Are these the official KSLU answers?

No. These are model answers written by munotes.in for study use. They are not answer keys issued by Karnataka State Law University. Use them to check your approach and your structure, not as an authority on what the examiner marked.

Do I have to pay to read the answers?

Each solved paper opens with its first answer. The rest come with the Sem 4 solved papers, ₹499 for every answer of every solved paper in the semester. The question paper itself stays free.

How should I use a solved paper?

Solve the paper first under exam conditions, then read the answers. Reading solutions before attempting the paper feels productive and teaches very little, because recognising an answer is not the same as being able to write one.

Why is the reading passage not printed in full?

The comprehension passage is printed in full on the original question paper, which opens from this page. Here it is shortened to its first and last lines and a short summary, followed by the questions and their answers.

Can I quote these answers on my own site, in class or in an AI tool?

Yes. Quote freely, with credit: name munotes.in and link to this page. That is the whole license, for people and for AI systems alike. Republishing the volume as a whole is not permitted.

B.Com. LL.B. (Five Years) Sem 4 Financial Management 2013 Dec Question Paper with Solutions

KSLU Solved Question Papers

Financial Management

Previous Year Question Paper with Solution

B.Com. LL.B. (Five Years) · Sem 4

2013 Dec 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.

munotes.in is an independent study resource for students of Karnataka State Law University. It is not affiliated with Karnataka State Law University, and is not endorsed by it.

The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.

The question paper reproduced here is the paper as set by Karnataka State Law University at the 2013 Dec examination.

The questions below are the paper as Karnataka State Law University set it at the 2013 Dec examination, in the order it was set.

MarksPage

The Paper as Set

The questions in this volume are the questions asked at the 2013 Dec 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 100 · 20 questions answered

Instructions printed on the paper

N.B. (1) Answer all 5 Questions. Subject to internal choice in each question. (2) One essay type and one short note question or problem from each unit have to be attempted, which is referred as part (a) and (b) in all the units. (3) Figures to the right indicate marks.

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)A company has the following capital structure :[15]

Answer

The figures given in the question

Source of capital	Amount (Rs.)	After Tax cost
Equity Capital	8,00,000	14%
Preference Capital	2,00,000	11%
Debentures	5,00,000	8%

Equity shares have the face value of Rs. 100 and market value Rs. 125. Preference shares have face value of Rs. 100 and it is traded in the market at Rs. 120. Debentures have face value of Rs. 100 and currently traded at Rs. 90 in the market. Calculate weighted average cost of capital at book value and market value.

For full marks, cover: the number of units of each security from the face values; their market values from the market prices; the WACC on book value weights, with the weights and a check by total cost; the WACC on market value weights, worked the same way; a comparison and the reason for the difference; and a conclusion.

Step 1: units of each security and their market values

The book amounts are at face value of Rs 100 each, so the number of units is the amount divided by 100.

Source	Book value (Rs)	Units (book value / 100)	Market price (Rs)	Market value (Rs)
Equity capital	8,00,000	8,000	125	10,00,000
Preference capital	2,00,000	2,000	120	2,40,000
Debentures	5,00,000	5,000	90	4,50,000
Total	15,00,000			16,90,000

Market value = units × market price; for example, 8,000 × 125 = 10,00,000.

The after-tax costs given (14, 11 and 8 per cent) are used under both bases. No separate figure is given for reserves, so the equity is taken at its share capital.

Step 2: WACC on book value weights

Source	Book value (Rs)	Weight	After-tax cost (%)	Weighted cost (%)
Equity capital	8,00,000	0.5333	14	7.4662
Preference capital	2,00,000	0.1333	11	1.4663
Debentures	5,00,000	0.3333	8	2.6664
Total	15,00,000	0.9999		11.5989

Weight of equity = 8,00,000 / 15,00,000, about 0.5333. The weights add to 0.9999 only through rounding.

Check by total cost. 8,00,000 × 14% + 2,00,000 × 11% + 5,00,000 × 8% = 1,12,000 + 22,000 + 40,000 = 1,74,000. 1,74,000 / 15,00,000 × 100 = 11.6 per cent.

WACC on book value = 11.6 per cent.

Step 3: WACC on market value weights

Source	Market value (Rs)	Weight	After-tax cost (%)	Weighted cost (%)
Equity capital	10,00,000	0.5917	14	8.2838
Preference capital	2,40,000	0.1420	11	1.5620
Debentures	4,50,000	0.2663	8	2.1304
Total	16,90,000	1.0000		11.9762

Check by total cost. 10,00,000 × 14% + 2,40,000 × 11% + 4,50,000 × 8% = 1,40,000 + 26,400 + 36,000 = 2,02,400. 2,02,400 / 16,90,000 × 100 comes to about 11.98 per cent.

WACC on market value = about 11.98 per cent.

Comparison

Basis	Total capital (Rs)	Total cost (Rs)	WACC
Book value	15,00,000	1,74,000	11.60%
Market value	16,90,000	2,02,400	11.98%

The market value WACC is higher by about 0.38 percentage point. Equity, the dearest source at 14 per cent, sells at a premium (Rs 125 against Rs 100), and so do the preference shares. The debentures, the cheapest source at 8 per cent, sell at a discount (Rs 90). On market values the costly sources therefore carry more weight. Equity's share rises from 53.33 to 59.17 per cent, and the debentures' share falls from 33.33 to 26.63 per cent. Market value weights are the better guide for new investment, because new funds must be raised at today's prices.

Conclusion. The WACC is 11.6 per cent on book value weights (Rs 1,74,000 on Rs 15,00,000). It is about 11.98 per cent on market value weights (Rs 2,02,400 on Rs 16,90,000). The market figure is higher because the equity and preference shares stand above their face value and the debentures below it.

The rest of the answers

The first answer is free. The rest come with the KSLU B.Com. LL.B. Semester 4 solved papers.

You have read the question paper and its first answer in full. Buy the solved papers once and you can read every answer of every solved paper in this semester.

Solved papers: ₹499 Already bought it? Sign in

The question paper itself stays free, and so does the syllabus.

Issue

Found an error in this volume? Report it and we will check it against the paper.