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APR 22

The document is an examination paper for the B.Com. degree in Corporate Secretaryship at Loyola College, Chennai, focusing on Financial Management. It includes various questions divided into three parts: Part A consists of short answer questions, Part B contains detailed questions requiring explanations and calculations, and Part C involves comprehensive problems and case studies. The exam covers topics such as financial management objectives, capital budgeting, cost of capital, working capital requirements, and financial analysis methods.

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Vasanth Alagappan
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6 views

APR 22

The document is an examination paper for the B.Com. degree in Corporate Secretaryship at Loyola College, Chennai, focusing on Financial Management. It includes various questions divided into three parts: Part A consists of short answer questions, Part B contains detailed questions requiring explanations and calculations, and Part C involves comprehensive problems and case studies. The exam covers topics such as financial management objectives, capital budgeting, cost of capital, working capital requirements, and financial analysis methods.

Uploaded by

Vasanth Alagappan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP


FOURTH SEMESTER – APRIL 2022
UBC 4501 – FINANCIAL MANAGEMENT

Date: 16-06-2022 Dept. No. Max. : 100 Marks


Time: 09:00 AM - 12:00 NOON
PART-A
Q.No Answer ALL Questions 10X2=20 Marks
1 What are the basic objectives of Financial Management?
2 What do you mean by Financial Management?
A project has an initial investment of Rs.2,50,000. It will produce cash flows
3 after tax of Rs.50,000 per annum for 8 years. Compute the payback period for
the project.
4 What is capital budgeting?
5 Write a brief note on cost of capital?
A company limited issued 10% debentures of Rs.5,00,000 at par. Compute the
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cost of capital if the applicable tax rate on the company is 50%.
7 Define capital budgeting?
The cost of plant is Rs.5,00, 000.It has an estimated life of 5 years after which it
would be disposed off (scrap value is nil). Earnings before depreciation, interest
8
and taxes (EBIT) is estimated to be Rs.1,75,000 p.a. Find out cash flow from the
plant. Tax rate 30%.
9 What are the four main components of working capital?
10 Write down the steps involved in the determination of the operating cycle?

PART-B
Answer any FOUR Questions 4X10=40 Marks
11. Explain the objectives of Financial Management?
12 The existing capital structure of Risk Ltd is as follows
Equity shares of Rs.100 each Rs.25,00,000
Retained earnings Rs.15,00,000
10% Preference shares Rs.20,00,000
8% Debentures Rs.20,00,000
Company earns a return of 15% and tax on income is 35%. Company wants to
raise Rs.18,00,000 for its expansion projects for which it is considering
following alternatives:
i. Issue of 14,400 equity shares at a premium of Rs.25 per share
ii. Issue of 11% preference shares
iii. Issue of 10% debentures
Projected that the Price Earnings(P/E) ratio in the case of equity,
preference shares and debentures financing would be 15,12 and 10
respectively. Which alternative would you consider to be the best? Give
reasons for your choice.
13 X Company Limited issued 12% debentures of Rs.2,00,000, face value of the
debentures is Rs. 100.Compute cost of debenture before and after tax if.
(a) Issued at par, tax rate is 20%
(b) Issued at 10% premium, tax rate is 30%
(c) Issued at 10 % discount, tax rate is 40%
1
14 A company has to choose one of two alternative machines. Calculate the pay
back period and suggest the profitable machine.
Machine Raja Nataraja
Cost of Machine (Rs) 2,00,000 2,00,000
Working life (years) 5 5
Profits before depreciation and tax
I Year 60,000 80,000
II Year 70,000 1,00,000
III Year 80,000 80,000
IV Year 60,000 70,000
V Year 40,000 60,000
Rate of income tax 50% 50%

15 From the following information, prepare a statement showing the estimated


working capital requirements:
Budgeted sales-Rs.2,60,000 p.a
Analysis of cost and profit of each unit
Raw material-Rs.3
Labour-Rs.4
Overheads-Rs.2
Profit-Rs.1
Selling price per unit-Rs.10
It is estimated that
(a) Pending use, raw materials are carried in stock 3 weeks and finished
goods for 2 weeks.
(b) Factory processing will take 3 weeks.
(c) Suppliers will give 5 weeks credit and customers will require 8 weeks
credit.
It may be assumed that production and overheads accrue evenly
throughout the year.
16 The following projections have been given in respect of companies X and Y.
Particulars Company-X Company-Y
Volume of output & Sales 80,000 units 1,00,000 units
Variable cost per unit Rs.4 Rs.3
Fixed cost Rs.2,40,000 Rs.2,50,000
Interest burden on debt Rs.1,20,000 Rs.50,000
Selling price per unit Rs.10 Rs.8
On the basis of the above information, calculate (a) Operating leverage, (b)
Financial leverage and (c) Combined leverage.

17 A Brief note on (a) Pay back Period method (b) Accounting or Average Rate of
Return method (c) Net Present Value Method (d) Internal Rate of Return method
and (e) Profitability Index (PI) Method.

2
PART-C
Answer any TWO questions 2x20=40 Marks
18 The ZBB Ltd needs Rs.5,00,000 for construction of a new plant. The following
three financial plans are feasible.
(i) The company may issue 50,000 equity shares at Rs.10 per share
(ii) The company may issue 25,000 equity shares at Rs.10 per share and
2,500 debentures of Rs.100 each bearing 8% rate of interest.
(iii) The company may issue 25,000 equity shares at Rs.10 per share and
2,500 preference shares at Rs.100 per share bearing 8% rate of
interest.
If the company’s earnings before interest and taxes are Rs.10,000,
Rs.20,000, Rs.40,000, Rs.60,000, Rs.1,00,000, what are the earnings
per share under each of the three financial plans? Which alternative
would you recommend and why? Assume corporate tax rate to be
50%.
19 A) It is proposed to introduce a new machine to increase the production
capacity of department X. Two machines are available. Type ‘A’ and Type
‘B. The following information is available:
Particulars A (Rs) B (Rs)
Cost of machine 3,50,000 6,30,000
Estimated life 7 10
Estimated savings in scrap p.a 20,000 32,000
Additional cost of Indirect material p.a 10,000 16,000
Estimated savings in wages:
Employees not required 15 20
Wages per employee per annum 10,000 16,000
Additional cost of maintenance p.a 7,200 12,000
Additional cost of supervision p.a 24,000 36,000

The rate of taxation can be regarded as 50% of profits. Which machine


can be recommended for purchase?
B) Compute ARR from the following data:
Cost of asset: Rs.4,00,000
Useful life: 5 Years
Cash flow after tax (CFAT) Rs.1,72,000 p.a
20 Asin Ltd issued 15,000 12% preference shares of Rs.100, redeemable at 10%
premium after 20 years. The floatation cost was 5%. Find out the cost of
preference share capital if shares are issued (a) at par; (b) at a premium of 5%
and (c) at a discount of 10%.
21 Explain in detail the determinants of working capital requirements?

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