M.B.A-M.B.A 2nd Year Paper - I : FINANCIAL MANAGEMENT (Acharya Nagarjuna University - Center for Distance Education, Guntur, Andhra Pradesh-2013)

M.B.A. DEGREE EXAMINATION, DEC. - 2013
Second Year
Paper - I : FINANCIAL MANAGEMENT

Time : 03 Hours                                                                    Maximum Marks : 80

SECTION – A (3 × 5 = 15)

Answer any Three of the following
1) a) Profit maximisation

b) Fixed budget

c) Flow of fund

d) NI approach

e) Cash budget

f) Reordering level

SECTION – B (3 × 15 = 45)
Answer any Three of the following

2) X Ltd. has to decide between rental of two types of machine manufacturing the same product.
Machine A, an inexpensive economy model, rents for Rs. 1,000 per month but the variable
production cost is Rs.0.25 per unit. Machine B rents for Rs. 3,000 per month but the variable
production cost is only Rs.0.10 per unit. Monthly demand varies between 10,000 and 19,000
according to the following probabilities.

Demand Probability

10,000 0.12

12,000 0.17

15,000 0.41

17,000 0.24

19,000 0.06
Make a comparision of the two machines. Which machine X Ltd. should rent? If the demand is
definitely known to be 10,000 units, would the decision reverse?

3) What are the sources of finance?

4) State the essentials of budgetary control.

5) Critically examine any one theory of capital structure known to you.

6) What are the mechanics of BE analysis?

7) Explain the organisation of finance function in a concern.

SECTION – C (15 m)
(Compulsory)


8) From the following capital structure of a company, calculate the overall cost of capital using

a) book value weights and

b) market value weights.
Source Book value Market value

(Rs.) (Rs.)

Equity share capital

(Rs. 10 each) 45,000 90,000

Retained earnings 15,000 –

Preference share capital 10,000 10,000

Debentures 30,000 30,000


The after tax cost of capital of different sources of finance is as follows:

Equity share capital 14%

Retained earnings 13%

Preference shares 10%

Debentures 8%