DRIVE

PROGRAM
SEMESTER
SUBJECT CODE
& NAME
BK ID
CREDITS
MARKS

SUMMER 2015
MBA/ MBADS/ MBAFLEX/ MBAHCSN3/ PGDBAN2
II
MB0045
FINANCIAL MANAGEMENT
B1628
4
60

ASSIGNMENT
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Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately
of 400 words. Each question is followed by evaluation scheme.

Q.N
o
1

Questions

Total
Marks

Critically analyze the four broad areas of strategic financing decision.

Four broad areas of strategic financing decision

Marks

10

10

What is FVIFA ? Is it different from Sinking fund factor ?

A finance company offers to pay Rs. 44,650 after five years to investors who
deposit annually Rs. 6,000 for five years. Calculate the rate of interest implicit in this
offer.
5
10
What is FVIFA ? Differentiate FVIFA and Sinking Fund
5
factor Solve the case

A firm owns a machine furnishes the following information :

Project E
Rajrappa,
Hazaribag
h
Rs.
11,87,200

Project F
Tatisilwai,
Ranchi
Rs.
10,06,700

Initial Outlay
Net Cash Inflow :
End of year 1
10,00,000
1,00,000
2
2,00,000
1,00,000
3
1,00,000
2,00,000
4
1,00,000
10,00,000
The firm follows straight line method of depreciation (permitted by the Incometax authorities).
The management of the company is now considering selling of the machine. If it
does so, the total operating costs to perform the work, now done by the
machine, will increase by Rs. 40,000 p.a.
Advise the management.
Solve the case.
4

10

10

How will you compute the cost of equity capital using CAPM ?
The Xavier Corporation, a dynamic growth firm which pays no dividends, anticipates
a long-run level of future earnings of Rs. 7 per share. The current market
price
Xaviers share is Rs. 55.45.
Floatation costs
for the sale of3 months
new equity
Creditofperiod
1 month
2 months
shares would average about 10 % of the price of the shares. What is the cost of new
Increase in sales by
-10 %
30 %
equity capital to Xavier Corporation ?
Bad debts on sales
1%
2%
5%
How will you compute the cost of equity capital using CAPM
? Solve the case

5
5

10

Jharkhand Mining ltd. has to select one of the two alternative projects
whose particulars are furnished below :

The company can arrange necessary funds @ 8 %. Compute the NPV and IRR of
each project and comment on the results.
Is there any contradiction in the results ? If so, state the reason for
such contradictions. How would you propose to resolve the contradictions ?
Solve the case

10

10

6
Premier Steel Ltd. has a present annual sales turnover of Rs. 40,00,000. The unit
sale price is Rs. 20. The variable costs are Rs. 12 per unit and fixed costs amount
to Rs. 5,00,000 per annum. The present credit period of 1 month is proposed to be
extended to either 2 or 3 months whichever is profitable. The following additional
information is available :

Fixed costs will increase by Rs. 75,000 when sales increase by 30 %. The
company requires a pre-tax return on investment of 20 %.
Evaluate the profitability of the proposals and recommend the best credit period for
the company.
Solve the case

10

10