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NOVEMBER 2014 72206/MAM3E/BPF5D/

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Time : Three hours Maximum : 75 marks

SECTION A — (10  2 = 20 marks)

Answer any TEN questions.

1. What is Profit Maximization?

C»õ£® ªøP£kzxuÀ GßÓõÀ GßÚ?

2. What is Trade Credit?

¯õ£õμU Phß GßÓõÀ GßÚ?

3. What is Dividend Decision?

£[Põuõ¯ •iÄ GßÓõÀ GßÚ?

4. State the meaning of Capital Structure.

‰»uÚ Pmhø©¨¤ß ö£õ¸Ò TÖP.

5. Explain NI approach.
NI AqS•øÓ°øÚ ÂÍUSP.

6. Define Financial Leverage.

{v P¸Â¯õØÓÀ Áøμ¯Ö.

7. What is Cost of Debt?

Phß «uõÚ ö\»Ä GßÓõÀ GßÚ?

8. Explain Walter model of dividend.

ÁõÀhº £[Põuõ¯ Aø©¨¤øÚ ÂÍUSP.

9. Define Working Capital.

|øh•øÓ •uÀ – Áøμ¯Ö.

10. What is Operating Cycle?

ö\¯À£õmk _ÇØ] GßÓõÀ GßÚ?
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11. What is Dividend?

£[Põuõ¯® GßÓõÀ GßÚ?

12. What are the components of Working Capital?

|øh•øÓ ‰»uÚzvß TÖPÒ ¯õøÁ?

SECTION B — (5  5 = 25 marks)

Answer any FIVE questions.

13. Dewey Ltd. has an EBIT of Rs. 4,50,000. The cost of debt is 10%
and the outstanding debt is Rs. 12,00,000. The overall
capitalisation rate ( k0 ) is 15%. Calculate the total value of the
firm and equity capitalisation rate under NOI approach.
wÁõ ¼ªöhmiß Á› ©ØÖ® ÁmiUS •ß£õP Á¸©õÚ®
¹. 4,50,000. Phß AhUP® 10% ©ØÖ® ö\¾zu ÷Ási¯ Phß
¹. 12,00,000. ö©õzu •u»õUP ÂQu® ( k0 ) 15%. {ÖÁÚzvß
ö©õzu ©v¨ø£²® ©ØÖ® \© £[SPÎß AhUPzøu²® NOI
AqS•øÓ°À PnUQkP.

14. A company issues Rs. 10,00,000, 13% debentures at a discount of

5%. The debentures are redeemable after 5 years at a premium
of 5%. Calculate before tax and after tax cost of debt, if the tax
rate is 50%.
J¸ {Ö©® 13% Phß £zvμzøu ¹. 10,00,000&ø¯ 5% ÁmhzvÀ
öÁΰkQßÓx. Ax I¢x BskPÒ PÈzx 5% •øÚ©zvÀ
«mP¨£kQßÓx. Á› ÂQu® 50% GÚ öPõsk, Á›US •¢øu¯
©ØÖ® ¤¢øu¯ Phß ‰»uÚ AhUPzøu PnUQkP.

15. Compute the operating, financial and combined leverages from

the given data :
Sales 50,000 units at Rs. 12 per unit
Variable cost at Rs. 8 per unit
Fixed cost Rs. 90,000 (including 10% interest on Rs. 2,50,000).
¤ßÁ¸® ÂÁμ[Pμ¸¢x ö\¯»õUP®, {v ©ØÖ® Tmk
BØÓ»õuõ¯[PøÍ PnUQkP :
ÂØ£øÚ – 50,000 A»SPÒ ¹.12 Kº A»QØS
©õÖ£k® ö\»ÄPÒ – Kº A»QØS ¹. 8
{ø»¯õÚ ö\»ÄPÒ – ¹. 90,000 (¹. 2,50,000&US 10% Ámi
EÒÍhUQ¯x).

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16. Alpha Ltd., issued 10% redeemable preference shares of Rs. 100
each, redeemable after 10 years. The floatation costs are 5% of
the nominal value. Compute the effective cost to the company if
the issue is made at (a) par; (b) a premium of 5% and (c) a
discount of 5%.
BÀ£õ {Ö©® 10% «m¦ •ßÝ›ø© £[SPÒ ¹. 100 Ãu®
10 BskPÎÀ «m£uõP TÔ öÁΰkQÓx. öÁαmk ö\»ÄPÒ
•P ©v¨¤À 5%. ¤ßÁ¸ÁÚÁØÔ¼¸¢x, «m¦ •ßÝ›ø©
£[SPÎß Qμ¯ ©v¨¤øÚ PnUQkP :
(A) •P ©v¨¤À öÁΰkuÀ
(B) 5% •øÚ©zvÀ öÁΰkuÀ
(C) 5% ÁmhzvÀ öÁΰkuÀ.

