M.B.A. (Part II) (Semester IV) (CBCS) Examination, 2018
Financial Management Group B (Paper III)
Project Planning and working Capital Management
Day and Date Thursday, 29-11-2018 Max. Marks 70
Time 10.30 a.m. to 1.00 p.m.
Instructions Q. No. 1 is compulsory.
Attempt any two questions from Q. No. 2 to Q. No. 4.
Attempt any two questions from Q. No. 5 to Q. No. 7.
Figures to the right indicate full marks.
1. Case Study. 14
A company is considering a new equipment. The net cash flows of the
equipment have been estimated as given below. The equipment's life is
estimated to be two years.
Year 1 Probability Year 2 Probability
Net Cash Flow 10000 0.4 8000 0.5
12000 0.5
Net Cash Flow 12000 0.6 16000 0.4
20000 0.6
The cost of equipment is Rs. and the company's cost of capital is
12%. Use decision tree approach to recommend whether the equipment
should be bought or not. 7
A Co. is considering an investment proposal to install new machine at a
cost of Rs. 80,000/-. The machine has a life expectancy of 5 years and has
no salvage value. Assume that the firm use straight line depreciation. The
estimated cash flows after tax from the investment is as follows
Year 1 2 3 4 5
EAT(Rs.) 15,000 20,000 18,000 14,000 22,000
Calculate
Pay Back Period
ARR
NPV 10% Discount Rate
Profitability Index. 7
2. Attempt (any 14
From the following details calculate
Re-ordering level
Maximum level
Minimum level
Danger level
Cost of placing order Rs. per order.
Number of units to be purchased during the year is 5000 units.
Annual Cost of storage per unit is Rs.
Details of Lead Time Average 10 days, Maximum 15 days, Minimum 6 days,
For emergency purchase 4 days.
Rate of Consumption Average 15 units per day, Maximum 20 Units
EXIM
Features of Venture Capital.
3. Attempt (any 14
Causes of Sickness
Determinants of working capital
Benefits and Cost of holding inventory.
4. Attempt (any 14
Motives of holding cash
Factoring
Revival of sick units.
5. The following data pertain to a shop. The owner has made the following sales and
purchase forecast for the first 5 months of the coming year.
Month Sales(Rs.) Purchases
January 40,000 33,000
February 45,000 36,000
March 55,000 38,000
April 60,000 40,000
May 50,000 42,000
Set P
Additional Information
Opening balance of debtors and creditors at the beginning of the year are
Rs. and Rs. 14,000 respectively.
Opening Cash balance on 1st Jan. Rs.
40% of sales are on cash basis. Credit sales are collected in next month.
Trade Creditors are paid in the following month after purchase.
Fixed Costs are Rs. per month including Rs. depreciation.
The only variable cost is a commission on total sales. The sales
commission is paid in the month following sales. Outstanding sales
commission of December was Rs.
Prepare the cash Budget for the 3 months beginning from January. 14
6. On 1st January of the year, the Managing Director of company wanted to know
the amount of working capital that will be required during the year.
From the following information prepare the forecast of working capital
requirements after adding 15% as contingencies. Production in the last year
was 60,000 units. The same will be the production this year. Estimated ratios
of different costs to selling prices are
Raw Material 60%
Direct Wages 10%
Overheads 20%
Raw Material will remain in store on an average for 2 months, before issued
for production. Each unit will be in production process for one month. Finished
goods stay in warehouse, awaiting dispatch to customers, for approximately
3 months.
Credit allowed by creditors is 2 months whereas credit allowed to debtors is
3 months. Wages are paid on the first of each month whereas there is time lag
of 1 month in payment of overheads.
Company keeps normally Rs. as cash in kind.
Selling Price Rs. 14
7. Explain Generation and screening of project ideas also explain technical
analysis in project idea. 14