Critically comment.
5. Is the Walter’s model relevant to the dividend policy? Calculate the market price of the firm’s share as per Walter Model if dividend payout ratio is (i) 25%, (ii) 50% or (iii) 100% from the following information: Earnings per share Rs. 10 Cost of equity 15%. Rate of return on investment 10%. What conclusion will you draw from these prices?
6. Compute Working Capital Requirements from the following details:
Budgeted Sales: 30,000 units per annum Rs. Raw material cost per unit 10 Direct labour per unit 8 Overhead per unit 2
Total cost per unit 20
Profit per unit 2
Selling price per unit 22
Additional Information: i. Raw material will be carried in stock for 4 weeks and finished goods for 2 weeks. ii. Factory processing will take on an average 3 weeks iii. Suppliers provide 6 weeks credit; and iv. Debtors are allowed 8 weeks credit. Assume labor and overhead expenses to accrue evenly throughout the production cycle. ______________________________________________________________
