\i,-:

r-.i

l',{'{

r-i

r. 5'190-09.

{FURTt :R R=VeSf:D r*:f,}Utt$Lr}

(3 Hours)

n$-5735
I Total Marks : 60

ru.B"

(1) Answer any five questions. All qLiestions carry equal marks. (2) presentation should be neat and clean. Marks i';ili be deducted for poor
presentation. (3) All the sub-questions of the main question should be anernpte3 together. (4) Every new question should start on a new page'

1.

There are two main regulators to regulate the lndian Financial system - FiBI and SEBI. merged Explain the role of sggl in detail. Do you think that tryi: two agencies can be regulaiion of the financial system ? to create a super regulatory body for an effective

2.

(a) (b)

;rvestment Explain the different ways in which a venture capitalist can finance an What do you understand by financial derivatives

? Explain in detail"

Write short notes on any three of the following

:-

(a)Creditratingmethodologyforafinancialinstrument (b) Book building Process for IPO ("i Revival progiamme for a sick industrial unit

(d) Functions

Gi (f)
4t.

of investment bank Rationale of disinvestrnent in PublicSector Enterprise Sources of foreign currency finance fola company'

Followinginformationisavailablefrorntlre."?A:.::TJ.fii,..
500 Sales 200 Cost of Raw Materials 't00 Labour cost for manufacturing 60 lnterest on borrowings entire firm is The capitatizationiraie for deit is 10 % and the capita.lization rate for the is no tax, as per net 12.5%. Assuming thar rhe firm cloes not retain any earning and there operating income aPProach -Whut is the iotal market value of the firm ? (a) iUi What is the market value of the debt of the tirm ? ? i.j What is the markel value of the equity? of the tirm iO) Wi'ut is the equity capitalization rale

*t 5
tA

Sr

; E; -

2'

ft

<! -i clu

5.

is Rs' 9'00'000 and A firm has sales of Rs. 10,00,000. Variable c.9st is 7o%,.total cost n"t, of Rs. 5,0b,000 at 107o rate of interest' lf lax rate is 40% calculate :_-

(a) OPerating leverage (b) Financial leverage

(c) Combined Leverage (d) lf the firrn wants to double up its earning before

interesl and tax (EBIT), hov'r much

ofaraiseinsaleswou|dbeneerJedonapereentagebasis?

6. (a) ABC company Ltd' is expecting 10 7" return on lotalas isets of Rs' 50 Lakh' The comPany of the:oTPut'Y.$9,,Ye_decicied to pay

(b)

has outsraniing shares 20,000. Ihe direclors by srrti+rrolders is 12'5"/"' +O Z of *urninJ ur UiuiO"ncJs. The rate of relyT requirecl required to determine the' Rate of return ixpected on investment is 15% You''are price of the shares using Waitei's fiodel' per share' The company The current market price of the shares of X Ltd. is l--Is.120 belongs to a risk class is consiclering Rs. 6.40 per sfrare ou OiuiOenO' I'he comparry M approach calculate for which thJcaoitalizaticn rate is g.6a%. Based qn ni and
:

Con. 5190-DS-523S-09.

The income statement of Modern Electronics Limited for years I and ll is given below (All figures are in Rs. Lakh) :-

lncome Staternent
Net sales Cost of goods sold -,1 Gross profit Selling expenses General and administration expenses Depreciation Operating profit Non-operating surplus / deficit Earnings before interest and tAx lnterest Earnings before tax
Tnx

Year I (Rs.) 2,400 1,830 574 180 180 150 60 24

B4

Year ll {Rs.i 2,670 2,04A 630

195

156

192 87 30
117

30 54
21

33
B4

30
54
21

Earnings after tax Dividends Retained earnings

33
1B

15

33

The balance sheet of lr4odern Electronics Ltd. as of the end o{ years I and ll is given below :Balance Sheet Year I {Rs.) Year ll (Rs.) Assefs.' Fixed assets (net) 900 1,140

ull F:

2z Fi
Fr/a

-'

AE

lnvestment Current assets, loans arid acjvances Cash and bank Receivables lnventories Prepaid expenses F,4iscellaneous expenclitures and losses

60

60 42 600 576 135 42 2,595

36 s40 519 123 45

2,2-23

o ,-

Liabilities : Share capital ._

Equity Reserves and surplus Secured loans-T-erm loans Bank borrowings Current liabilities Trade creditors Provisions 450 354 432
489 378
12A

6 6

4s0
387

525
597
501

135

2,223
(a)

2,595

Using the per cent of sales meihcd (except, assuryie that dividends ai"e raised to 24, depreciation to 180 and interest to 36) prepare the pro forma income statement for year lll. Assume that the sales will be Rs. 3,060 in year lll. (b) Assume that all items on the assets side, except investment and misceilaneous expenditures and losses, will grow proportionally to sales. Likewise, trade credit

237: llndHt-C-09.Mk

Con.5190-DS-5735-09. 3 B' The following is the balance sheet ef a corporate firm as on March 31. ;r.rri.ent year :* Liabilities Amount
(Rs.) Share callital (fis. 100reach futly paid-up) Reserves an$surplus Sundry creditors and other

(Rs in t:xh)

Assets

Amount

'

. buitdings machinery securities

tRsl
B0

ZOO

B0

Land and plant and

1;;

liabilities

60

.30
:i
:

Cash and bank

340

3:",::,, balances

Marketable

f
340

20

10

i
I

Profit before tax for currenl year-end amount to Rs.128 lakh, including Rs. e tatfr as extraordinary income. Besides, the firm has earned inlerest income of Rs. 2 lakh in tf,e current year from investments in marketable securities. lt is not usual for lhe ilr,.i to have excess cash and invest in marketable securities. Howevei, an additional arnount of Rs' 10 lakh per annum, in terms of advertisement and other expenses, lvill be required to be spent forthe smooth running of the business in the-yearsto come. l,4alrlet values of land and buildings, and plant and macfrinery are estimated at Rs.lB0lakh and Rs. 200 lakh respectively. ln order to match the revalued figures of these fixed assets, aCciiiional depreciation of Rs.12 lakh is required to be taken into consideration. Effective co:norate tax rate may be taken at 30 percent. The capitalization rate applicable to businesses of such risks is 15 percent. (a) From the above information, compute the value of business, value of equity and

priceperequityShare'basedonthecapitalizationmethod

(b)

Assuming everything to be the same as given above calculate the expecied market price of the share, given the P/E multipie of (i) B times and (ii) 5 tii-nes.

NFAK ASHYANI{AR

i.li ST ; T LJ T