DISTANCE EDUCATION
M.B.A. DEGREE EXAMINATION, DECEMBER 2017.
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. Who is financial manager? State his functions for
promoting business organization.
2. List out the difference between Equity Shares and
Preference Shares.
3. Write Note on Long term Capital Bonus Issues.
4. Define — Working Capital. Bring out various objectives
of Working Capital.
5. What is Cost of Capital? Explain its importance.
6. Bring out the sources of Working Capital.
7. Explain MM approach to Capital Structure.
8. Discuss about the various types of dividend policies.
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SECTION B — 15 60 marks)
Answer any FOUR questions.
All questions carry equal marks.
9. State the Salient features of the traditional and modern
approaches to financial management.
10. What is Debenture? State its merits and demerits.
11. Bring out the factors determinants of Working Capital.
12. The following particulars relate to Sakthi Ltd.
Equity Share Capital
1,20,000 shares of Rs.100 Rs. 12,00,000
Profit after Tax Rs. 9,10,000
Current market price of equity share Rs. 78
Calculate the Cost of Equity
What is the cost retained earnings if the average
personal tax rate of shareholder's is 35% and the
brokerage cost for making new investment is 3%.
13. VISU Company Ltd. has an all equity capital structure
consisting of 20,000 equity shares of Rs. 100 each. The
management plans to raise Rs. 30 lakhs to finance a
programme of expansion. Three alternative methods of
financing are under consideration.
Issue of 30,000 new shares of Rs. 100 each
Issue of 30,000 debentures of Rs. 100 each
Issue of 30,000 Preference shares of Rs. 100
each
The Company's expected earning before interest
and taxes (EBIT) are Rs. 10 lakhs. Determine the
earnings per share in each alternative assuming a
corporate tax rate of 50 per cent. Which alternative
is best and why?
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14. KSRCAS Ltd. Earnings Rs. 5 per share. The
capitalization rate is 10% and the return on investments
is 12%. Under Walter's model, determine
The optimum payout
The market price of the share at this payout
The market price of the share if the payout is 40%
15. Cost of Preference Capital is generally lower than the
cost of equity, State the reasons.
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