M.B.A. (Part II) (Semester IV) Examination, 2017
Group B Financial Management (Paper III)
PROJECT PLANNING AND WORKING CAPITAL MANAGEMENT
Day and Date Saturday, 20-5-2017 Total Marks 70
Time 10.30 a.m. to 1.30 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. You are a financial analyst for XYZ Co. Ltd. The director of capital budgeting has
asked to analyse two proposed capital investments, Project P and Q. The cost of
capital for each project is 12%. The Project's expected.
Net cash flows are as follows
Year Project P Project Q
0
1 6,50,000 3,50,000
2 3,00,000 3,50,000
3 3,00,000 3,50,000
4 1,00,000 3,50,000
Calculate
Payback, NPV and IRR.
Which project or projects should be accepted, if they are independent
Which project should be accepted if they are mutually exclusive
Does your decision changes if cost of capital, increases to 15% based on
NPV method
2. Attempt (Any
Generation and screening of project ideas.
Features of Venture Capital.
Factoring.
3. Attempt (Any
SICOM.
ABC analysis.
Estimate the working capital requirement from the following information. You
are given the following estimates and are instructed to add 20% as
contingencies.
Details Figures for the years
Amount blocked up in stocks
Stock of finished goods 6,000
Stock of stores 10,000
Average Credit Sales
Inland sales 8 weeks Credit 3,00,000
Export Sales 2 weeks Credit 80,000
Lag in payment of wages and other outgoings
Wages 2 weeks 2,50,000
Stock of materials 2 months 50,000
Rent, Royalties 6 months 10,000
Clerical Staff 1 month 5,000
Misc. Expenses 2 Months 50,000
Payment in Advance
Sundry Expenses (Paid Quarterly) 10,000
4. Attempt (Any
Economic enterprises requires 90,000 units of certain items annually the cost
per unit Rs. The cost per purchase order is Rs. and the inventory
carrying cost is Rs. per unit per year.
Calculate EOQ.
Determine optimum order quantity if the supplier offers discount as detailed
below
Order Quantity Discount
4500-5999
6000 and above
Commercial Paper.
Motives of holding cash
5. ABC Corporation is considering relaxing its present credit policy and is in the
process of evaluating 2 alternative policies. Currently, the firm has annual credit
sales of Rs. 50 lakh and accounts receivable turnover ratio of 4 times a year. The
current level of loss due to bad debts is Rs. The firm is required to
give a return of 25% on the investment in new accounts receivable. The Co's
variable costs are 70% of the selling price. Given the following information, which
is a better option.
Particulars Present Policy 1st Option 2nd Option
Annual Credit Sale 50,00,000 60,00,000 67,50,000
A/c Receivable turnover 4 3 2.4
Bad debts (Losses) 1,50,000 3,00,000 4,50,000
6. Define Sickness. Explain the causes of sickness and Revival sick units.
7. Prepare the cash budget for the 3 months ending 30-06-2004 from the following
information.
(Amt. in Rs.)
Month Sales Materials Wages Overheads
Feb 14,000 9,600 3,000 1,700
March 15,000 9,000 3,000 1,900
April 16,000 9,200 3,600 2,000
May 17,000 10,000 3,200 2,200
June 18,000 10,400 6,000 2,300
Additional Information
Credit Terms
Sales/Debtors 10% Sales are on cash, 50% of the credit sales are
collected next month and the balances in the following month.
Creditors (Suppliers) 2 months Wages ¼month Overheads 1/2 month.
Cash and Bank Balance as on 1st April 2004 is expected to be Rs.
Other Information
Machinery will be installed in Feb at a cost of Rs. 96,000. The monthly
installment of Rs. payable from April 2004.
Dividend on preference share capital of Rs. will be payable
on May, the same is paid on 1st June.
Advance to be received for the sale of vehicle Rs. in June.
Dividends from investments amounting to Rs. 1,000 are expected to be
received in June.
Income Tax (advance) to be paid in June is Rs.