M.B.A-M.B.A 3rd Sem 303 B : Advanced Financial Management(University of Pune, Pune-2013)

Time :3 Hours]                                                                                     [Max. Marks :70

Instructions to the candidates:-

1) Q.No. 1 is compulsory.

2) Solve any two questions from Section I and two questions from Section II.

3) Figures to the right side indicate full marks.

4) Use of non programmable calculator allowed.

Q1) What is Economic Value Added (EVA) and how it is calculated? On what

factors EVA changes?                                                                                               [10]

SECTION - I

Q2) Write short notes on : ( any three)                                                                   [15]

a)  Project Internal Rate of Return (IRR). 

b)  Modigliani and Miller Approach.

c) Working Capital Management. 

d) Sensitivity analysis.

e)  Use of Fund Flow statement.

Q3) Briefly explain the following :                                                                           [15]

a)       Disclosure on Accounting Policies.

b)       Accounting for Depreciation.

c)       Accounting standards and Indian GAAP.

Q4) What is the difference between stock price Maximisation, firm value

maximisation and stock holder wealth maximisation.                             [15]

P.T.O.

SECTION - II

Q5) A firm can make investment in either of the following two projects. The firm

anticipates its cost of capital to be 10% and the net (after tax) cash flows of the projects for five years are as follows.

Figures in Rs. “000

Year                   0                 1                2                 3                 4           5

Project A          (500)          85              200               240              220         70

Project B          (500)         480             100                70                30          20

The discount factors are as under

Year                   0                 1                 2                3                 4           5

PVF (10%)   1              0.91             0.83           0.75           0.68     0.62

PFF (20%)   1              0.83             0.69           0.58           0.48     0.41

Calculate NPV and IRR of the Projects and suggest which project should be

selected.                                                                                                                       [15]

Q6) Calculate the amount of working capital required by ABC ltd on the basis of

following :                                                                                                                   [15]

Particulars          Cost per unit

                                                           (Rs.)

Raw Materials                       50 

Direct Labour                      20

Overheads                           40

Total Cost         110

Profit                                       20

Selling Price                          130

Additional information :

a) An average raw material in stock is for half month.

b) Average material in work in progress is for half month.

c) Credit allowed by suppliers: one month; credit allowed to debtors: one

month.

d) Average time lag in payment of wages: 10 days.

e) Average time lag in payment of overheads 30 days. f) 25% of the sales are on cash basis. g) Cash balance to be Rs. 1,00,000.

h) Finished goods lie in the ware house for one month.

i) You are required to prepare a statement of the working capital needed to finance a level of the activity of 54,000 units of output. Production is a carried on evenly throughout the year and wages and overheads accrue similarly. State your assumptions, if any clearly.

[4375]-304                                                     2

Q7) As on 31st March 2003, the paid up capital of XYZ Ltd was Rs. 1,00,00,000.

The ratios as on that date were as under

a)  Current debt to Total debt                           0.40

b)  Total debt to Equity                                      0.60 

c)  Fixed assets to Equity                                  0.60 

d)  Total assets turnover (based on sales)       2 times 

e)  Inventory turnover (based on sales)            8 times

Draw the Balance sheet of XYZ Ltd                   [15]

Liabilities                Amount in Rs.          Assets                                  Amount in Rs

Paid up Capital                                             Fixed Assets

Long Term Debt                                            Inventory

Current debt                                                Other Current Assets

Other Liabilities

Total                                                                                        Total

Q8) From the following Balance sheets of XYZ Ltd. Prepare a statement showing

sources and application of funds for the year ended 31st March 2008. [15]

Liabilities                           31.3.07       31.3.08       Assets        31.3.07      31.3.08

Equity Capital               3,00,000      4,00,000      Goodwill     1,15,000      90,000

8%                                                                                                               Land & 

Redeemable                  1,50,000      1,00,000           Building  2,00,000     1,70,000

Pref.Shares

General                                40,000           70,000             Plant             80,000      2,00,000

Reserve

Profit & Loss                    30,000           48,000           Debtors     1,60,000    2,00,000

A/c

Proposed                            42,000           50,000           Stocks         77,000      1,09,000

Dividends

Creditors                              55,000           83,000           Bills               20,000      30,000

           Receivable

Bills Payable                         20,000            16,000         Cash in          15,000      10,000

                 Hand

Tax provision                      40,000            50,000          Cash at        10,000       8,000

                    Bank

Total                                  6,77,000         8,17,000      Total         6,77,000      8,17,000

[4375]-304                                                     3

Additional information:

a)   Depreciation has been charged on Plant, Land & Building Rs. 10,000 and Rs.20,000 respectively, in 2007-08.

b)  Interim dividend of Rs. 20,000 has been paid in 2007-08.

c)  Income tax paid during 2007-08 Rs. 35,000.

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