DISTANCE EDUCATION
M.B.A. DEGREE EXAMINATION, MAY 2018.
Fourth Semester
CORPORATE FINANCIAL MANAGEMENT
(Upto 2012-13 Academic Year and 2013 Calendar Year)
Time Three hours Maximum 100 marks
SECTION A — x 8 40 marks)
Answer any FIVE questions.
All questions carry equal marks.
1. What is Financial Management? Explain its objectives.
2. Bring out the difference between Debentures and Equity
Shares.
3. Write note on
Short-term Capital
Rights Issues
4. Examine the importance of Working Capital.
5. List out the various types of financial assistance given by
commercial banks.
6. How debt is regarded as the cheapest sources of finance
for a profit making firm?
Sub. Code
45
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7. Define Optimum Capital Structure. Explain its
essential features.
8. What are the factors affecting Dividend Policy?
SECTION B — × 15 60 marks)
Answer any FOUR questions.
All questions carry equal marks.
9. List out and explain the key activities of financial
manager.
10. Define Preference Shares. Bring out the various
advantages and disadvantage of preference shares.
11. List out and explain the types of working Capital.
12. The following information relates to Sathyam Ltd. You
are required to calculate the weighted average cost of
capital, using
Book value weights and
Market value weights.
The present book value capital structure is
Debentures (Rs. 100 per debentures) Rs.80,00,000
Preference shares (Rs.100 each) Rs. 2,00,000
Equity Shares (Rs.10 per share) Rs.10,00,000
All these securities are traded in the market. The recent
prices are
Debentures Rs.110 Preference Shares Rs.120
Anticipated external financing opportunities are:
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Rs.100 per debenture, redeemable at par: 20
year maturity coupon rate, floatation
costs, sales price Rs.100
Rs. 100 preference shares, redeemable at par:
15 year maturity, 10% dividend rate,
floatation costs, sale price Rs.100
Equity Shares: Flotation costs Rs.2 per share,
Sale price Rs.22
Dividend Expected on the equity shares at the
end of the year is Rs.2 per share. Expected
growth rate in dividend is 5%. The Company
has the practice of distributing all its earnings
in the form of dividends. The corporate tax
rate is 50%
13. A Ltd. Company needs Rs 6,00,000 for construction of a
new plant. The following three financial plans are
feasible.
The Company may issue 60,000 equity shares of Rs. 10
each.
The company may issue 30,000 equity shares of
Rs. 10 each and 3,000 preference shares of Rs. 100
each bearing coupon rate of interest.
The company may issue 30,000 equity shares of
Rs. 10 each and 3,000 preference shares of Rs. 100
each bearing rate of dividend.
The Profit before interest and taxes (PBIT) is
expected to be Rs 1,50,000. Corporate tax rate is
50%. Calculate the earnings per share under the
three plans. Which plan would you recommend and
why?
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14. The cost of capital and the rate of return on investment of
MRM Ltd. are 10% and 15% respectively. The company
has one million equity share of Rs. 10 each outstanding
and earnings per share is Rs.5. Calculate the value of the
firm in the following situations. Use Walter's model and
comment on the results.
100% retention 50% retention No retention
15. What is Capital mix? Bring out and discus the essential
of Sound Capital mix.