Roll No..

Jamia Hamdard
School of Management'and Business Studies
Department of Management
Even Semester Examination,- August 2023
MBA-II Semester
Financial Management (MBA-CG-203)
Duration: 3 Hour Max.Marks -60

(12X5=60)
Note: Atempt any Five Questions, Al questions carry equal marks

Q1: You have purchased a flat worth Rs. 1631250. 20% of the
amount was paid as
downpayment, while for the remaining 80% you took a loan from the bank which charges you
12% per annum. Your bank calculated your annual payment as Rs.
1,80,000. How much time
will it take to repay the loan?

Q2: Phoenix Ltd is looking at 2 mutually exclusive projects to invest in, if the rate
of
is 10%. Please suggest the promising project based on payback period method, discount
payback and post payback method. Which method will you opt for and why? discounted

Year Project A Project B

0 (1,00,000) (1,00,000)
1 30,000 20,000
2 30,000 20,000
3 40,000 20,000
4 10,000 20,000
5
10,000 20,000
6 10,000 45,000
7 5000 7000

03:i) Aradhana expects her cash flow to behave in a random manner and she wants to establish
upper control limit and retum point from the following information. The annual yield on
marketable securities is12%. The fixed cost of marketable securities transaction is Rs.1500. the
standard deviation of the changes in daily cash balance is Rs.6000. Aradhana wants to maintain
a minimum cash balance of Rs 1,00,000. (6 marks)
ii) The finance department of Apex Ltd has gathered the following information:
The annual demand is of 30000 units, the holding cost is Rs. 10per unit and the fixed cost per
order is Rs20. Determine the EOQ, the number of orders per year and the time gap between
the orders. Also calculate the total cost. (6 marks)

Q4: Lehman Brothers Ltd has the following details, through which you have to prepare a cash
budget for the month of January 2022 to June2022.

CS CamScanner
The estimated sales is Rs.1,50,000 from January through March and Rs.2,00,000 from April
through June. The sales for the month of November 2021 and December 2021 have been
Rs.1,20,000 each. The estimated credit sales is 70% the rest 30% in cash. Credit sales are
collected at 40% at the end of one month and 60% at the end of second month from the date of
sales. Bad debts are nil. Other anticipated receipt is of Rs.70,000 from sale of machine in April
and Rs.3000 as interest on securities to be receivable inJune 2022.
The estimated purchase of material is of Rs 60,000 per month from January through March and
of Rs. 80,000 each from April through June. The payment for purchases is generally made in
one month from the date of purchase. The purchases for the month of December 2021 have
been of Rs.60,000 the payment of which must be made in January 2022. Miscellaneous cash
purchase is estimated to be Rs3000 per month each, while wages estimated to be Rs25,000 for
each month, manufacturing expenses to be Rs,32,000 and selling expenses to be Rs.15,000 per
month from January to June. Payment of Dividend of Rs.30,000 and tax of Rs 35,000 is
scheduled in June 2022. Amachine worth Rs.80,000 must be purchased by cash in the month
of March. The cash balance on January 1,2022 has been Rs 28,000. If the company wants to
maintain a cash balance of Rs.30,000 per month estimate the cash balance and deficit for each
month.

Q5: Zenith Ltd. has a cost of equity capital of 10%, the current market value of the shares is
Rs 20 each while the value of the firm is Rs. 20,00,000. If the investment requirement for the
next year is Rs.6,80,000 while the expected profit of the company is Rs.1,50,000 and the
company is proposing to pay Re. las dividend per share. Show that under Modigliani and
Miller assumptions, the payment of dividend does not affect the value of the company.

