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MB0029

# MB0029

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Published by: Tej Pratap Singh Solanki on Aug 14, 2010

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08/30/2010

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ASSIGNMENTMB0029(3 Credits)SET 1MARKS 60Financial Management1a. Explain why wealth maximization is superior over profit maximization.(5 Marks)b. Briefly explain the steps involved in financial plan(5 Marks)2a. Explain the two theories of capitalization(5 Marks)b .A customer wants to deposit Rs.10,000 in ICICI bank for 5 years. The prevailing interestrate is 9.50% what will be the value of the deposit on maturity(5 Marks)3a. Reliant Ltd has to redeem 12% Rs. 30 million debenture 5 years hence. How muchshould it deposit annually in sinking fund account so that it can accumulateRs. 30million at the end of 5 years.(5 Marks)b. Road Transport Corporation issued deep discount bands in 1996 which has a facevalue of Rs. 2,00,000 maturing after 25 years. The bond was issued at Rs. 5300. Whatis the effective interest rate earned by the investor from this bond?(5 Marks)4. A bond has a par value of Rs. 1000 bearing a coupon rate of 10% maturing in 10 years.If the YTM is 12% what is the market value of the bond? If the YTM is increase to 14%,what is the market value of the bond? Compare and give the inference.(10 Marks)5a. ABC Ltd, produced and sold Rs.1,00,000 of a product at the rate of Rs.100. For productionof Rs.1,00,000 units, it has spent a variable cost of Rs.6,00,000 at the rate

of Rs.6 per unitand the fixed cost if Rs. 2,50,000. The firm has paid interest Rs. 50,000 atthe rate of 5percent and Rs.1,00,000 debts. Calculate operating leverage.(5 Marks)b. Explain the importance of capital budgeting(5 Marks)CASE STUDY (10 MARKS)6. Financial Planning: Assume you are working for an investment banker. A clientaged 30 hasapproached you on investment planning. His present salary is Rs.6,00,000 peryear and hiscurrent savings is Rs.1,50,000. (a) How much does this current saving grow toin 3 years ifthe interest rate is12% compounded annually. (b) Assume he plans to save Rs.60000 at theend of every year for 5 years, what would be the amount at the end of 5 yearsif the interestbeing 10% compounded annually.

ASSIGNMENT___ MB0029(3 Credits)SET 2MARKS 60Financial Management1. Compare and contrast NPV with IRR (10 Marks)2. Zodiac Ltd is considering purchase of investment worth Rs. 40 lakhs. (10 Marks)The estimated life and the new cash flow fir 3 years are as under.MachinesA B CEstimated life 3 Years 3 Years 3yearsCash inflows(in lakhs)1 Year 27 06 122 Year 18 21 803 Year 55 33 30Which machine should be selected on the basis of payback period? Calculate discountedpayback period if the cost of capital is 12%3.The cash flow stream of Nanotech Ltd, is as follows: (5 Marks)years 0 1 2 3 4 5 6Cash flows -120 -100 40 60 80 100 130(in million)The cost of capital is 13%. Find MIRR.3. Elaborate different sources of risk in a project (10 Marks)4. The expected cash flow of Tejaswini Ltd, are an follow. (5 Marks)Year Cash flow

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