B.Com In Investment Management SEM III 2019 2020 Oct 2020 INV. MGT FINANCIAL MANAGEMEN Question Paper - Mumbai University | munotes

Questions asked in this paper

1. Q1 A) Select the most appropriate answer (Any 8) are the techniques of capital budgeting 8 marks
   • b) Accounting rate of Return All of the above value of money a} A unit of money received today is worth more than a unit received in future by A unit of money received today is worth less than a unit received in future A unit of money received today and a some other time in future is equal d} None of these is a sole objective of financial management
   • c) General welfare d) Welfare of the society
   • 4) Cost of capital
   • c) Required rate of return d) None of the above
   • 5) Debt financing is a cheaper source of finance because of a} lime value of money b) rate of Interest deductibility of interest d) Dividend not payable to lender
   • 6) is having the biggest cost of capital
   • 7) Capital budging decision involve decision relating to
   • a) Acquisition of
   • b) Financing day to day activities
   • c) Both (a) and (b)
   • d) None of the above
   • 8) Financial decision
   • a) Investment. financing and dividend decision
   • b) Investment. and sales decision Investment. financing and cash decision
   • d) None of these
   • 9) Appropriate objective of an enterprise 1s
   • a) Maximization of owner s wealth by of sales Maximization of own share capital
   • d) of the above
   • 10) Profit maximization does not take into consideration
   • a) Risk and cash flow Cash flow and stock prize
   • c) Risk and EPS
   • d) EPS and stock Prize
2. Q1 Match the columns (Any 7) 7 marks
   • 2) Return of investment b) Convertibility into cash
   • 3) Trading on Equity c) optimum capital structure does not exit Annuity e) Part of profit distiibute
   • 6) m.m Approach f) Stream of constant cash flows occurring at 7} The payback period g) Increases EPS
   • 8) Cost of debenture issued/redeemable h) PV of cash inflows/PV of cash outflows
   • 9) Profitability index i) The period a project taxes to record its Objective of financial management j) (1-b)/ k-br
3. Q2 A) A project involves cash inflows as given below. the rate of interest is 15% find out present value of cash inflows (consider upto two 8 marks
   • B) Following is the capital structure of firm. The firm’s alter tax component Costs various sources of finance are as follows = Calculate weighted average cost of capital of the firm 7
4. Q2 ABC Ltd. Wishes to raise additional finance of Rs.20 Lakhs for meetings its Investment plans. The company has Rs. 4 Lakhs in the form of retained earnings available for investment purpose. The following are the further details Cost of debt at the rate of 10% (before tax) upto Rs. 2 lakhs & 13% (Before tax) Dividend payout 50% of earnings Expected growth rate in dividend 10% tax rate is 30% and personal tax rate is 20% 15 marks
   • 1) Calculate post tax average cost of additional debt
   • 2) Calculate the cost of retained earnings and cost of equity
   • 3) Calculate the overall weighted average (after tax) cost of additional finance One up has equity share capital of divided into shares of Rs. 100 eac wishes to raise further Rs.3.00.000 {or expansion cum-modernization scheme. (15) Phe company plans the following financing alternatives: a} By issuing equity shares only b} Rs. by issuing equity shares and RS. 200000 through debentures or term loan By raising term loan only al 10% p.a Rs. 100000 by issuing equity and Rs. 200000 by issuing 8% preference shares You are required to suggest the best alternative, giving your comments assuming that the estimated earnings before and taxes (EBIT) after expansion is Rs.150000 and corporate rate of tax is 35% From the following of \B Ltd. You are required to calculate. (15)
   • a) Cost of equity
   • b) Cost of debt (after tax) Weighted average cost of capital Rate of Tax = 30% The company wants to raise additional capital of Rs.10,00,000 including debts of Rs 400000. The cost of debt (before tax) is 10% upto Rs.200000 and 15% beyond that
5. Q4 Following are the details regarding three companies A Ltd. B Ltd and C Ltd. internal rate of return 15% 5% 10% Cost of Equity capital 10% 10% 10% value of an equity share of each of these companies as per walter’s model when the dividend payout ratio is: 15 marks
   • 4. Abhishek Ltd. Has equity share capital of Rs.30,00,000 divided into share of Rs.100 each. It wishes to raise further Rs.12,00,000 for expansion.programme company has the following pians of financing alternatives for additional funds company plans the following financing alternatives for additional funds required: raised by alternatives Issue of equity shares (at par} 100% 50% 50% issue of shares - - 30% 50% Issue of 10% Debentures - 50% 20% 50% You are requires to suggest the best financing alternatives giving your comments, assuming that estimate EBIT after expansion Rs. 600000 and corporate tax rate is 30% = A) Write short Notes (Any 3)
   • 1) Cost of retained earnings 2} Features of optimal capital structure 3} Importance of financial management for different stakeholders
   • 4) Return on capital employed
   • 1) What is capital budgeting? Explain the techniques of evaluating investment
   • 2) What factors we need to consider while constructing capital structure. 7

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