LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A.  DEGREE EXAMINATION –ECONOMICS

RF 33

SIXTH SEMESTER – APRIL 2007

EC 6602 – FINANCIAL MANAGEMENT

 

 

Date & Time: 20/04/2007 / 9:00 – 12:00       Dept. No.                                                                 Max. : 100 Marks

 

 

PART A

 

ANSWER ANY FIVE QUESTIONS IN ABOUT 75 WORDS EACH

 

• Define Co-operative organization
• Explain the concept of Annuity
• What is “call money” market?
• What do you understand by accrual principle?
• Find the present value of the following
  1. Rs 3000 due to be received six years from now with an opportunity cost of 8%
  2. Rs 1000 to be received 3 years from now with an opportunity cost of 6%

 

• A Limited is at present paying a dividend of Rs. 4 per equity share this rate of dividend is going to continue in the years to come. The current expected dividend rate is 12% Calculate the value of equity share

 

• A debenture holder is to receive an annual interest of Rs 100 for perpetuity on his debenture of Rs. 1000. Calculate the value of debenture if the rate of return is
  1. 12%
  2. 8%

PART B

 

ANSWER ANY FOUR QUESTIONS IN ABOUT  250 WORDS EACH

 

• State the difference between public and private limited company
• Examine the role of financial managers in the post liberalization era
• Discuss the functions of the financial system
• Discuss the role of IDBI in industrial finance
• A Limited has issued bond of the par value of Rs 1000 the present value of the bond is Rs 900. The bond carries an interest rate of 14%. The maturity period is 6 years. You are required to calculate the yield on maturity.

 

• ABC Ltd is expected to pay a dividend of Rs 30 per share. Dividends are expected to grow perpetually at 10% You are required to calculate the market value of the share if capitalization rate is 15%

 

• Discuss the powers and functions of SEBI

 

 

PART C

 

ANSWER ANY  TWO QUESTIONS IN ABOUT  900WORDS EACH

 

• Financial management as an integral part of the overall management , is not totally independent area – Justify

 

16. a) A company issues Rs 10,00,000 16% debentures of Rs 100 each. The company is in 35% tax bracket you are required to calculate the cost of debt before and after tax. If debentures are issued at (i) at par (ii) 10% premium (iii) 10 % discount (b) If brokerage paid at 2% what will be the cost of debentures if issued at par

 

17. From the following capital structure of a company calculate the overall cost of capital, using (a) book value weights and (b) market value weights

 

Sources	Book value	Market value
Equity share capital Rs 10 per shares	45000	90000
Retained earnings	15000	–
Preference share capital	10000	10000
Debentures	30000	30000

 

The after- tax cost of different sources of finance is as follows

Equity share capital 14%, Retained earnings 13% Preference share capital 10%

Debentures 5 %.

 

18. Examine the Equilibrium financial markets through four panel diagram.

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