17. The earnings per share of Nadal Ltd. are Rs. 15 and the rate of
capitalization applicable to the company is 12%. The
productivity of earnings (r) is 12%.
Compute the market value of the company’s share if the payout
is (a) 20% (b) 50% (c) 70%. Which is the optimum payout?
|hõÀ ¼ªöhmiß £[S JßÔß Á¸Áõ´ ¹. 15 ©ØÖ® Auß
•u»õUP ÂQu® 12% Auß {Özv øÁUP¨£mh C»õ£zvß EØ£zv
vÓß 12% GÛÀ, {Ö©zvß £[S ©v¨¤øÚ ¤ßÁ¸ÁÚÁØÔØS
PõsP.
(A) £[Põuõ¯® ö\¾zuÀ ÁÈ 20%
(B) £[Põuõ¯® ö\¾zuÀ ÁÈ 50%
(C) £[Põuõ¯® ö\¾zuÀ ÁÈ 70%.
CÁØÔÀ GøÁ \©{ø» £[Põuõ¯ AÍÄ GÚ PõsP.

18. Rose Ltd. is engaged in customer retailing. You are required to

estimate its working capital requirements from the following
data :
Projected annual sales Rs. 9,00,000
Percentage of net profit to cost of sales 20%
Average credit allowed by debtors 1 month
Average credit allowed by creditors 2 months
Average stock carrying (in terms of sales 2 12 months
requirements)
Add 10% to allow for contingencies.
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÷μõì {Ö©® ~Pº÷Áõº ÂØ£øÚ°À Dk£mkÒÍx. ¤ßÁ¸®

ÂÁμ[Pμ¸¢x |øh•øÓ ‰»uÚ® PnUQkP :
Gvº£õºUS® Bsk ÂØ£øÚ ¹. 9,00,000
AhUP ÂØ£øÚ°ß «x C»õ£® 20%
PhÚõÎPÐUS ÁÇ[S® Põ»® 1 ©õu®
PhÜ¢÷uõº ÁÇ[S® Põ»® 2 ©õu[PÒ
\μõ\› \μUS øP°¸¨¦ (ÂØ£øÚ «x) 2 12 ©õu[PÒ
Gvº£õμõu ©õØÓ[PÐUPõP 10% TmkP.

19. Consider the following information for Strong Ltd. :

EBIT Rs. 1,120 lakh
Fixed cost Rs. 700 lakh
PBT Rs. 320 lakh
Calculate the percentage of change in EPS if sales increases
by 5%.
ìmμõ[ {Ö©zvß ¤ßÁ¸® ÂÁμ[PÒ u쨣mkÒÍx :
Á› ©ØÖ® ÁmiUS •¢øu¯ Á¸©õÚ® – ¹. 1,120 C»m\®
{ø»a ö\»ÄPÒ – ¹. 700 C»m\®
Á›US •¢øu¯ C»õ£® – ¹. 320 C»m\®.
ÂØ£øÚ 5% AvP›US® GÛÀ J¸ £[S Á¸Áõ°À HØ£k® \uÃu
©õØÓzøu PnUQkP.

SECTION C — (3  10 = 30 marks)

Answer any THREE questions.

20. What are the factors influencing working capital?

|øh•øÓ •uø» £õvUS® PõμoPÒ ¯õøÁ?

21. The capital structure of Hindustan Corporation Ltd., consists of

equity share capital of Rs. 10,00,000 (shares of Rs. 100 each) and
Rs. 10,00,000 of 10% debentures. Sales have increased from
1,00,000 units to 1,20,000 units, the selling price is Rs. 10 per
unit and fixed expenses amount to Rs. 2,00,000. The income tax
rate is assumed to be 50%. You are required to calculate the
following :
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(a) Percentage increase in earnings per share.

