LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.A., DEGREE EXAMINATION – ECONOMICS
SIXTH SEMESTER – NOVEMBER 2012
EC 6602 – FINANCIAL MANAGEMENT
Date : 5/11/2012 Dept. No. Max. : 100 Marks
Time : 1.00 – 4.00
PART-A
Answer any FIVE questions in about 75 words each: (5×4=20)
- Discuss the relationship of financial management to Economics.
- What are the different ways of classifying financial markets?
- What are the principal tasks of SEBI?
- Determine the present value of the following cash stream if the discount rate is 14 %.
Year |
1 |
2 |
3 |
4 |
5 |
Cash flow |
5000 |
6000 |
8000 |
9000 |
8000 |
- A Rs 100 par value bond bearing a coupon rate of 12% will mature after 5 years. What
is the value of the bond, if the discount rate is 15%?
- Explain Implicit and Explicit cost.
- If you deposit Rs 1000 annually in a bank for 5 years and your deposits earn a
compound interest rate of 10 percent. What will be the value of this series of deposit at
the end of 5 years?
PART-B
Answer any FOUR questions in about 300 words each: (4×10=40)
- Explain the various forms of business organization.
- “Financial management is in many ways an integral part of the jobs of the managers”-
Comment.
- Discuss the functions of a financial system.
- (a) The project X cost Rs 1,00,000 and its expected cash flows are as follows:
Year |
1 |
2 |
3 |
4 |
5 |
cash flow |
20000 |
30000 |
40000 |
50000 |
30000 |
The cost of capital is12% calculate the net present value
(b) A company has 15% perpetual debt of Rs 100000. The tax rate is 50%. Determine
the cost of capital (before tax as well as after tax) assuming that the debt is issued at (i)
par, (ii) 10% discount, and (iii) 10% premium.
- Explain the equilibrium in financial markets.
- The market price of a Rs1000 par value bond carrying a coupon rate of 14percent and
maturing after 5 years is Rs 1050. What is the YTM on this bond? What is the
approximate YTM? What will be realized YTM if the reinvestment rate is 12 percent
- A company issues 14% irredeemable preference shares of the face value of Rs 100
each. Flotation costs are estimated as 5% of the expected sale price .What is the
cost of preference capital if preference shares are issued at (i) par value (10%)
premium and (iii) 5% discount?
PART-C
Answer any TWO questions in about 900 words each: (2×20=40)
- Explain the nature and scope of Business finance.
- Discuss the measurement of Cost of Capital
- A company has on its books the following information:
Type of capital |
Book value |
Market value |
Specific costs |
Debt |
300000 |
270000 |
8% |
Preference capital |
200000 |
230000 |
14% |
Equity capital |
500000 |
600000 |
17% |
Retained Earnings |
|
150000 |
17% |
Total |
1000000 |
1250000 |
|
Determine the weighted average cost of capital using (a) Book value weights (b) Market value weights.
- a) Discuss the various components of financial system.
- b) Explain the indicators of financial development.
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