M.Com. (Semester IV) (CBCS) Examination Nov/Dec-2018
ADVANCED COSTING (Paper III)
Time: 2½ Hours Max. Marks: 70
Instructions: All questions are compulsory.
Figures to the right indicate full marks.
Use of Calculator is allowed.
Q.1 Choose the alternatives given below. 14
Earnings per share net profit after tax and preference share dividend by

Equity Capital No. of Equity Shares
Bonus shares No. of preference shares
Present value of Re.1 at year is Re.1
Zero End of 1st year
0.909 NPV
Payback Period is the length of time required to recover the on the
project.
Initial Outlay Cost
Capital Expenditure All of these
leverage arises from existence of fixed interest expenses.
Operating Financial
Combined All types of
Cost of preference share capital is represented by
ke kp
ko kd
If Operating leverage is contribution is Rs. 3,20,000 then EBIT is Rs.

1,60,000 80,000
12,80,000 3,20,000
leverage affects the earnings per share.
Operating Financial
Combined Business
If cost of project is Rs. 2,50,000 and annual CFAT Rs. 1,00,000, then pay
back period is
2 yrs and 5 months 2 years and 6 month
2.6 years 0.4 years
Maximize the shareholders return is the objective of
Dividend policy Capital Budgeting
Cost of Capital Leverages
10) Dividend policy of the firm is irrelevant as it does not affect the value of the
firm, is the hypothesis of
Gorden Miller-Modiglani
Taylors Walters
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11) Amount that can be fetched after the useful life of a capital asset is called

Working capital Cost of capital
Salvage value Installation charges
12) Net present value method is also called as
Profitability index ARR
IRR Discounted cash flow method
13) EAT plus depreciation
CFBT CFAT
EBT EBIT
14) Present value factor at the end of 3rd year at 10% cost of capital is
0.751 0.683
0.826 0.621
Q.2 From the following calculate cost of debt in each case 07
A. Ltd issued Rs 100 lacs 12% debentures of Rs 100 each, assume
corporate tax rate being 40%
Case If issued at par with no flotation cost
Case If issued at 10% premium with flotation cost
Case If issued at 10% discount with flotation cost
The current market price of the company's share is Rs. 200 and the
expected dividend per share year is Rs 18. Expected growth rate of
dividend is 6%. Calculate the cost of equity share, and also calculate
earnings per share if price earnings ratio is 4.
07
Q.3 Write short notes on.
Types of dividend 07
Types of Leverages 07
Q.4 Answer any one of the following. 14
The balance sheet of a company is as follows:
Liabilities Rs Assets Rs
Equity share Capital of
Rs. 10 each
5,00,000 Fixed Assets 7,50,000
10% Long Term Debt 4,00,000 Current Assets 2,50,000
Retained Earnings 60,000
Current Liabilities 40,000
Total 10,00,000 10,00,000
The company's total assets turnover ratio is 4 times. Its fixed operating
costs are Rs. 6,00,000 and its profit volume ratio is 40%. The income tax
Rate is 30%.
You are required to compute all leverages.
X Ltd provides you the following information
Particulars Machine X Machine Y
1. Purchase price of Machinery 3,60,000 4,50,000
2. Useful life of Machine- 3 years 3 years
3. Annual CFAT
End of 1st year 1,20,000 1,30,000
2nd year 1,50,000 1,80,000
3rd year 2,00,000 2,40,000
You are required to calculate the Pay back period, ARR and Net present
value at 10%.
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Q.5 Answer any one of the following. 14
Two firms A and B have the following information
Company Fixed
Assets
Rs.
Fixed Assets
Turnover
Ratio
P.V.
Ratio
Fixed
Cost Rs.
10% Debt in
Capital
Structure
A Ltd 90,000 5 times 40 30,000 Rs. 5,00,000
B Ltd 60,000 4 times 25 20,000 Rs. 1,00,000
You are required to compute the degree of operating leverage, Financial
leverage and combined leverage of both firms.
Calculate all leverages and EPS under situation A and B and financial plan I
and II,
Actual production and sale 800 units
Selling price per unit Rs. 15
Variable cost per unit Rs. 10
Tax rate 40%
Fixed cost Situation A Rs. 1000
Situation B Rs. 2000
Particulars Financial Plan I Plan II
Equity Rs. (Rs. 10 each) 5,000 7,500
12% Debt Rs. 5,000 2,500