M.Com. (Semester IV) Examination, 2017
ADVANCED COSTING PAPER -III
Day Date: Wednesday, 19-04-2017 Max. Marks: 50
Time: 02.30 PM to 04.30 PM
N.B. All questions are compulsory.
Use of Calculator is allowed.
Q.1 Choose correct alternatives. 10
should also solve the problem of choosing among
alternative project.
Composite Leverage Classification of dividend
Interest on capital Investment Evaluation Criteria
means the influence of one financial variable over some
other related financial variable.
Contribution Dividend policy
Capital structure Leverage
Irrelevance of dividend theorem is developed by
Mr. Gorden Mr. Walter
Mr. Lintner Prof. Miller and Modigliani
pleads that the dividend policy of a company is relevant to
the value of its shares.
Prof. Miller Lintner's Model
Walter Model Gorden's Model
Leverage is also called composite Leverage.
Financial Capital structure
Operating Combined
The Investment Decision of the firm are commonly known as the
Capital expenditure decisions Short term decisions.
Lower level decisions Cost of capital decisions
In Return on Investment Method Capital Project are ranked in order
of
Earning Pay back period
Cost of capital Cost of variable cost
Operating leverage X financial leverage=
Combined leverage Contribution EBIT EBT
Capital Budgeting Decisions can be made by considering the
Cost of capital Dividend on capital
Dividend policy Capital structure
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SLR-Q-71
10) In India forms of dividend permitted are dividend.
Cash and stock Bond and property
Only property Only Bond
Q.2 Write short notes on. 10
1. Forms of dividend
2. Significance of cost of capital
Q.3 Krishna Koyana Company issued 5000, Debentures, of Rs. 100
each at a premium of 10%. The cost of floatation is 2%. The rate of
tax applicable to the company is 60%. Compute cost of debt
capital.
05
From the following information calculate EBT and EBIT. 05
Sales Rs. 5,00,000
Variable cost Rs. 2,00,000
Fixed cost Rs. 60,000
Interest 10% on term loan of Rs. 8,00,000.
Q.4 X Ltd. is considering the purchase of a new machine for operations
which are at present carried by labour. Surekh and Sundar are
alternative models. The following information is available.
10
Particulars Surekh Rs. Sundar Rs.
Life in years 5 6
Cash 15,000 24,000
Estimated savings in scrap 1,000 1,500
Estimated cost of Indirect Materials 600 800
Estimated savings in direct wages
Employees not required
No. 15 No. 20
Wages per employee 600 600
Additional cost of Maintenance 700 1,100
Additional cost of supervision 1,200 1,600
Depreciation will be taken on straight line basis. A Tax rate of 50% is
assumed. Evaluate the two alternatives according to pay back method.
OR
A company issues 1,000 10% preference shares of Rs. 100 each at a
discount of cost of raising capital on Rs. 2000. Compute the cost of
preference capital.
Q.5 Explain the important Investment evaluation criteria used in Investment
decisions.
10
OR
Liability side of EXL Ltd. is as under.
Equity share capital (in shares of Rs. 10 each) 3,00,000
10% preference shares capital Rs. 10 per share 1,00,000
15% debentures 2,00,000
Earnings before interest and tax is Rs. 1,00,000
The tax rate is 50%.
Ascertain financial leverage