B.B.A. (Three Year) DEGREE EXAMINATION, MARCH/APRIL 2018.
End Semester Examination
Fourth Semester
Part II
(Regular Supplementary)
FINANCIAL MANAGEMENT
2 C-4401
Time 3 Hours Max. Marks 70
PART — A
Answer any FIVE of the following questions. 4 20 Marks)
1. Importance of Financial Management.
2. EBIT-EPS Analysis.
3. Difference between Preference shares and Equity shares.
4. Operating Leverage.
5. Need of working capital.
6. Pay back period.
7. Opportunity cost.
8. Sources of finance.
PART — B
Answer ALL the following questions. 10 50 Marks)
9. Explain the evolution of finance function. What is the scope of finance
function?
Or
Explain about profit maximisation and wealth maximisation.

10. What do you mean by Investment decision? Also state the importance and
difficulties regarding it.
Or
A project needs a capital outlay of Rs. 1,38,500. The cost of capital is 12%.
The net cash flows are as under
Year Rs.
1 30,000
2 40,000
3 60,000
4 30,000
5 20,000
You are required to calculate NPV and IRR. Suggest whether the project
should accepted not and why?
11. Explain the estimation of working capital requirement of a firm.
Or
Explain the classification of working capital. Distinguish between permanent
and temporary working capital.
12. What is weighted average cost of capital? How it is calculated and explain
with an example?
Or
A firm issues debentures of Rs. 1,00,000 and realizes Rs. 98,000 after
allowing commission of brokers. The debentures carry an interest rate of
The debentures are due for maturity at the end of the 10th year. You are
required to calculate the effective cost of debt before tax.
13. Given the following information about ZED Ltd., show the effect of the
dividend policy on the market price of its shares, using the Walter's model.
Equity Capitalization rate 12%
Earnings per share Rs. 8
Assumed return on investments are as follows
r r 10%.
Or
Define 'dividend'? What are the major forms of dividend?