ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION- APRIL 2013
MIB – II SEMESTER
FINANCE FOR MANAGERS
Duration : 3 HRS MARKS : 100
SECTION – A
I) Answer any SEVEN of the following. Each question carries 5 marks. (7×5=35)
1. Explain the theories of Dividend Policy.
2. Explain any five Risk Accounting Methods.
3. Explain factors affecting Capital Structures.
4. Explain in detail tools of Inventory Management.
5. Give a note on Bonus Shares.
6. Elucidate the various Finance Decisions.
7. How do you measure time value of money?
8. What are the different types of leverages? Explain their importance.
9. Define Capital Budgeting and explain its importance.
10. Write a note on factoring.
SECTION – B
II) Answer any THREE of the following. Each question carries 15 marks (3×15=45)
11. Critically evaluate the objectives of Financial Management.
12. Explain the following Innovative sources of long term finance
a. Lease Finance
b. Venture Capital
c. Euro Issues
13. Aries Ltd. Wishes to raise additional finance of Rs.10,00,000 for meeting its investment
plans. It has Rs.2,10,000 in the form of retained earnings available for investment purpose. The following are the further details
Date Equity Mix is 3:7
Cos of debt upto Rs.1,80,000-10% before tax, beyond Rs.1,80,000-16% before tax
Earnings per share Rs.4
Dividends payout– 50%
Expected growth rate in dividend – 10%
Current market price per share- Rs.44
Tax rate- 50%
You are required to
a. To determine the pattern of raising the additional finance.
b. To determine post tax average cost of additional debt.
c. To determine cost of retain earnings and cost of equity.
d. Compute overall WACC
14. Axion Ltd. Sells its product on a gross profit of 20% on sales. The following information
is extracted from its annual accounts for the year ending 31st March 2012
Sales( 3 months Credit ) Rs.40,00,000
Raw materials Rs.12,00,000
Wages(15 days in arrears) Rs.9,60,000
Manufacturing Expenses(1 month in arrears) Rs.12,00,000
Administration Expenses (1 month in arrears) Rs.4,80,000
Sales Promotion Expenses (payable half-yearly in advance) Rs.2,00,000
The company enjoys 1 month’s credit from its suppliers and maintains two months stock of raw material and one and a half months of finished goods. Cash balance is maintained at Rs.1,00,000. Assuming a 10% margin find out working capital requirement.
(Cost of sales to be considered for debtors and stock of finished goods)
15. An enterprise can make either of two investments at the beginning of 2013. Assuming
rate of return at 10% Evaluate the investment proposals as under
a. Payback period
b. NPV
c. PI
d. IRR (10% and 14%)
Particulars Proposal A Proposal B
Rs. Rs.
Cost of investment 20,000 28,000
Life (years) 4 5
Net Income (after depreciation and tax)
2012 500 NIL
2013 2,000 3,400
2014 3,500 3,400
2015 2,500 3,400
2016 — 3,400
It is estimated that each of the alternative projects will require an additional net working capital of Rs.2,000which will be received back in full after the expiry of each project life. Depreciation is provided under straight line method
SECTION – C
III) Case Study- Compulsory question. (20 marks)
16. A firm has a sales of Rs.75,00,000, Variable cost of Rs. 42,00,000 and fixed cost of
Rs.6,00,000. It has a debt of Rs.45,00,000 at 9% and equity of Rs. 55,00,000
a. What is the firm’s ROI ?
b. Does it have favorable financial leverage?
c. If the firm belongs to an industry whose asset turnover is 3. Does it have a high or low
Asset leverage?
d. What are the operating, financial and combined leverages of the firm?
e. If the sales drop to Rs.50,00,000 what will be its new EBIT ?
f. At what level the EBIT of the firm will be equal to 0 (zero).
g. Determine its present and future EPS if the value of each share is Rs.100.
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