Financial Management, Question Paper of MBA 2nd Semester,Download Previous Years Question Paper 5

No. ……………..                                                                                     Total No. of Pages: 3

Examination May-2014

FINANCIAL MANAGEMENT

MBA-205

Paper ID: C0250

Time: 03 Hours                                                                                     Maximum Marks: 60

Instructions to Candidates:       

Attempt the following question as per instruction.

                                                             Section – A                                 (2 x 10 = 20 Marks)

Q.1. Attempt any four question

a)     How to calculate Valuation of convertibles.

b)    What is internal Rate of return?

c)     What is Gordon model?

d)    What is factoring and its importance?

e)     Operating cycle.

f)      Relationship between risk & return.

Section – B

Attempt one question from each units each unit carries 8 marks.          Mark – 32

Unit-I

Q.2.    The responsibility of finance manager is now regarded as much more than ere procurement of funds. What do you think are the other responsibilities of finance Manager?

Q.3.    (a) Depreciation and retained earnings are the internal sources of finance. Discuss

(b) Debenture capital is the cheapest source of funds Discuss.

Unit-II

Q.4.    (i) From the following information determine the expected rate of return.

	Green Valley		Skyiark
Investment (Rs) Return Pessimistic Most likely Optimistic	Rs.	Pro	Rs.	Pro
	1,00,000 19 18 24	0.3 0.4 0.3	1,00,000 12 18 29	0.3 0.4 0.3

           

(ii) A company has 2000000 6% debentures outstanding today. The company has to redeem the debentures after 5 years and establishes a sinking fund to provide funds for redemption. Sinking fund investments earn interest @ 10% p.a. The investments are made at the end of each year. What annual payment must the firm make to ensure that the needed Rs. 20, 00,000 is available on the designated date?

Unit – III

Q.6.    How does the traditional view of the capital structure differ from net income approach and net operating income approach? Explain.

Q.7.    A Company provides the following information to you

            Equiry earning Rs. 4, 00,000

            Dividend paid Rs.   2, 20,000

            Price earning ration (PE Ratio)-8

            Required rate of return is 15 per cent

a.     Determine whether the company’s D/P ratio is optimal according to waiter. The company’s paid up equity share capital is Rs. 40, 00,000 with face value Rs. 100 per share. It is expected to maintain its current rate of earnings on total assets.

b.     What should be the P/E ratio at which the dividend payout ratio will have on impact on the share price?

c.      Will you decision change if the P/E ratio comes down by 2?

Q.8.    Performa cash sheet of a company provides the following particulars.

            Material                    40%

            Direct Labour          20%

            Overheads               20%

            The following information is also available:

a.     It is proposed to maintain a level of activity of 200000 units.

b.     Selling price of Rs. 12 per unit.

c.      Raw materials are expected to remain in store of an average period of one month.

d.     Materials will be in process on an average half a month.

e.     Finished goods are required to be in stock on average period of one month.

f.       Credit allowed to debtors in two month.

g.     Credit allowed by suppliers is  one month. Estimate working capital required.

Section-C                                         Marks 8                                              

Q.9.    Attempt the following question

You are a financial analyst of XYZ Company Ltd. The director of capital budgeting has asked to analyse two proposed capital investments project P and Q. each has a cost of 10 lakhs as the cost of capital for each project 12%. The project’s expected net cash flows are as follows:

Expected net cash flows

Year	Project ‘P’	Project ‘Q’
0 1 2 3 4	(10,00,000) 650000 300000 300000 100000	(10,00,000) 350000 350000 350000 350000

            Required

a.     Calculate each project’s payback period NPV and IRR.

b.     Which project or projects should be accepted. If they are independent?

c.      Which project should be accepted if they are mutually exclusive?

d.     How might a change in the cost of capital (K_o) produce a conflict between the NPV and IRR ranking of these two projects? Would this conflict exist if ‘K_o’ were 5%?

e.     Why does the conflict exist?