Q6: What are the various factors that affects the capital structure decision of a company.
Elaborate with appropriate examples

Q7: i) Show how issuing equity, debentures, or preference share can affect the Eaming per
share of a company with appropriate examples. (6 marks)
ii) Explain in your own words what do you understand by the term Operating Cycle. Also
explain briefly what do you mean by negative cash cycle with appropriate examples. (6 marks)
Q8: Tesla Ltd. expects a net income of Rs. 1,00,000. It has Rs. 1,50,000, 10% debentures.
The equity capitalization rate of the company is 12%.
A) Calculate the value of the firm and overall capitalization rate according to the Net
Income Approach (ignoring income-tax).
B) If the debenture debt increased to Rs. 2,00,000, what shall be the value of the firm and
the overall capitalization rate?
 Roll NO......
Department of Management
School of Management & Business Studies
Jamia Hamdard, New Delhi
MBA (General) - | Semester Examination,, April - May 2019
Financial Management; MBA-CG-203
Max Marks: 75 Time Allowed: 3 Hours

"Attempt any 5questions, Scientific Calculators are allowed.

Questionl
(a) Briefly explain the three major decisions of financial management. (15]

Question2
(a) Using the relative standard deviation approach, calculate the modified historical risk premium for lndia given
that the Risk premium in U.S. Market is 4.20%, Standard deviation of Equity returns for India is 24% and the
Standard deviation of Equity returns for U.S. is 15%. [5)

(b) Assume that the current level of S&P 500 index is 900, the expected dividend yield on the index for the next
period is 2%, and the expected growth rate in earnings and dividends in the long run is 7%. What is the implied
equity premium? [5]

(c) In November 2013, the ten year rupee denominated Indian Government Bond Rate was yielding 8.82% and the
local currency sovereign rating assigned to the Indian Government in November 2013, by Moody's was Baa3. The
default spread for Baa3 rated government bonds is 2.25%. What is the rupee risk free rate? (5]
Question3
You are provided with the projected income statements for a project:
Year 1 2 3 4
Revenues $10,000 $11,000 $12,000 $13,000
- Cost of Goods Sold $4,000 $4,400 $4,800 $5,200
- Depreciation $4,000 $3,000 $2,000 $1,000
= EBIT $2,000 $3,600 $5,200 $6,800
The tax rate is 40%.
The Project reçuired an initial investment of $15,000 and an additional investment of S2,000 at the end of
year 2.
The working capital is anticipated to be 10% of revenues, and the working capital investment has to be made
at the beginning of each period.

(a) Estimate the free cash flow to the firm for each of the four years. [4]
(b) Estimate the payback period for investors in the firm. (3]
(c) Estimate the Net Present Value to investors in the firm if the cost of capital is 12%. Would you accept the
project? [4)
(d) Estimate the internalrate of return to investors in the firm. Would you accept the project? (4)
Questicn 4
(a) Explain how Profitability Incex (P1) and Modified internal Rate of Return (MIRR} heip in resoiving coniicting
rankings as given by NPV and IRR decision rules in case of mutually excusive projects with the help ot a
suitable example. [15)

Question5
(a) Is there an optimal level of working capital for a business? Explain (S)
(b) Discuss the trade-off associated with a decision to offer credit to customers. [5]
(c) "Keeping large cash balances is always beneficial for the firm". Comment [5]

Question6
(a) Estimate the

Safety Inventory [S]

(ii) Economic order quantity (EOa) [S)
(ii) Average Inventory [S]

for a new car dealer with the following characteristics:

The annual expected sale, in units, is 1200 cars; some uncertainty is associated with this forecast, and monthly
sales are normally distributed with mean of 100 cars and a standard deviation of 15 cars.
The cost per order is $10,000 and it takes 15 days for new cars to be delivered by the manufacturer.

