Karnataka State Open University (KSOU) 2010 M.Com Commerce Final Year VI - Financial Management - - Question Paper
MCO (F) 96
M.Com. (Final) Examination, June 2010 (SIM) COMMERCE Paper - VI : Financial Management
Time : 3 Hours Max. Marks : 90
SECTION - A
Note : Answer any three questions. Each question carries 15 marks. (15x3=45)
1. Define working capital. Bring out the role of various constituents of working capital.
2. What are the basic components of capital budgeting analysis ? Explain the difference between traditional techniques and D.C.F. techniques of capital budgeting.
3. Explain the various factors which determine the dividend policy of a company. Name different types of dividends.
4. A company with 12% cost of capital and limited investment funds of Rs. 4,00,000/- is evaluating the desirability of several investment proposals.
|
Project |
Initial investment |
Life |
Cash flow |
|
Rs. |
(Years) |
Rs. | |
|
A |
3,00,000 |
2 |
1,87,600 |
|
B |
2,00,000 |
5 |
66,000 |
|
C |
2,00,000 |
3 |
1,00,000 |
|
D |
1,00,000 |
9 |
20,000 |
|
E |
3,00,000 |
10 |
66,000 |
i) Rank the projects according to the profitability index and NPV methods.
ii) Determine the IRR of three projects in their order of merit.
5. A Limited Company has the following capital structures
Equity share capital (2,00,000 shares) 40,00,000
10,00,000
6% Pref. shares
8% Debentures
30.00.000
80.00.000
The market price of the companys equity share is Rs. 20/-. It is expected that company will pay a current dividend of RS. 2/- per share which will grow at 7% for ever. The tax rate may be presumed at 30% you are required to compute.
a) A weighted average cost of capital of the existing structure
b) The new weighted average cost of capital if the company raises an additional Rs. 20,00,000 debt by issuing 10% debentures. This would result in increasing the expected dividend to Rs. 3/- and leave the growth rate unchanged but the price of share will fall to Rs. 15/- per share.
SECTION - B
Note : Answer any three questions. Each question carries 10 marks : (10x3=30)
6. Explain the differences between NOI approach and NI approach of capital structure.
7. What do you mean by capital assets pricing model ? Explain.
8. ABC Ltd., belongs to a risk class of 10%. It has currently outstanding 25,000 shares of Rs. 100/- each. The firm is contemplating a declaration of dividend of Rs. 5/- per share at the end of current financial year. The company expects to have a net income of Rs. 2.5 and has a proposal for making new investments of Rs. 5 lakh.
Show that under MM assumption the payment of dividend does not affect the value of the firm.
9. X Ltd., is considering three different plans to finance its total project cost of Rs. 100 Lakh : A, B and C
|
Equity capital (Rs. 100 per share) 10% Debentures |
Plan Plan A 50 lakh 50 lakh 100 lakh Plan B 34 lakh C 25 lakh 66 lakh 75 lakh 100 lakh 100 lakh |
Sales for the first 3 years are estimated at Rs. 100 lakh, Rs. 125 lakh and Rs. 150 lakh respectively. Estimated profit before interest and taxes is 10%. The tax rate is 35%. Compute EPS in each of the 3 alternative financing plans.
10. How the objective of wealth maximisation is superior to the objective of profit maximisation.
SECTION - C
Note : Answer any three questions. Each question carries 5 marks. (5x3=15)
11. a) What are the functions of a modern finance manager ?
b) Define uncertainty and distinguish between certainty.
c) Write a short note on Inventory management.
d) Calculate the sum of money to be received after 3 years when Rs. 10,000/- is deposited at an interest of 10% compounded annually.
e) What is EBIT - EPS analysis ?
|
Attachment: |
| Earning: Approval pending. |
