1ype LexL 1ype LexL lall 2011

Master of Business Administration - MBA Semester 2

MB0045 Financial Management - 4 Credits
(Book ID: B1134)
Assignment Set- 1 (60 Marks)


Note: Each question carries 10 marks. Answer aII the questions.

Q.1 What are the 4 finance decisions taken by a finance manager.
Q.2 What are the factors that affect the financial plan of a company?
Q.3 Show the relationship between required rate of return and coupon rate on the value
of a bond.
Q.4 Discuss the implication of financial leverage for a firm.
Q.5 The cash flows associated with a project are given below:
Year Cash flow
0 (100,000)
1 25000
2 40000
3 50000
4 40000
5 30000
Calculate the a) payback period.
b) Benefit cost ratio for 10% cost of capital
Q6. A company's earnings and dividends are growing at the rate of 18% pa. The growth
rate is expected to continue for 4 years. After 4 years, from year 5 onwards, the growth
rate will be 6% forever. f the dividend per share last year was Rs. 2 and the investors
required rate of return is 10% pa, what is the intrinsic price per share or the worth of one
share.


1ype LexL 1ype LexL lall 2011
Master of Business Administration - MBA Semester 2
MB0045 Financial Management - 4 Credits
(Book ID: B1134)
Assignment Set- 2 (60 Marks)


Note: Each question carries 10 Marks. Answer aII the questions.

Q.1 Discuss the objective of profit maximization vs wealth maximization.
Q.2 Explain the Net operating approach to capital structure.
Q.3 What do you understand by operating cycle.
Q.4 What is the implication of operating leverage for a firm.
Q.5 A company is considering a capital project with the following information:
The cost of the project is Rs.200 million, which consists of Rs. 150 million in plant a
machinery and Rs.50 million on net working capital. The entire outlay will be incurred in the
beginning. The life of the project is expected to be 5 years. At the end of 5 years, the fixed
assets will fetch a net salvage value of Rs. 48 million ad the net working capital will be
liquidated at par. The project will increase revenues of the firm by Rs. 250 million per year.
The increase in costs will be Rs.100 million per year. The depreciation rate applicable will be
25% as per written down value method. The tax rate is 30%. f the cost of capital is 10%
what is the net present value of the project.
Q.6 Given the following information, what will be the price per share using the Walter
model.
Earnings per share Rs. 40
Rate of return on investments 18%
Rate of return required by shareholders 12%
Payout ratio being 40%, 50%, or 60%.