Master of Commerce (M.Com.) Part I SEM II 2022 2023 Jun 2023 CORPORATE FINANCE Question Paper - Mumbai University | munotes

Questions asked in this paper

• ii. Figures to the right indicate full marks

1. Q1 Sales
2. Q3 Sundry Debtors
3. Q4 Sundry Creditors 8 marks
   • C) Let us assume you want to obtain an Annuity Policy that will give you a guaranteed sum of Rs.10,000 per annum for the next three years. If the company pays its customers 12% per annum, how much do you have to put into the policy immediately so that you would have nothing in the policy at the end of the third year? [07 Marks]
   • A) The Mehak Chemicals Ltd. requires Rs.1,00,00,000 for a new plant. This plant is expected to yield earnings before interest and taxes of Rs.20,00,000. While deciding about the financial plan, the company considers the objective of maximising earnings per share. It has three alternatives to finance the project-by raising debt of Rs.20,00,000 or Rs.30,00,000 or Rs.40,00,000 and the balance , in each case, by issuing equity shares. The company’s share is currently selling at Rs. 200, but it is expected to decline to Rs.125 in case the funds are borrowed in excess of Rs. 30,00,000. The funds can be borrowed at the rate of 15% upto Rs.25,00,000, at 18% over Rs.25,00,000 and up to Rs.30,00,000 and at 22% over Rs.30,00,000. The tax rate applicable to the company is 30%. Which form of financing should the company choose? [15 Marks]
   • B) Following is the capital structure of Manju Company Ltd Equity share of the company sells for Rs. 100 each Expected dividend is Rs. 1 per share. Tax rate is 20 %. Growth rate is 10 %
   • a. Calculate weighted average cost of capital (WACC) in the above situation
   • b. Calculate WACC if the company wants to raise additional capital of Rs. 25,00,000 through the debentures at 15%. In this situation, expected dividend would be Rs. 1.5 per share. Market price would be Rs. 80 per share. Growth rate is now expected to be
   • A) The data relating to the following Companies and their details are as follows: You are required to calculate the operating leverage, financial leverage and combined
   • B) Kirit Engineering Ltd. belongs to a risk class for which the capitalization rate is 15%. It currently has outstanding 25,000 shares selling at Rs. 100 each. The firm is contemplating the declaration of a dividend of Rs. 10 per share at the end of the current financial year. It expects to have a net income of Rs. 20,00,000 and has a proposal for making new investments of Rs.40,00,000. Calculate the value of the firms when dividends are paid using Modigliani Miller Approach. [15 Marks]
   • A) Multiple Choice Questions: 8
4. Q1 Liquidity and profitability are goals
   • a. Competing
   • b. Different
   • c. Separate
   • d. Finance
5. Q2 The source of capital used to get the financial leverage is
   • a. Retained Earnings
   • c. Debt Capital
6. Q3 Short term creditors
   • b. Operating ratios
   • c. Current ratios
   • d. Return on proprietors funds
7. Q4 Standard Liquid
8. Q5 is promised the sum of Rs.10,000 per annum indefinitely at an interest rate of 12% per annum, what will be the present value of this perpetual annuity?
9. Q6 What would be the present value (PV) of an annuity of Rs. 2,00,000 paid at the end of every year for 5 years @ 8% rate of return. If PV factor for 5 Years @8% is 3.993
10. Q7 In Net Operating Income Approach, which one of the following is constant?
    • a. Cost of Equity
    • b. Cost of Debt
11. Q8 Which of the following is not a relevant factor in EPS Analysis of capital structure?
    • a. Rate of interest on debt
    • b. Tax rate
    • c. Amount of preference share capital
    • B) True or False: 7
12. Q1 The wealth of corporate owners is measured by the share price of the stock
13. Q2 Shareholders handle the financial management of a company as they are the owners of
14. Q3 records a credit sale, the acid-test ratio will increase
15. Q4 A business with a higher working capital will also have a higher current ratio
16. Q6 Cash flows accruing to the firms at different time periods are directly comparable
17. Q7 Financial leverage depends upon the operating leverage
    • C) Write short notes: (Any Three) 15
18. Q1 Composite Ratios
19. Q2 Objectives of financial management
20. Q3 Perpetuity
21. Q4 Cost of debt

Read from the scan above, so a character or two may differ. The scan is the original.