The carrying cost per car on an annualized basis is $1,000

Question 7

(a) Debt is always cheaper than equity. Therefore, the optimal debt ratio is all debt. How would you respond? [S)
(b) "Debt is irrelevant for firm valuation". Explain [S]

Question 8
(a) Dividend policy is often described as "sticky". What is meant by this description? What might explain the sticky
nature of dividends? (S]
(b) Acompany that historicaly has had low capital investments and has paid out high dividends is entering a new
industry, in which capital expenditure requirements are much higher. What should the firm do to its dividends?
What practical problems might it run into? (10]
 DEPARTMENT OF MANAGEMENT
Schoolof Management & Business Studies
JAMIA HAMDARD

Even Semester Examination 2022

MBA-IISemester
Subject Name: Financial Management Max. Marks: 75
Subject Code: MBA-CG-203 Time: 03 Hours

Attempt any 5questions, each question carries equal marks

Please read all the questions carefully:

Q1 a)Wiley Co. Ltd has a capitalization rate of 10%. It currently has 1,00,000 shares of
Rs.100 cach. The company is planning to paya dividend of Rs.5 on each share. The profit of
the company for the year is Rs.l0,00,000. If the company is planning an investment of
Rs.15,00,000 for the next year, which will be funded by retained earnings and issuance of
new equity shares. What will be the price of the shares at the end of the year if the dividend is
declared and if the dividend is not declared? How much new shares should be issued by the
company in both the cases. Answer these questions on the basis of MM model and assume
there is no taxes. (10 marks)
b) According to Walter's Model of Dividend Decision, explain why do young growing
companies do not pay dividend? (5marks)
Q.2 a) PLC Ltd expects a net income of Rs. 1,00,000. It has Rs. 1,50,000, 10 % debentures.
The equity capitalization rate of thecompany is 12%.
i)Calculate the value of the firm and overall capitalization rate according to the Net Income
Approach (ignoring income-tax).
ii) If the debenture debt increased to Rs. 2,00,000, what shall be the value of the firm and the
overall capitalization rate? (10 marks)
b) Explain how operating leverage impacts a firms profit when the sales increases with the
help of an example (5 marks)
Q.3 a) What will be your choice of financing a company, equity or debt. What are the various
factors you willconsider before making such decision? (5 marks)
b)Mehta and Co. currently provides 45 days of credit to its customers. Its present sales are
Rs. 80 million. The firms cost of capital is 13% and Profit on sales is 25%. The fim is
considering extending its credit period to 60 days. Such an extension is likely to push up the
sales by Rs. 20 million. The additional cost of collection of bad debts will be 10%. Suggest
whether the company should increase its credit period or not. (Smarks)
c)A firm can never have a negative cash cycle. Comment (5 marks)
Q.4 You are planning to purchase a house 5years from now. The value of the property is
Rs.30,00,000 today and is expected to grow at 5% p.a in the next five years. What amount
 should you save annually to pay 20% as down payment for the same in an account that pays
10% interest annually. liow much will be the EMI if you are planning to pay the loan back in
20 ycars if tlheinterest on loan is 15% per annun. (15 marks)
Q.5. Pinnacle Ltd is planning to invest in cither of the three mutually cxclusive project. You
are required to help Pinnacle Ltd by suggesting the most profitable project of the tlhree.
Which method of capital budgeting willyou use for this problem, and why? (15 marks)
|Year Project A Project B Project C
0 1,15,000 1,20,000 1,18,000
30,000 35,000 (20,000)
2 45,000 40,000 45,000
|3 30,000 40,000 45,000
4 (20,000) 40,000 45,000
5 50,000 45,000
6 16,000

Q.6 a) NKM Manufacturer provides the following infornation about its cash management
system. The annual yield on marketable securities is 20 percent. The fixed cost of per
transaction of marketable securities transaction is Rs. 1500. The standard deviation of the
change in daily cash balance is Rs.4000. The minimum cash balance is Rs.40000. Calculate
the spread, upper limit and return point for NKM using Miller and Orr Model. (8 marks)
b) Explain Operating Cycle and all its elements with the help of an example. (7 marks)
Q.7. a) Explain briefly the factors affecting dividend policy of a company. Also enumerate
the legal formalitities governing payment of dividend in India (8 marks)
b) Explain Pecking order theory with appropriate example (7 marks)

