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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI 600 034
M.COM.DEGREE EXAMINATION COMMERCE
FOURTH SEMESTER APRIL 2018
CO 1014/ CO 1015 FINANCIAL MANAGEMENT
Date: 09-05-2018 Dept. No. Max. 100 Marks
Time: 9:00 12:00
Section A Answer all questions:- 10 x 2 20
1. Explain the term 'Time Value of Money'.
2. What do you mean by Financial Management?
3. Illustrate the term 'Pay Back Period'
4. Explain the characteristics of Working Capital management?
5. What is Dividend?
6. Mention the objectives of Cash Management.
7. A company bank has offered to you an annuity of Rs.1,800 for 10 years if you invest Rs.12,000 today. What rate of return would you earn?
8. Discuss the uses of Leverage Analysis.
9. Mention the Advantages of Leasing.
10. What are the factors affecting the cost of capital.
Section B Answer any FIVE questions:5 x 8 40
11. Discuss the factors affecting the payment of Dividend.
12. Explain in detail the types of Leasing.
13. What are the determinants of Working Capital requirements?
14. Analyse the Profit Maximisation and Wealth Maximisation in detail.
15. Sales 1000 units Rs.10 per unit, variable cost Rs.4 per unit, Fixed cost
Rs.2,000.Calculate the operating leverage and interpret the results.
EBIT is Rs. 2,000, Interest Rs. 1,000, Tax rate No of Equity share 100. Calculate the
operating leverage and interpret the results
16. There are two projects A and B. The cost of the project is Rs.30,000 in each case. The cash
inflows are as under:
Cash inflows
Year Project A Project B
1 10,000 2,000
2 10,000 4,000
3 10,000 24,000
Calculate Payback period.
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17. X ltd has the following projects available for investment.
PROJECT
INVESTMENT
NPV
A
1,00,000
20,000
B
3,00,000
35,000
C
50,000
16,000
D
2,00,000
25,000
E
1,00,000
30,000
Total funds available for investment are Rs 3,00,000. Which project wills you chose? If
i.Projects are divisible. ii. Projects are indivisible
18.Calculate the value of an equity shares of company X Ltd. and Y Ltd. from the
following particulars by applying Walters formula when dividend payment ratio
ratio) is and
X Ltd. Y Ltd.
r 12% 15%
Ke 10% 10%
E Rs.15 Rs.12
Section C Answer any TWO questions 2 x 20 40
19. The following are the cash inflows and outflows of a certain project.
Year Outflows Inflows
0 1,50,000
1 30,000 30,000
2 30,000
3 50,000
4 60,000
5 40,000
The salvage value at the end of 5 years is Rs.40,000. Taking the cut off rate as
Calculate net present value.
Year 1 2 3 4 5
P.V. factor 10% 0.909 0.826 0.751 0.683 0.621
20. From the following capital structure of a company, compute the overall cost of capital
using Book value weight and Market value weight
Book value Rs
Market value Rs
Equity share capital(Rs 10 per share)
Retained earnings
Preference share capital
Debentures
45,000
15,000
10,000
30,000
90,000

10,000
30,000
The after tax cost of different sources of finance is as follows:
Equity share capital 14%
Retained earnings 13%
Preference share capital 10%
Debentures
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21. A Ltd has an equity capital consisting of 5000 Equity shares of Rs 100 each. It plans to raise
Rs. 300000 for the financial expansion programme and identify four options for raising
funds.
1. Issue 3,000 Equity shares of Rs 100 each
2. Issue 1,000 Equity shares of Rs.100 each and 2000 Preference shares of Rs 100 each
3. Burrow of Rs 3,00,000 at 10% interest p.a
4. Issue 1,000 Equity shares of Rs.100 each and Rs. 2,00,000, 10% debentures
This company has EBIT of Rs 1,50,000 of its expansion. Tax rate is 50%. Suggest the source in
which funds should be raised.
22.The cost sheet of PQR Ltd provides the following data.
Raw material Rs. 50 per unit
Labour 20 per unit
OHS including Depreciation Rs. 10 40 per unit
Profit Rs. 20 per unit
Selling price Rs.130 per unit
1. Raw material is in stock 1 month. 2. WIP for ½ month. 3. Finished goods for 1 months
4. Credit allowed by suppliers 1 month. 5. Credit allowed to customers 1 month.
6. Average time lay in payment of wages 10 days and payment of OHS 30 days
7. 25% of the sales are for cash. The cash balance of Rs. 1,00,000 is to be maintained.
Ascertained the requirement of working capital needed to finance level of activity of 54,000 units.
Production is carried on evenly throughout the year and wages and OHS accrue evenly throughout the
year.