GUG/W/18/10687 1 P.T.O
Master of Business Administration (CBCS And Old Pattern) Second Semester Old+CBCS
C26 PCB2F06 Financial Management
P. Pages 2 GUG/W/18/10687
Time Three Hours Max. Marks 70

Notes 1. Attempt any five questions.
2. All questions carry equal marks.
3. Use PVF tables.
1.
Z Ltd is presently financed entirely by equity shares. The current market value is 6,00,000. A dividend of 1,20,000 has just been paid. This level of dividend is expected to be paid indefinitely. The company is thinking of investing in a new project involving an outlay of 5,00,000 now and is expected to generate net cash receipts of 1,05,000 per annum indefinitely. The project would be financed by issuing 5,00,000 debentures at the market interest rate of 18% Ignoring tax.
Calculate the value of equity share and the gain made by the shareholders if the cost of equity rises to 21.6%
ii) Prove that the WACC is not affected by gearing.
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2.
A company is considering a proposal of installing a drying equipment. The equipment would involve a cash outlay of 6,00,000 and net working capital of Rs. 80,000. The expected Life of the project is 5 years without any salvage value. Assume that the company is allowed to charge depreciation on straight Line basis for Income tax purpose. The estimated before tax cash inflows are given below.
Year
1
2
3
4
5
Cash inflow
000)
240
275
210
180
160
The applicable Income tax rate to the company is 35% If the company's opportunity cost of capital is 12% calculate,
Payback period. Net Present Value.
Discounted Payback Period. Internal rate of return.
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3.
M Industries Ltd. desires to estimate working capital requirement for 2017-18 when expected annual output is 1,30,000 units. The sales price is 250 The proportion cost of, Material- 40% wages- Overheads- 12% and margin- 28% The other information are below.
Cash transaction are 25% for. Sales and 20% for purchase.
ii) The stock holding of Materials 2 Weeks and finished goods equal 4 weeks.
iii) Processing time is 2 weeks.
iv) Credit allowed and enjoyed is 4 week.
Time lag for wages is 2 week Overheads 3 weeks.
The banker have agreed to provide finance with margin money of Raw material- WIP- 20% finished good- Debtor- 15% Estimate the working capital required and Ascertain bank facility available.
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GUG/W/18/10687 2
4.
ABC Ltd has capital of 10 lakhs in equity shares of 100 each. The shares currently quoted at par. The company proposes declaration of a dividend of 10 per share at the end of current financial year. The capitalization rate for the risk class to which the company belongs is 12% What will be the market price of the share at the end of the year if.
A dividend is declared or not declared.
ii) Assuming that the company pays the dividend and has net profit of 5,00,000 and makes new investment of 10 lakhs during the period, how many new shares must be issued? use M-M model.
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5.
Calculate simple interest, compound interest and future value of an amount of 2,00,000 borrowed. of a interest of 10% per annum. for
6 Month. ii) 1 Year. iii) 2 Year.
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6.
Explain the role of a finance Manager in a large corporate enterprise.
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7.
How can you determine cost of equity capital in a growth company?
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8.
'Working capital management is an indispensable functional area of financial management'. Discuss briefly.
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9.
Discuss in brief the taxation aspects of Amalgamation.
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10.
Write a short note on any two.
Bill discounting
ii) Over capitalization
iii) Privatization.
iv) Stability of dividends.
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