B.Com In Investment Management SEM IV 2018 19 April 2018-19 CORPORATE FINANCE Question Paper - Mumbai University | munotes

Questions asked in this paper

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1. Q1 <A State whether the statements are true or false. (Any 8) 8 marks
2. Q1 Overcapitalization does not have any adverse effect
3. Q2 The duties of a finance manager are to determine which marketing strategy to use to promote a product
4. Q3 Cost of equity is zero
5. Q4 Cost of capital is used in capital budgeting decision
6. Q5 Preference share capital has fixed rate of interest
7. Q7 Margin of safety is the difference between maximum sales and breakeven
8. Q8 Capital not bearing risk relates to equity share capital
9. Q9 IRR is easy to calculate
10. Q10 Share capital is a long term source of finance B Match the column. (Any 7) 7 Bad Debts No profit — No loss Modern Method Relationship between Profit & Sale WACC Combined Cost of Capital
11. Q2 A Following are the details relating to capital structure of Oreo Ltd. You are required to calculate the weighted average cost of capital, using 15 marks
    • a. Book Weights
    • b. Market Weights From the following particulars, you are required to calculate: 15
12. Q2 Fixed Cost
13. Q4 Sales to earn Profit of Rs: 6,00,000
14. Q5 Margin of Safety of the year 2017
15. Q3 A .A-company needs Rs. 12 lakhs for the installation of a new factory which would yield an annual EBIT of Rs. 2,00,000. The company has the objective of maximizing the earnings per share. It is considering the possibility of issuing equity shares plus raising a debt of Rs. 2,00,000; Rs.6,00,000 and Rs. 10,00,000. The current market price per share is Rs. 40 which is expected to drop Rs. 25 per share if the market borrowings were to exceed Cost of Borrowings are indicated as under Assuming a tax rate of 50%, workout the EPS and the scheme which would meet the objective of the management Capital Structure consists of the following: 15 Equity Shares of Rs. 100 each The company earns 12% on Capital. The Income Tax rate is 50%. The company requires a sum of Rs. 25,00,000 to finance expansion programme for which the following alternatives are available to it 15 marks
16. Q1 Issue of 20,000 Equity Shares at a premium of Rs. 25 per share li. Issue of 10% Preference Shares Issue of 8% Debenture It is assumes that the P/E Ratio in the cases of equity, preference and debenture financing would be 21.4; 17 and 15.7 respectively. Which of the three financing alternative would you recommend and why?
17. Q4 Acompany has an Investment opportunity for Project P. Assuming a required return of 10% determine the following: 15 marks
18. Q1 Payback Period Net Income (after depreciation, interest and tax) Expected life (no salvage) is of Syears B Calculate the IRR for the following projects and decide which is the most profitable Explain the need and importance of corporate finance. 8 Discuss the importance of merchant bankers. 7 Write short notes (Any 3) 15
19. Q1 Components of Cost of Capital
20. Q2 Need for Capital Structure Planning
21. Q4 Margin of Safety
22. Q5 Average Rate of Return

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