M.B.A. DEGREE EXAMINATION, NOVEMBER 2017
Hotel Management and Catering Science
FINANCIAL MANAGEMENT
(2016 onwards)
Time 3 Hours Maximum 75 Marks
Part A (10 x 2 20)
Answer all questions.
1. What is profit maximization?
2. What is venture capital?
3. What are the various types of finance decisions?
4. What is secondary market?
5. Define working capital.
6. What are the types of working capital?
7. What is capital budgeting?
8. What is cost of capital?
9. What is dividend policy?
10. List out the different forms of dividend.
Sub. Code
31
CP-8285
2
Wk 10
Part B x 5 25)
Answer all questions.
11. Explain the significance of financial management.
Or
Explain the concept of risk-return trade off.
12. What are the different methods of flotation of issues
in the primary market?
Or
Describe the merits and demerits of debentures.
13. What are the determinants of working capital needs
of an enterprise?
Or
Explain the limitations of 'inadequate' and
'expressive' working capital.
14. What do you mean by optimum capital structure?
Explain.
Or
A company has issued 10% debentures aggregating
Rs.1,00,000. The floatation cost is 10%. The
company has agreed to repay the debenture at par
in 5 equal annual installments starting at the end of
year 1. The company's rate of tax is 55%. Find the
cost of debt.
CP-8285
3
Wk 10
15. The Agro-chemicals company belongs to a risk class
for which the appropriate capitalisation rate is 10%.
It currently has 1,00,000 shares selling at Rs.100
each. The firm is contemplating the declaration of
Rs.5 as dividend at the end of the current financial
year, which has just begun. What will be the price of
the share at the end of the year, if a dividend is not
declared? What will it be if one is? Answer these on
the basis of Modigliani and miller model and
assume no taxes.
Or
The Apex company which earns Rs.5 per share, is
capitalized at 10% and has a return on investment
of 12%. Using Walter's dividend policy model,
determine
the optimum payout and
the price of share at this payout.
Part C 10 30)
Answer all questions.
16. Explain the various functions of financial
management.
Or
Distinguish between shares and debentures.
17. Explain the background and the recommendations
of Tandon Committee in financing of working
capital by commercial banks in India.
Or
CP-8285
4
Wk 10
The shares of a leather company are selling at Rs.30
per share. The firm had paid dividend at the rate
Rs.3 per share last year. The estimated growth of
the company is approximately per year.
Determine the cost of equity capital of the
company.
Determine the estimated market price of the
equity shares if the anticipated growth rate of
the firm rises to and falls to 3%.
18. The following information is available in respect of
the rate of return on investments the
capitalization rate Ke and earnings per share
of Hypothetical Ltd.
r 12%
r 11%
r Ke E Rs. 20.
Determine the values of its shares, assuming the
following:
D/P ratio Retention
ratio
10% 90%
40% 60%
70% 30%
Or
Explain the different types of dividend policies.
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