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B.B.A. LL.B. (Five Years) Sem 4 Financial Management 2026 Jan Question Paper with Solutions

KSLU Solved Question Papers

Financial Management

Previous Year Question Paper with Solution

B.B.A. LL.B. (Five Years) · Sem 4

2026 Jan Examination

munotes.in

Mumbai

First published on munotes.in on 21 October 2026.

Published by munotes.in, Mumbai.

Model answers written and edited by the munotes.in editorial desk.

Passages from this volume may be quoted, in print, online or by an AI system, with credit: name munotes.in and link to this volume's page. The volume may not be reproduced as a whole. Full terms at munotes.in/content-license.

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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2026 Jan examination.

The questions below are the paper as Karnataka State Law University set it at the 2026 Jan examination, in the order it was set.

MarksPage

The Paper as Set

The questions in this volume are the questions asked at the 2026 Jan examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.

Duration 3 hours · Total marks 80 · 20 questions answered

Instructions printed on the paper

N.B. (1) Answer all five Units. (2) One essay type question and short note/problems is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in Kannada or English completely.

How to use this volume

Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.

Read the original question paper

Q1

Unit I

(a)From the following information calculate weighted average cost :[10]

Answer

The figures given in the question

1) Equity shares 10,000 of Rs. 10 each Market Price Rs. 15 each Ke = 12%.

2) Debentures 10,000 of Rs. 100 each Market Value Rs. 120 each Kd = (After tax) 11%.

You are required to determine the weighted average cost of capital using

a) Book value and market value as weights.

b) Book value and market value based on total cost.

For full marks, cover: the book value and the market value of each source; the weights; the WACC by the weights method at book value and at market value; the WACC by the total cost method at book value and at market value; and a short comment on why the two bases differ.

Working note 1: book value and market value of each source

Source	Number	Face value (Rs)	Book value (Rs)	Market price (Rs)	Market value (Rs)
Equity shares	10,000	10	1,00,000	15	1,50,000
Debentures	10,000	100	10,00,000	120	12,00,000
Total			11,00,000		13,50,000

Book value is number × face value: 10,000 × 10 = 1,00,000 and 10,000 × 100 = 10,00,000. Market value is number × market price: 10,000 × 15 = 1,50,000 and 10,000 × 120 = 12,00,000.

The specific costs are given after tax: Ke = 12 per cent and Kd = 11 per cent.

(a) WACC with book value weights and market value weights

Formula. WACC = (We × Ke) + (Wd × Kd), where W is the weight of each source in the total capital.

Book value weights.

Source	Book value (Rs)	Weight	Cost (%)	Weighted cost (%)
Equity shares	1,00,000	0.0909	12	1.0909
Debentures	10,00,000	0.9091	11	10.0000
Total	11,00,000	1.0000		11.0909

The weight of equity is 1,00,000 / 11,00,000, which comes to 0.0909. The weight of debt is 10,00,000 / 11,00,000, which comes to 0.9091. So the WACC on book value weights is about 11.09 per cent.

Market value weights.

Source	Market value (Rs)	Weight	Cost (%)	Weighted cost (%)
Equity shares	1,50,000	0.1111	12	1.3333
Debentures	12,00,000	0.8889	11	9.7778
Total	13,50,000	1.0000		11.1111

The weight of equity is 1,50,000 / 13,50,000, which comes to 0.1111. The weight of debt is 12,00,000 / 13,50,000, which comes to 0.8889. So the WACC on market value weights is about 11.11 per cent.

(b) WACC by the total cost method

In this method each source is multiplied by its cost to get the cost in rupees. The total cost is then divided by the total capital.

At book value.

Source	Book value (Rs)	Cost (%)	Total cost (Rs)
Equity shares	1,00,000	12	12,000
Debentures	10,00,000	11	1,10,000
Total	11,00,000		1,22,000

Here 1,00,000 × 12/100 = 12,000 and 10,00,000 × 11/100 = 1,10,000. WACC = 1,22,000 / 11,00,000 × 100, which comes to 11.09 per cent.

At market value.

Source	Market value (Rs)	Cost (%)	Total cost (Rs)
Equity shares	1,50,000	12	18,000
Debentures	12,00,000	11	1,32,000
Total	13,50,000		1,50,000

Here 1,50,000 × 12/100 = 18,000 and 12,00,000 × 11/100 = 1,32,000. WACC = 1,50,000 / 13,50,000 × 100, which comes to 11.11 per cent.

Why the two bases give different answers

The weights method and the total cost method always give the same answer on the same base. They are two ways of doing one sum. The difference comes from the base. At market value, equity forms a larger share of the capital (11.11 per cent against 9.09 per cent). Equity costs more than debt. So the market value WACC is a little higher.

Market value weights are usually preferred. They show what the capital is worth today, and that is the value investors expect a return on.

Conclusion. (a) WACC is about 11.09 per cent on book value weights and about 11.11 per cent on market value weights. (b) The total cost method gives the same figures. At book value the cost is Rs 1,22,000 on Rs 11,00,000 (11.09 per cent). At market value it is Rs 1,50,000 on Rs 13,50,000 (11.11 per cent).

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