(b) Operating leverage at 1,00,000 units and 1,20,000 units
(c) Financial leverage at 1,00,000 units and 1,20,000 units.
Comment on the risk position of the firm.
C¢xìuõß ½Áº ¼ªöhmiß ‰»uÚ Pmhø©¨¤À \© £[S •uÀ
¹. 10,00,000 (J¸ £[S ¹. 100 Ãu®) ©ØÖ® 10% PhÜmk
£zvμ[PÒ ¹. 10,00,000 EÒÍx. ÂØ£øÚ 1,00,000 A»SPμ¸¢x
1,20,000 A»SPÍõP AvP›UQßÓx. ÂØ£øÚ Âø» A»S JßÔØS
¹. 10 ©ØÖ® {ø»a ö\»ÄPÒ ¹. 2,00,000. Á› ÂQu® 50% GÛÀ,
¤ßÁ¸ÁÚÁØøÓ PnUQkP :
(A) J¸ £[S Á¸Áõ°À HØ£k® AvP›¨¦.
(B) ö\¯»õUP P¸Â¯õØÓÀ 1,00,000 ©ØÖ® 1,20,000 A»SPÐUS.
(C) {v P¸Â¯õØÓÀ 1,00,000 ©ØÖ® 1,20,000 A»SPÐUS.
{Ö©zvß {v ChºPøÍ ÂÁ›.

22. The following is the capital structure of Moris Ltd. :

Source Amount Market value C/C
Rs. Rs.
14% preference capital 2,00,000 2,30,000 14%
Equity capital 5,00,000 7,50,000 17%
16% debt 3,00,000 2,70,000 8%
Total 10,00,000 12,50,000

Calculate the weighted average cost of capital, using book value

weights and market value weights.
÷©õ›ì {Ö©zvß ‰»uÚ Pmhø©¨¦ ¤ßÁ¸©õÖ :
‰»[PÒ öuõøP \¢øu ©v¨¦ Qμ¯®
¹. ¹.
14% •ßÝ›ø© £[SPÒ 2,00,000 2,30,000 14%
\© £[SPÒ 5,00,000 7,50,000 17%
16% PhÜmk¨ £zvμ® 3,00,000 2,70,000 8%
ö©õzu® 10,00,000 12,50,000

Gøh°h¨£mh \μõ\› ‰»uÚ AhUPzøu ¦zuP ©v¨¤¾® ©ØÖ®

\¢øu ©v¨¤¾® PnUQkP.
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23. Calculate the market price of a share of Pollard Ltd. under :

(a) Walter’s Formula and (b) Gordon model from the following
data :
Earnings per share Rs. 75
Dividend per share Rs. 45
Cost of capital 15%
Rate of return on investment 18%
Retention ratio 40%
ÁõÀhº ©ØÖ® Põºhß `zvμzøu¨ £¯ß£kzv, ¤ßÁ¸®
ÂÁμ[Pμ¸¢x ÷£õ»õºk {Ö©zvß £[SPÎß \¢øu ©v¨ø£
PnUQkP :
J¸ £[Qß Á¸Áõ´ ¹. 75
J¸ £[Qß £[Põuõ¯® ¹. 45
‰»uÚ Qμ¯® 15%
•u½miß «x Á¸Áõ´ 18%
{Özv øÁUP¨£k® Á¸Áõ´ 40%

24. From the following information, prepare a statement showing

the estimated working capital requirements :
Budgeted sales – Rs. 2,60,000 p.a.
Analysis of cost and profit of each unit :
Rs.
Raw materials 3
Labour 4
Overheads 2
Profit 1
Selling price per unit 10

It is estimated that
(a) Pending use, raw materials are carried in stock for three
weeks and finished goods for two weeks.
(b) Factory processing will take 3 weeks.
(c) Suppliers will give five weeks credit and customers will
require eight weeks credit.
It may be assumed that production and overheads accrue
evenly throughout the year.
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¤ßÁ¸® £μ[Pμ¸¢x |øh•øÓ •uÀ ÷uøÁ°øÚ

PnUQkP :
vmhªh¨£mh ÂØ£øÚ – ¹. 2,60,000 BsiØS
AhUP® ©ØÖ® C»õ£® (Kº A»QØS) :
¹.
‰»¨ö£õ¸ÒPÒ 3
T¼ 4
÷©Øö\»ÄPÒ 2
C»õ£® 1
ÂØ£øÚ Âø» 10

Gvº£õºUPUTi¯øÁ :
(A) ‰»¨ö£õ¸Ò C¸¨¦ 3 Áõμ[PÒ ©ØÖ® CÖv \μUQ¸¨¦
Cμsk Áõμ[PÒ.
(B) öuõÈØ\õø»°À 3 Áõμ[PÒ ö\¯À•øÓ |øhö£ÖQÓx.
(C) PhÜ¢÷uõº 5 Áõμ[PÒ Phß ©ØÖ® PhÚõÎPÒ 8 Áõμ[PÒ
Phß.
EØ£zv ©ØÖ® ÷©Øö\»ÄPÒ C¢u Bsk •uÀ \μõ\›¯õP
|øhö£ÖQßÓx GÚ GkzxU öPõÒP.

———————

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