Q.8 a) Anish, a financial analyst, would like to have Rs. 20,000 saved in his bank account at
the end of3 years. The bank offers a retun of 10% per annum compounded monthly.
Calculate the amount Anish will receive after 3 years, also caleulate the effective annual rate.
(5 marks)

b) ABC Ltd.has a paid up capital of Rs. 10,00,000 cquity shares of Rs. 10 each. The firm is
expecting the EBIT of Rs. 1,50,000 per annum on an investment Rs.5,00,000, is considering
the finalizaion of the capital structure. The company has access to raise funds of Rs.5,00,000
by issuing equity share capital, 12% preference share and 10% debenture or any combination
thereof. Assuming that ABC Ltd. belongs to 50% tax bracket show the impact of the
following options on EPS of the firm.
i) 100% financed by equity share capital
i) 100% financed by preference share capital
ii) 100% financed by debentures
iv) S0% by equity and 50% by debentures.
v) S0% by equity and 50% by preference share. (10 marks)
 Roll No...
Department of Management
School of Management and Business Studies
Jamia Hamdard
MBA(G) -II Semester, APR- MAY 2d19 GAm
Financial Management (MBA-203)
Time:3hrs Maximum Marks:75
Write your roll no immediately on top on receipt of this paper.
Use of scientific calculator is allowed.

Q1. What is Financial Managemnent? Explain. (15 Marks)

Q2a. What is time value of Money? (5 Marks)
Q2b. How is this concept useful in Financial Management? Explain with the help of an
example.(5 Marks)
Q2c. Mr. X invests Rs 5000 every six months in a bank deposit that pays 129% interest per
annum. How much money will Mr Xaccumulate after 3years? (5 Marks)
3. Calculatepost tax net cash flows from the following data &based on the same calculate
the NPVofthe project assuming a WACCof 12% &tax rate of 40% : (10+5=15 marks)
Description of Revenues &Expenses Years
1 2 3 4 5
Initial investment including working
capital -300000
Operating Revenues 100000 125000 150000 200000 250000
Operating costs other than interest,
depreciation and amortization 20000 25000 30000 40000 50000
Interest 10000 9000 8000 7000 6000
Depreciation &amortization 20000 19000 18000 17000 16000
Capex 0 25000 30000
Changes in working capital 15000 20000 25000 30000 30000

Post tax recovery of initial

investment including working capital 150000

Q4. Differentiate between NPV & IRR & comment on the usefulness of both the methods as
used in capital budgeting. Calculate IRR for the following post tax net cash flows: (5+10=15
marks)
Year 0 1 2 3 4 5

Post tax net cash flows -100 20 30 50 60 50

Q5. Explain the Modigliani &Miller theory of capital structure. (15 Marks)
Q6. "Dividends are irrelevant for fim value". Explain. (15 Marks)
Q7. What is MIRR? Comment on the usefulness of this method in capital budgeting.
Calculate MIRR for the following data assuming WACC of 12%: (5+10=15 Marks)
Year 0 1 2 3 4 5

Post tax net cash flows -100 20 30 -50 60 50

QSa. X Ltd. requires Rs 1500000 cash for meeting its transaction requirements over the next
I year. It has marketable securities worth Rs 3000000. What is the lot size in which
marketable securities should be converted into cash so that the total costs are minimized. It is
given that marketable securities earn a return of 12% p.a. & the transaction cost per
conversion is Rs S500. Also find out the total minimum cost and average cash balance. (9
Marks)
Q8b. The annual yield available on marketable securities is 12% p.a. The fixed cost of
affecting a marketable securities transaction is Rs. 1600. The standard deviation of the
change in daily cash balance is Rs5000. The management would like to maintain a minimum
cash balance of Rs 50000. Calculate RP &UL as per Miller-Or's cash management model.
(6 Marks)