Q.1. A.

MCQ
1. A
2. C
3. A
4. C
5. B
6. A
7. A
8. A
9. A
10.A

Q.1.B. TRUE: 1, 2, 3, 4, 5, 7, 8
FALSE: 6, 9, 10

Q.2.A.
1. NET ASSET METHOD:
Goodwill 207000
Land and building 240000
Plant and machinery 240000
Stock 120000
Debtors 30000
Investment 60000
Cash at bank 150000
Cash in hand 60000

(-) 9% debenture (60000)

Creditors (60000)
987000
(-) pref. share capital (60000)
927000
NAV= 927000 / 6000 = 154.5
2. YIELD METHOD
Average profit 114000
(-) tdf. To general reserve (10%) (11400)
 (-) pref. dividend 10% on 60000 (6000)
FMP 96600
Rate of FMP = 96600 / 600000 x 100 = 16.1%
Yield value = 16.1 /10 x 100 = 161
3. FAIR VALUE = 154.5 + 161 / 2 = 157.75
OR
Q.2.B.
EBIT 92
(-) interest (250x8%) 20
EBT 72
(-) tax @ 40% 28.8
EAT 43.2
(+) interest 20
NOPAT 63.2
Capital employed = 250 + 500 = 750 cr.
WACC
Source Amt. Proportion Specific cost Product
Debt 250 0.33 0.08 2.64
Equity 500 0.67 0.15 10.05
750 1.00 12.69%
EVA = NOPAT – WACC x CE = 63.2 – 12.69% (750) = 63.2 – 95.18 = (31.98) cr.
Q.2.C.
EPS = NPAT – Pref. dividend / no. of equity share = 2271 / 120 = 18.93
P/E ratio = MPS/EPS
2 = MPS/ 18.93
MPS = 18.93 x 2 = 37.85
Market capitalization = 37.85 x 120 = 4542 lakhs
Net worth = equity share capital + retained earnings = 1200 + 600 = 1800 lakh
MVA = Market capitalization - Net worth = 4542 – 1800 = 2742 lakh

Q.3.A.
i. Present EPS = EAT/ no. of equity share
Zigma Ltd. = 90/45 = 2
Sigma Ltd. = 18/18 = 1
ii. Present P/E ratio = MPS/EPS
 Zigma Ltd. = 60/2 = 30
Sigma Ltd. = 37/1 = 37

iii. New EPS if proposed merger takes place

No. of Zigma Ltd. shares to be exchanged for Sigma Ltd. based on MV per
share = 1800000 shares x 37/60 = 1110000 shares
Total no. of equity shares in Zigma Ltd. after proposed merger
= 4500000 + 1110000 = 5610000 shares
EPS of Zigma Ltd. after merger = 10800000 / 5610000 = 1.93

iv. Exchange ratio if Zigma Ltd. wants to ensure the earnings to members
before merger takes place
Shares to be exchanged on EPS basis = 1800000 x ½ = 900000 shares
Total no. of equity shares in Zigma Ltd. after proposed merger
= 4500000 + 900000 = 5400000 shares
EPS after merger = 9000000 + 1800000 / 5400000 = rs.2
Exchange ratio Zigma Ltd.: Sigma Ltd.
4500000:900000
5:1
OR
Q.3.B.
Rama Ltd.
Laon Amortization Schedule
Year Principal at Interest Principal Loan Principal at
the (15% of 2) instalment instalment the end
beginning
1 2 3 4 (5-3) 5 6 (2-4)
1 1250000 187500 212500 400000 1037500
2 1037500 155625 244375 400000 793125
3 793125 118969 281031 400000 512094
4 512094 76806 323194 400000 188900

Q.3.C.
I. Calculate H.P Price = down payment + instalments
= 200000 + 1000000 = 1200000
 II. Calculate total interest = H.P. Price – cash price
= 1200000 – 1000000 = 200000
III. Calculate the ratio of H.P. price outstanding at the beginning of each year
Year o/s H.P price at Instalment paid o/s H.P. price at
beginning end
1 1000000 250000 750000
2 750000 250000 500000
3 500000 250000 250000
4 250000 250000 -
Ratio of H.P. price at the beginning of the year:
100:75:50:25
4:3:2:1
IV. Calculate interest for each year
a. 4/10 x 200000 = 80000
b. 3/10 x 200000 = 60000
c. 2/10 x 200000 = 40000
d. 1/10 x 200000 = 20000
Analysis
Year Instalment paid Principal Interest
Down 200000 200000 -
1 250000 170000 80000
2 250000 190000 60000
3 250000 210000 40000
4 250000 230000 20000
1200000 1000000 200000

Q.4.A.
Journal of Gangram Ltd.
Particulars Rs. Rs.
Preference share capital a/c 400000
To Preference share capital a/c 300000
To Capital reduction a/c 100000
(being pref. shares reduced)
Equity share capital a/c 300000
To Equity share capital a/c 120000
To Capital reduction a/c 180000
(being equity shares reduced)
10% Mortgage debenture a/c 200000
To Stock a/c 60000
To Debtors a/c 100000
To Capital reduction a/c 40000
(being debenture satisfied)
Creditors a/c 180000
To Equity share capital a/c 130000
To Capital reduction a/c 50000
(being creditors reduced and satisfied)
Premises a/c 30000
To Capital reduction a/c 30000
(being appreciated by 20%)
Capital reduction a/c 400000
To Goodwill a/c 50000
To Profit and loss a/c 320000
To Machinery a/c 30000
(being debenture satisfied)

Gangram Ltd.
Balance sheet as on 31st March 2019
Particulars Notes no. Rs.
Equity and Liabilities
Shareholders fund
Share capital 1 550000
Total 550000
Assets
Non – current assets
Tangible assets 2 550000
Total 550000
Notes to B/S
1. Share capital: 6250 Equity shares of rs.40 each 250000
4000 Preference shares of rs.75 each 300000 = 550000
2. Tangible assets: Premises + machinery = 180000 + 370000 = 550000

OR
Q.4.B.
PQR Ltd.
Computation of P.V of NCOAT (lessor’s point of view)
Particulars Year Amt. PVF @ 16% PV
Cost of assets 0 100000 1 100000
(-) tax saving on 1-5 6000 3.274 (19644)
depreciation (20000 x 30%)
PV of NCOAT 80356

Computation of PV of ALR
Particulars Year Amt. PVF @ 16% PV
Annual lease rental 1-5 35000 3.274 114590
(-) tax @ 30% 1-5 10500 3.274 (34377)
PV of cash inflow 80213

Q.4.C.
Effective interest rate = FV – IP – C / IP – C x 12 / Maturity x 100
= 100000 – 98000- 850 / 98000 – 850 x 12/4 x 100
= 1150 / 97150 x 12/4 x 100
= 3.55%

Cost of fund = Effective interest + Brokerage + Rating chargers + Stamp duty

= 3.55 + 0.10 + 0.60 + 0. 15
= 4.4 %