Answer any 4:I) A company is considering an investment proposal to install new milling controls at a cost of Rs.50,000.

The facility has a life expectancy of 5 yrs and no salvage value. The tax rate is 35%. Assume the firm uses straight line depreciation and the same is allowed for tax purposes. The estimated cas flows before depreciation and tax (CFBT) from the investment proposal are as follows: Compute the foll:      Pay back period Average rate of return Internal rate of return Net present value at 10% discount rate Profitability index at 10% discount rate Year 1 2 3 4 5 PV@10% .909 .826 .751 .683 .621 OR I) CFBT Rs. 10000 10,692 12,769 13,462 20,385 Pv@35% .741 .549 .406 .301 .223 PV@50% .667 .444 .296 .198 .132 Pv@60% 625 391 244 153 095

Explain all the methods of Capital Budgeting stating their features, advantages and disadvantages.

II)

Prepare an estimate of working capital requirement from the foll details of a company. 1. The monthly production and sales will be 5000 units to be sold at Rs.15 each. 2. The per unit cost will be a. Materials: rs.6 b. Labor: rs. 4.50 c. Expenses: rs. 1.50

00. job of a finance manager.00.00..200000 by what amount does the value increase and find the cost of capital thereafter.00.000 20. nature and scope of financial management.100 each.50.000 24. The process time will be one month 5.50. . V) Calculate operating.000 2.5 and 2 months respectively.00. The credit allowed to the debtors and received from creditors will be 2 and 1 month respectively. also 12% debentures of 200000/. 15. The tax rate is 50%.3. If the firm increases the 12% debentures by rs. financial and combined leverage from the foll data: Particulars 2007 2008 Sales(100000 units @ 550000 750000 55/75 each) Variable cost 15 18 Fixed cost 180000 200000 Interest on loans 120000 130000 VI) Explain the meaning. Also calculate the cost of equity or equity capitalization rate.and Ko is 14%. 194000/- III) a) XYZ company supplied the following information and requested you to compute the cost of capital based on book values and market values.000 8.000 7. Calculate cost of debenture (pre and post tax cost) IV) Calculate the value of the firm which has EBIT of 70000/.000 2. finance functions. Book Value RS.000 Market Values Rs. Cash expected to be held will be Rs. 4. Raw materials and finished goods will remain in stock for 1. 6.are seen in the capital structure.00.000 After Tax cost % 12 7 4 Source of Finance Equity capital Long term debt Short term debt Total b) XYZ company Ltd. organization of function. Decides to float perpetual 12% debentures of rs. 10.