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Financial Management (1)

This document outlines the instructions and questions for a Financial Management exam for MMS (Sem II) with a total of 60 marks. It includes seven questions, with the first question being compulsory and options provided for the remaining questions. Topics covered include project evaluation, working capital requirements, net present value calculations, capital structure, leverage, and financial planning.

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Deepak Nayak
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3 views

Financial Management (1)

This document outlines the instructions and questions for a Financial Management exam for MMS (Sem II) with a total of 60 marks. It includes seven questions, with the first question being compulsory and options provided for the remaining questions. Topics covered include project evaluation, working capital requirements, net present value calculations, capital structure, leverage, and financial planning.

Uploaded by

Deepak Nayak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SUBJECT: FINANCIAL MANAGEMENT MARKS: 60

COURSE: MMS (SEM II) DURATION: 3HRS


INSTRUCTIONS:
1. Read all questions carefully before writing answers.
2. Do not write anything on your question paper.
3. Label your answer numbers correctly.
4. There are 7 questions in all. Question no. 1 is compulsory and out of remaining 6 questions
attempt any four questions.
5. There is internal choice in questions 2 to 7.

Q1. Solve the following (10 Marks)


a) A Company has to consider the following project:
A firm whose cost of capital is 10% is considering mutually exclusive project RED the details are
as follows.
Cost 2,00,000
Cash inflows:
Year 1 20,000
Year 2 40,000
Year 3 60,000
Year 4 90,000
Year 5 1,20,000

b) A company is considering a new project for which the investment data as follows. (5 Marks)
Investment – 1,20,000/-

Year Net Cash Flow


1 21000
2 21000
3 21000
4 21000
5 21000
6 24000
7 30000
8 45000
9 30000
10 12000
Calculate the Payback period of the above project

c) Write an Scope of Financial Management (5 Marks )

Q-2) Solve the following


a) The Board of Director of Rube Ltd. Request you to prepare a statement showing the working capital
requirements forecast for the level of activity of 1,56,000/- units of production. The following information is
available for your calculation:

Particulars Per unit


Raw Materials 90
Direct Labour 40
Overheads 75
205
Profit 60
Selling Price 265
i) Raw material is in stock on average one month
ii) Material is in process on average 2 weeks
iii) Finished goods are in stock, on average on month.
iv) Credit allowed by supplier one month
v) Time leg in payment from debtors 2 months
vi) Leg in payment of wages one and half month
vii) leg in payment of overheads one month
Cash in hand and at Bank is expected to be 60000/-
OR
b) A Proforma cost sheet of a company provides the following data
Particulars Per unit
Raw Materials 52.0
Direct Labour 19.5
Overheads 39.0
110.5
Profit 19.5
Selling Price 130.0
The following is the additional information available
i) Raw material are in stock on one month
ii) Material is in process on half month
iii) Credit allowed by supplier one month
iv) Credit allowed to debtors 2 months
v) Leg in payment of wages one and half week
vi) Leg in payment of overheads one month
vii) Cash in hand and at Bank is expected to be 120000
You are required to prepare a statement showing the working capital needed to finance a level of activity of
70000 units of output.

Q-3) Solve the following


a) Form the following information calculates the net present value of the project (10 marks)
Initials investment 20,000
Estimated life 5 years
Scrape Value 1,000
Discounting rate is 10% and tax is 20%
The profit before depreciation and taxes are as follows

Year 1 2 3 4 5 6
Project 7000 12000 12000 5000 4000 2000
OR
a) Form the following information calculates the net present value of the project (10 marks)
Initials investment 45,000,
Estimated life 5 years
Scrape Value 0
Discounting rate is 12% and tax is 25%
The profit before depreciation and taxes are as follows

Year 1 2 3 4 5 6
Project 10000 25000 15000 1700 21000 20000
0

Q-4) Explain and solve the following.


a) A firm has all equity capital structure consisting of 1,00,000/- ordinary shares of 10 each. The firms want
to share top raise Rs. 2,50,000/- (10 marks)
1) to issue 25000 ordinary shares at 10 each
2) To borrow 2, 50,000/- at 8 % of dividend
3) to borrow 250000/- at 8% rate of interest
If the firm earning before interest and taxes investment are 312500 and tax rate is 50 %. Calculate the EPS
for all 3 cases.

b) Explain the objective of financial management


OR
c) Calculate the Profitability Index from the following data. (10 marks)
Year 1 2 3 4 5 6 7
Cash inflow 25300 23450 21850 15320 14780 29352 25000

Discounting rate is 9%, Cash outflow is 200000


d) Proforma of Cash flow statement.

Q-5) Answer the following (10 marks)


a) Calculate the all leverage form the following information
Sales 50000
Variable cost 25000
Interest 5000
Fixed cost 15000
And
b) Determine the EPS of the textile company which has EBIT or 1,60,000/- its capital structure consist of the
following securities
company has 30 % tax bucket.
12% Debenture 700000
10% Preference Share 150000
Equity shares (100 each) 600000

OR
c) Explain the Traditional and modern technique of capital budgeting

Q-6) Answer the following. (10 marks)


a) Explain the Internal and External sources of Finance
OR
b) Features and characteristics of Financial Planning
c) Function of Financial Managment

Q-7) writes a short note (Any Two) (10 marks)


a) Operating leverage
b) Venture Capital
c) Importance of financial planning
d) MM approach of Dividend

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