B.Com In Banking & Insurance (BCBI) Sem III 2019 2020 Oct 2020 FINANCIAL MANAGEMENT Question Paper - Mumbai University | munotes

Questions asked in this paper

• (b) Figures to the right indicate full marks

1. Q1 a) State whether following statements are true or false. (any 8) 8 marks
   • 1. Dividends are the cash flows returned to the shareholders
   • 2. Investor’s are risk averse
   • 3. The ratio of debt and equity must be equal
   • 4. Capital not bearing risk relates to equity share capital
   • 5. Cost of equity is zero
   • 6. Preference share capital has fixed rate of interest
   • 7. The payback period considers time value of money
   • 8. the NPV of the project is zero
   • 9. A bond payable is a mere promise to pay
   • 10. Profit maximization is the goal of financial management
2. Q1 b) fill in the blarks. (any 7) An company is one which incurs exceptionally high profits as compared 7 marks
   • 2. NPV considers of money
   • 3. Finance functions is performed in all the
   • 4. Capital structure decisions are taken in view of the purpose of is a goal of financial management
   • 6. always goes hand to hand
   • 7. Investments are shown in the _ side of the Balance Sheet
   • 8. As the discount rate _, the NPV of the project increases
   • 9. The formula of Dividend Payout Ratio is
   • 10. Standard debt equity ratio is
3. Q2 A) From the following details calculate: 15 marks
   • a. Net Present Value at discounting factor of 15%
   • b. Profitability Index Expected life of each project is 4 years. Also rank the projects
4. Q2 B)AB company needs Rs. 10 crores for the construction of a new plant. The following \ three financial plans are feasible. (15) \
   • a. The company may issue | lakh ordinary shares of Rs.10each
   • b. The company may issue 50,00,000 ordinary shares of Rs.10 and remaining amount may be collected by issue of 5,00,000 debentures of Rs.100 each bearing an 8% rate of
   • c. The company may issue 50,00,000 ordinary shares @Rs.10 each and remaining amount as preference shares of Rs.10 each bearing an 8% rate of dividend If the expected EBIT, which the company may earn is Rs.80,00,000 then suggest which capital structure alternative the company should select. Assume tax rate to
5. Q3 A) From the following data, calculate the MARKET PRICE of a share of LSK Ltd., under Walter’s formula; and (ii) Dividend growth model. (8)
   • B) If Reliance group has a choice of the following three financialplans.(Rs. in lakhs). Interest @12% per annum on debts in all cases. Tax rate 25% . Comment which plan is more beneficial for the owners of the company on basis of its net earnings with appropriate justification 7
6. Q3 A has the following capital structure as on 5000 equity shares ofRs.100 each 2.50,000 The Equity shares of the company are quoted at Rs.100 and the company is expected to declare a dividend of Rs.9 per share for 2016.The company has registered a growth rate of 5% which is expected to be maintained .The tax rate applicable to the company is 50% Calculate:1.The weighted average cost of capital revised weighted average cost of capital, if the company raises additional term loan of Rs.2,50,000 at 15% .In such a situation the company can increase dividend from Rs.9 to Rs.10 per share but the market price of the share will go down to Rs.90 15 marks
7. Q4 A) The total expenditure is budgeted as Rs. 70,00,000. Rs. 30,00,000 has been utilised for certain expansion plans. The balance Rs. 40,00,000 needs to be allocated amongst any two of the following proposals. Tax rate is 30%. Evaluate the same with the help of Payback period. The details of the proposals are: (15) Cost of the proposal (Rs.) 20,00,000 ~20,00,000 Additional working capital at 2,00,000 75,000 | 1,25,000 the end of second year (Rs.)
8. Q4 B) From the Capital structure calculate overall cost of capital for ABC Ltd Source Book Market After tax cost of
9. Q5 A) Define finance. State its importance for a corporate enterprise. 8 marks
   • B) “Debt is cheapest source of finance”. Comment. 7
10. Q5 Write Short Notes (Any 3) 15 marks
    • 1. Scope of finance
    • 2. Cost of capital
    • 3. Short term source of finance
    • 4. Profit Maximisation
    • 5. Time value of money

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