ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS) | ||||||||||||||||||||||||||||||||||||||||||||||
END SEMESTER EXAMINATION – SEPT/OCT.2015 | ||||||||||||||||||||||||||||||||||||||||||||||
B.B.M. –V SEMESTER | ||||||||||||||||||||||||||||||||||||||||||||||
FIN 506: ADVANCED FINANCIAL MANAGEMENT (FINANCE ELECTIVE) | ||||||||||||||||||||||||||||||||||||||||||||||
Duration: 3 Hours Max. Marks: 100 | ||||||||||||||||||||||||||||||||||||||||||||||
SECTION – A | ||||||||||||||||||||||||||||||||||||||||||||||
I) | Answer ALL the questions. Each carries 2 marks. (10×2=20) | |||||||||||||||||||||||||||||||||||||||||||||
1. | What is Reverse bid? | |||||||||||||||||||||||||||||||||||||||||||||
2. | What motivates an M &A deal? | |||||||||||||||||||||||||||||||||||||||||||||
3. | Compute the value of equity share if the normal ROI is 10%, 14%, 16% from the following information-
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4. | Is it true that “Post- merger EPS will have an impact on the firm’s value? If so, then reason it out with a brief explanation. | |||||||||||||||||||||||||||||||||||||||||||||
5. | As a budding entrepreneur which form of Project Finance would you choose to finance your project? Give suitable reasons to support your choice. | |||||||||||||||||||||||||||||||||||||||||||||
6. | What is ROCE? Explain its importance. What do financiers derive from this? | |||||||||||||||||||||||||||||||||||||||||||||
7. | What is Free Cash Flow? | |||||||||||||||||||||||||||||||||||||||||||||
8. | Explain the concepts of Asset Strapping and Boot Strapping. | |||||||||||||||||||||||||||||||||||||||||||||
9. | YG Enterprises is expected to generate future profits of Rs. 50, 00, 000. What is the value of business if investments of this type are expected to give an annual return of 18%. | |||||||||||||||||||||||||||||||||||||||||||||
10. | What is Expected Value? | |||||||||||||||||||||||||||||||||||||||||||||
SECTION – B | ||||||||||||||||||||||||||||||||||||||||||||||
II) | Answer any FOUR questions. Each carries 5 marks. (4×5=20) | |||||||||||||||||||||||||||||||||||||||||||||
11. | Determine the risk adjusted net present value of the following projects:
The company selects the risk-adjusted rate of discount on the basis of the coefficient of variation:
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12. | The profits of Zoya Ltd for the year ending were Rs.60, 00, 000. After setting apart amounts for interest, taxation and other provisions, the net surplus available to the shareholders is estimated at Rs.15, 00, 000. Company’s capital base is 1, 00, 000 shares of Rs.100 each, Rs. 50 paid up per share and Rs.25, 000, 12% Cumulative preference shares of Rs. 100 each. Enquiries in the stock market revealed that shares of companies engaged in similar business and declaring dividend at 15% on equity shares are quoted at a premium of 10%. Find the value per share. | |||||||||||||||||||||||||||||||||||||||||||||
13. | Consider the data given the following table. The information shows the probability distribution of 5 possible outcomes of the project. Compute the Standard Deviation.
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14. | Following are the Balance Sheet of Jai Ltd and Veer Ltd
The Board of Directors of Jai Ltd approved to take over Veer Ltd. Find out the ratio of exchange of shares based on Book Values. |
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15. | Explain the contents of a Project Report. | |||||||||||||||||||||||||||||||||||||||||||||
16. | Write a detailed note on Decision Tree Analysis. | |||||||||||||||||||||||||||||||||||||||||||||
SECTION – C | ||||||||||||||||||||||||||||||||||||||||||||||
III) | Answer any THREE questions. Each carries 15 marks. (3×15=45) | |||||||||||||||||||||||||||||||||||||||||||||
17. | The following information relating to Fortune India Ltd. having two divisions viz. Pharma Division and Fast Moving Consumer Goods Division. Paid up share capital of Fortune India Ltd. Is consisting of 3, 000 lakhs equity shares of Re.1 each. Fortune India Ltd. Decided to de-merge Pharma Division as Fortune Pharma Ltd.., w.e.f. 1.4.2015. Details of Fortune India Ltd..,as on 31.03.2015 and of Fortune Pharma Ltd.., as on 1.04.2015 are given below:
Board of Directors of the company have decided to issue necessary equity shares of Fortune Pharma Ltd of Re.1 each, without any consideration to the shareholders of Fortune India Ltd. For that purpose following points are to be considered:
Calculate:
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18. | (a) Write the assumptions, advantages and limitations of CAPM.
(b) A Ltd. Wants to acquire T Ltd.., and has offered a swap ratio of 1:2(0.5 shares for every one share of T Ltd.) Following information is provided:
Required: i. The number of equity shares to be issued by A Ltd.., for acquisition of T Ltd. ii. What is the EPS of A Ltd. After the acquisition? iii. Determine the equivalent earnings per share of T Ltd. iv. What is the expected market price per share of A Ltd. After the acquisition assuming its PE multiple remains unchanged? v. Determine the market value of the merged firm. |
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19. | Explain the various sources of finance for a project.
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20. | The following is the Balance Sheet of P Ltd. As on 31.03.2012
The debenture interest is due for 6 months and preference dividend is arrears for one year. Assuming assets are worth their book values. Show value per share if – a) Preference shares are preferential as to capital and arrears b) Preference shares are preferential as to capital only. |
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21. | A project with an initial outflow of Rs. 1, 00, 000 has a four year life and a 10% discount rate. The annuity cash flow is Rs.40, 000.
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SECTION – D | ||||||||||||||||||||||||||||||||||||||||||||||
IV) | Case Study (1×15=15) | |||||||||||||||||||||||||||||||||||||||||||||
22. | Reliable Industries Ltd. (RIL) is considering a takeover of Sunflower Industries Ltd. (SIL) The particulars of 2 companies are given below:
Find the following: i. What is the market value of each company before merger? ii. Assume that the management of RIL estimates that the shareholders of SIL will accept an offer of one share of RIL for four shares of SIL. If there are no synergic effects. What is the market value of the post merger RIL? What is the new price per share? Are the shareholders of RIL better or worse off than they were before the merger? iii. Due to synergic effect, the management of RIL estimates that the earnings will increase by 20%. What is the new post merger EPS and Price per share? Will the shareholders be better off or worse off than before the merger?
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