Lovely Professional University 2009 B.B.A Mid Term,Management of Finances - Question Paper

MGT206: Management of Finances A(code)

Time Allowed: 1.5 hour Max. Marks 50

1. This paper contains eight ques. on two pages.
2. ans all the ques. in serial oeder.
3. The marks assigned to every ques. are shown at the end of every ques. in square
brackets.

Q1. discuss the subsequent [10]

a. Financial Management Decisions
b. Commercial Papers
c. Trade Credit
d. Difference ranging from equity and Debentures
e. Time value of Money

Q2. Fill in the blanks: [3]

a. The equal amount of money instalment paid by an investor is known as__________
b. Discounting refers to _______________
c. Simulaion refers to _________________


Q3. provide 1 working example of Pay Back Period. [2]


Q4. Heaven Limited issued 15 year,14% bounds 5 year ago.The bond which has a face value
of Rs.100 is currently selling for Rs.108. What is the cost of debt
(i) Pre-Tax
(ii) Post tax (Assuming the rate of tax 35%) [5]

Q5. Mr Chintanmani,Rammani and Krishna mani are offered 20% nominal rate of return.What would
be the effective rate of return for ach one?Who will be the maximum gainer,if:

a. Compounding is done annually for chintanmani
b. Done three times a year for Rammani
c. Done six times for Krishna mani [5]

Q6. Suppose you are financial manager of a company. The management wants a good amount of
profit and the shareholders of the company want to maximize the wealth.Being a prudent
manager what would your choice? [5]

Q7. Bharat Ltd is considering 2 mutually exclusive projects;Project P,Project Q. the
expected cash flows of these projects are es follows:

Year Project P Project Q
0 (1,000) (1,600)
one (1,200) 200
two (600) 400
three (250) 600
four 2,000 800
five 4,000 100


a. Construct the NPV profiles for Project P and Q
b. What is the IRR of the project?
c. Which project would you select if the cost of capital is 20%? [10]


Q8. You and your friend are the financial manager in 2 various firms.You belief that Net
Income approach is the best approach for the capital structure designing.Your best friend
is against the opinion,and hardly care about the capital structure.

a. How would you justify your point? provide example
b. What opinion your friend is suggesting on the problem.

Earning:   Approval pending.