M.B.A. DEGREE EXAMINATION, APRIL 2017
Second Semester
FINANCIAL MANAGEMENT
(Common for M.B.A (CS)/M.B.A. (B&I)/M.B.A.
M.B.A.
(CBCS 2016 onwards)
Time 3 Hours Maximum 75 Marks
Part A x 3 15)
Answer all questions.
All questions carry equal marks.
1. Explain the importance of risk-return trade off in FM.
2. Classify cost of capital.
3. What are the different modes of payment of dividend?
4. Explain the importance of capital budgeting.
5. A company expects a net income of Rs. 80,000. It has
Rs. 2,00,000. debentures.
The equity capitalization rate of the company is 10%.
Calculate the value of the firm and overall capitalization
rate according the net income approach (ignoring income
tax).
Sub. Code
622206/
632206/
641206/
643203
RW-023
2
Sp 5
Part B x 10 50)
Answer all the questions, choosing either or
All questions carry equal marks.
6. Explain the scope of financial management from the
modern point of view.
Or
In what directions the field of finance evolved in
recent years. State briefly the objectives of financial
management.
7. Explain the guidelines issued by the Government of
India regarding foreign equity and debt securities.
Or
Explain at least five new financial instruments
which have been recently introduced in the capital
market.
8. Give a brief account of the various sources of
working capital available of a firm.
Or
What is 'leverage'? What are the leverages used in
financial analysis?
9. From the following particulars. Prepare a statement
showing working capital needed to finance a level of
activity of 12000 units of output per annum.
Analysis of selling price per unit.
Rs.
Raw materials 5
Labour 3
Overhead 2
Total cost 10
Profit 2
Selling price 12
RW-023
3
Sp 5
Additional information:
Raw materials are to remain in store on an
average of one month.
Material are in process on an average of
2 months.
Finished goods are in stock on an average of
3 months.
Credit allowed to debtors 4 months.
Credit allowed by suppliers 2 months.
It may be assumed that production and
overheads accrue evenly throughout the year.
Or
The Tamil Nadu Fertilizers Ltd. is considering a
proposal for the investment of Rs. 5,00,000 on
product development which is expected to generate
net cash inflows for 6 years as under
Year Net Cash Flows Rs.
1 Nil
2 100
3 160
4 240
5 300
6 600
The following are the present value factors
15% p.a
Year 1 2 3
Factor 0.87 0.76 0.66
Year 4 5 6
Factor 0.57 0.50 0.43
Find out whether the proposal can be accepted on
the basis of NPV method.
RW-023
4
Sp 5
10. Explain the factors influencing capital structure
planning.
Or
What are the determinants of the dividend policy of
Corporate Enterprises? What are the different
modes of payment of dividend?
Part C x 10 10)
Compulsory.
11. Read the following case and answer the questions.
A company is to start a new project which is having cost
of Rs. 1,00,000 and life of 5 years. Salvage value is nil.
tax rate for the company is 50% and it follows straight
line method of depreciation. The cash flows before tax
(CFBT) are as follows:
Year: 1 2 3 4 5 CFBT 35,000, 35,000, 40,000 30,000.
20,000 respectively. Compute the following:
Payback period.
What is your comment if the standard pay back
period is 3 years.
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