Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in
Department of Business Administration
Academic Year: 2024-25
Semester: 4th
Assignment-2 (Unit -3 & 4)
Course/ Subject Code: BBA 204 Subject Title: Financial Management
Issue Date: 04/04/2025 Last Date of Submission: 14/04/2025
Note:
1. The student should attach proper cover page for each assignment clearly mentioning Student’s complete
Name, University Enrolment No., Program, Semester, Class, Section, Assignment Number, and Subject
Title. Format of Cover page is attached herewith.
2. Each assignment should be prepared by the student individually in his/her own handwriting. A4
size ruled sheets should be used for writing the assignment.
3. Black or Blue pens should be used for writing the assignment.
4. Assignment pages should be serially numbered at the bottom of page.
5. The student should use examples and illustrations in support of the answers.
Questions All questions are compulsory. CO No.
Q1: While preparing a project report on behalf of a client you have collected the following CO4
facts. Estimate the net working capital required for that project. Add 10 per cent to your
computed figure to allow contingencies:
Particulars Amount per unit
Estimated cost per unit of production:
Raw material Rs80
Direct labour 30
Overheads (exclusive of depreciation, Rs 10 per unit) 60
Total cash cost 170
Additional information:
Selling price, Rs 200 per unit
Level of activity, 1,04,000 units of production per annum
Raw materials in stock, average 4 weeks
Work in progress (assume 50 per cent completion stage in respect of conversion
costs and 100 per cent completion in respect of materials), average 2 weeks
Finished goods in stock, average 4 weeks
Credit allowed by suppliers, average 4 weeks
Credit allowed to debtors, average 8 weeks
Lag in payment of wages, average 1.5 weeks
Cash at bank is expected to be, Rs 25,000.
Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in
You may assume that production is carried on evenly throughout the year (52
Weeks) and wages and overheads accrue similarly. All sales are on credit basis only.
OR
Q1: Bob owns a bakery and he's trying to determine how well operations are running at his
shop. The particulars of his business are given below. Calculate current Working Capital
Cycle and number of operating cycles the firm has in a year.
Raw Material Stock Turnover 20 days
Credit Received 40 Days
WIP Turnover 15 Days
Finished Goods Stock Turnover 40 Days
Debtors’ Collection Period 60 Days
Sales(Credit) 6000
Cost of Production 4200
Credit Purchase 1200
Average Raw Material Stock 190
Average WIP 170
Average Finished Goods Stock 360
Average Creditors 150
Average Debtors 700
CO3
Q2: A project requires an initial outlay of ₹50,000 and has life of 5 years. It generates year ending
profits before depreciation and taxes (PBDT) of ₹11000, ₹12000, ₹48000, ₹60000, ₹15000. It is
depreciated on using SLM. The rate of tax is 35% and cut-off rate is 16%. Compute the following:
Accounting Rate of return
Payback period
NPV
IRR
PI
OR
Q2. The Company has three mutually exclusive projects X, Y, Z. Basic information is as
follows:
Cost of Capital= 15%
Risk free rate = 10%
Cash flows and Risk Index are estimated as follows:
Particulars Project X Project Y Project Z
Initial Cash Investment 30 35 40
Cash Inflow
Year 1 15 18 17
Year 2 15 26 10
Year 3 15 10 18
Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in
Year 4 15 12 20
Risk Index 2 1.5 1
Calculate risk adjusted net present value for each project using RADR method. Give
Suggestions about which project should be selected?
Q3: The Vikas Engineering Co. Ltd., currently has one lakh outstanding shares selling at CO5
₹100 each. The firm has net profits of ₹10 lakh and wants to make new investments of ₹20
lakh during the period. The firm is also thinking of declaring a dividend of ₹5 per share at
the end of the current fiscal year. The firm’s opportunity cost of capital is 10 per cent. What
will be the price of the share at the end of the year if (i) a dividend is not declared; (ii) a
dividend is declared. (iii) How many new shares must be issued?
OR
Q3: The earnings per share of a company are ₹10. It has an internal rate of return of 15 per
cent and the capitalization rate of its risk class is 12.5 per cent. If Walter’s model is used: (I)
What should be the optimum pay-out ratio of the firm? (ii) What would be the price of the
share at this pay out? (iii) How shall the price of the share be affected if a different pay out
were employed?
