BCom In Accounting & Finance (BCAF) Sem VI 2018 19 May 2018-19 FINANCIAL MGT. III Question Paper - Mumbai University | munotes

Questions asked in this paper

1. Q1 A) Select the correct alternative from the choices given below and rewrite the 8 marks
   • 1. Under Net Asset Value method value of shares are depends on
   • a) Net asset available to equity shareholders
   • b) Net assets available to debenture holders
   • c) Net assets available to preference shareholders
   • d) None of the above
   • 2. Fair value of the share is equal to
   • c) Average of Intrinsic value and Yield value
   • d) None of the above
   • 3. Amalgamation is governed by
   • d) AS 32
   • 4. Anew formed under
   • a) Absorption
   • b) Reconstruction
   • c) Amalgamation
   • d) the above
   • 5. Balance of capital reduction should be transfer to
   • a) Security premium
   • b) Capital reserve
   • c) Share capital
   • 6. In case of Lease legal title is with
   • a) Lessor
   • d) None of the above
   • a) Special resolution passed at General meeting
   • b) Special resolution passed at Board meeting
   • c) Ordinary resolution passed at General meeting
   • d) Ordinary resolution passed at Board meeting
   • 8. Installment is equal
   • a) Principal + Interest
   • b) Principal- Interest
   • 9. Initial payment made on signing of agreement is
   • a) Down payment
   • c) Cash price
   • d) Interest
   • 10. Factoring involves
   • a) Management of debtors
   • b) Borrowing from banks
   • c) Borrowing against Bills of exchange
   • d) Payment of creditors
2. Q1 B) State whether following statements are True or False.(Any 7) 7 marks
   • 1. Net Asset value method is based on the assumption that the company is going to liquidated
   • 2. Discounted Cash Flow method considers time value of money Merger of two companies operating in the same market is called horizontal merger and
   • 4. A situation where combined firm is more valuable than the sum of the individual combined firm is called synergy
   • 6. Capital reduction requires approval from the High Court
   • 7. Incase of any default, the factor has to bear risk of loss due to bad debts
   • 8. Working capital finance is provided against inventories
   • 10. Under hire purchase system purchaser become owner of goods on signing of agreement
3. Q2 A) Following is the summarized balance sheet of Suzuki Ltd. as on March 2019. Share capital Land and Building 2,30,000 600, 10% Preference shares of Rs 100 each fully Paid 60,000 | Plant and Machinery 6000, Equity shares of Rs. 100 each Reserves and Surplus 1,50,000 | Debtors 40,000 Secured loan Cash at bank 1,50,000 600, 9% debentures of Rs. 100 each 60,000 | Cash in hand 60,000 Sundry creditors 60,000 | Investment in 10% Govt The average net profit earned by the company amount Rs. 1, 14,000. Every year an amount equal to 10% of the profit earned was transferred to general reserve. The industry average rate of return is 10% of the share value .On March 2019 independent expert valuer has assessed the values of following assets: Land and building Plant and Machinery On the basis of above information calculate the value of equity shares of company by 15 marks
   • b) -Yield Method
   • c) Also calculate fair value of the company’s share considering above two methods
4. Q2 B) Calculate EVA from the following information. Cost of debt ( after tax) = 8% Cost of equity= 15% 8 marks
5. Q2 C) Calculate MVA from the following information of Alpha Ltd. Balance Sheet of Alpha Ltd. as on March 2019 Equity Share Capital of Rs. 10 each 1,200 | Building 1,800 Profit After Tax (PAT)= Rs. 2, 271 ( in Lakhs), P/E Ratio = 2 7 marks
6. Q3 A) Zigma Ltd is intending to acquire Sigma Ltd. by merger and following information is available in respect of the companies Equity Share capital of Rs. 10 each (Rs. lakhs) | 450 180 Market price of each Share(Rs.) 60 37 On the basis of above information you are required to calculate following: 15 marks
   • a) What is the present EPS of both the companies?
   • b) What is the present Price Earning Ratios ( PE ratios) of both the companies?
   • c) If proposed merger takes place , What would be the new EPS for Zigma Ltd. ( assuming that the merger takes place by exchange of equity shares and the exchange ratio is based on the current market price)
   • d) What should be the exchange ratio, if Sigma Ltd. Want to ensure the same EPS to members as before the merger takes place?
7. Q3 B) Raghav takes an asset on finance lease from Rama Ltd. the terms of which are given below: 8 marks
   • b) Fair value of the inception of Lease: Rs. 12,50,000
   • c) Lease Rent: Rs. 4,00,000 at the end of year
   • e) Implicit rate of interest; 15% You are required to prepare loan amortization schedule
8. Q3 C) Ram Ltd. Purchased machinery from Sham Ltd. under hire purchase basis. The details of purchase are: 7 marks
   • b) Down payment: 20%
   • c) Balance amount to be paid in 3 yearly installment of Rs. each
   • d) Rate of interest is 10% Prepare table to show analysis of payment and calculation of interest
9. Q4 A )Following is the Balance Sheet of Gangram Ltd. On 31“ March 2019. 4,000 preference shares of Rs. 100 each | Premises 1,50,000 3,000 Preference shares of Rs. 100 each 3,00,000_| Machinery 4,00,000 10% Mortgage debentures 2,00,000.) Stock in trade 60,000 Owing to heavy losses the committee of shareholders and creditors approved the following scheme of reconstruction: 15 marks
   • a) Preference shares to be reduced to each fully paid
   • b) The equity shares to be reduced to Rs. 40 each fully paid up
   • c) The debenture holders took over the stock and book debts in fully satisfaction of the amount due to them
   • d) Sundry creditors agreed to reduce their claim to Rs. 1,30,000 which was to be satisfied by the issues of 3,250 fully paid shares of Rs. 40 each
   • e) The goodwill and Profit and Loss A/c to be eliminated
   • f) Premises to be appreciated by 20% and the machinery to be depreciated by Rs. 30,000 On the basis of above information pass journal entries, prepare capital reduction account and revised balance sheet after reconstruction
10. Q4 B) PQR Ltd. is planning to lease the asset having total value of Rs. 1,00,000 on rentals of Rs. 35000 p.a. for five years. The following additional information is available
    • a) The company has an effective tax rate of 30%
    • b) The company employs a discounting rate of 16% You required calculating net cash outflow of the company, if company opts for leasing of asset for five years, considering the above discount rate
11. Q4 C)L& T Company plans to issue commercial paper (CP) of Rs. 1,00,000 at a price of Rs. 98,000 with maturity period of 4 months. Company has also incurred following cost for issue of CP : 7 marks
    • a) Brokerage- 0.10%
    • b) Rating Charges- 0.60%
    • c) Stamp Duty- 0.15% Find effective interest rate and the cost of fund
12. Q5 A) What are different approaches to valuation of business? 8 marks
    • B) Explain various advantages of merger and acquisition. 7
13. Q5 Write note on the following.( Any 3) 15 marks
    • C) Forms of restructuring
    • E) Trade credits

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