Rajasthan Technical University 2009 M.B.A Financial Management - Question Paper
Rajasthan tech. University
M.B.A. two sem (Main/Back)
July 2009
Financial Management
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2M6202 | ||
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M. B. A. (Sem.II) (Main / Back) Examination, July - 2009 | ||
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M - 202 : Financial Management | |||
Time : 3 Hours] [Total Marks : 70
\ ' [Min. Passing Marks : 28
The question paper is divided in two sections_
There are sections A and B. Section A contains 6 questions out of which the candidate is required to attempt any 4 questions. Section B contains short case study/application based 1 question
which is compulsory.
All questions are carrying equa! marks.
Use of following supporting material is permitted during examination. (Mentioned in form No. 205)
1..__Nil ___2.__Nil
SECTION - A
What are the basic financial decisions ? How do they involve risk-return trade off ?
14
Write short notes :
(i) Financial leverage and operational leverage
(ii) Bonus shares v
(iii) Lease financing and Hire purchase financing
(iv) .Commercial paper. ,
14
(a) The following facts are available :
Risk free rate.....................................................9%
Required rate of return................................. 18%
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Beta coefficient of ABG share.............. 1.51-"
Expected dividend during next year...........Rs. 3
Growth rate in dividends.....H...........................8%
Compute the price at which the shares of ABC should sell ?
()-What is Risk ? How can risk of a security be
* calculated ? Explain with the help of example.
f 7+7=14
4 (a) Consider the following figures pertaining to risk free rate, market rate and return rate of a security of Pappu Ltd.
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Year |
Risk-free rate (Rf) |
Market rate (KJ |
Security return (Rj) |
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1 |
0.06 |
0.14 |
0.08 i |
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2 |
' 0.05 |
0.03 |
0.11 |
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3 |
0.07 |
0.21 |
0.29 |
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4 |
0.08 |
0.26 |
0.25 |
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5 |
0.09 |
0.03 |
0.07 |
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6 |
0.07 |
0.11 |
0.04 |
Determine the cost of equity capital in the context of CAMP. Past data may be taken as a proxy for future.
(b) Risk free return - 7.75%
Beta - 2
Expected return of investors - 16%
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Apply CAPM compute the expected market return.
1 10+4=14
f
What are the factors that influence management's decision to p.ay dividend of a certain amount ?
(b) /Define and distinguish between the concepts of merger, takeover and amalgamation. Illustrate your answer with suitable examples.
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(a) What is capital budgeting ? Why is it significant for a ?
How do you calculate the accounting rate of return ? What are its limitations ?
7+7=14
Case study : '
A firm has applied for working capital finance from a commercial bank. You are requested by the bank to prepare an estimate of the working capital requirements of the firm. You may add 10% to your estimated figure to account for exigencies. The following is the firms projected profit and loss account :
(1) Sales...................................................................22,47,000
(2) Cost of goods sold...........................................16,37,100
(3) Gross profit.........................................................6,09,900
(4) Administration expenses.................................... 1,49,800 '*1
(5) Selling expenses.................................................1,39,100
(6) Profit before tax...............................................
(7) Tax provisions.................................................... 1,07,000 " /
(8) Profit after tax.................................................. 2,14,000
The cost of goods sold is calculated as follows :
Materials used .....................................................898,800 .
Wages and other expenses....................................... 6,68,750 ,
y depreciation.................................................................2,51,450 J
18,19,000
Less : Stock of finished goods (10% product not yet sold)....................................1,81,900
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gflv. Cost of goods sold................................................... 16,37,100 j
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The figures given above relate only to the goods equal to 15 percent of the vea/ production (in terms of physical units) are in progress on an average requiring full material but only 40% of other expenses. The firm has a policy of keeping 2 months consumption of material in stock.. '
All expenses are paid 1 month in arrear. Suppliers
of material grant 1 month credit. Sales are 20% cash
while remaining sold on 2 month credit. 70% of the income tax was to be paid in advance in quarterly instalments.
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