*0442* 0442

Fourth Semester 5 Year B.B.A.,LL.B. (Hons.) Examination, December 2012

FINANCIAL MANAGEMENT

Duration : 2½ Hours Max. Marks : 70

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note question or problem
from each Unit have to be attempted, which is referred to
as Part (a) and Part (b) in all the Units.
3. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) What is Cost of Capital ? Explain the following terms : Marks : 9
1) Cost of Equity Capital 2) Cost of Debenture Capital
3) Cost of Preference Capital 4) Cost of Retained Earnings
OR
The TATA Mills Ltd. has the following cost of capital along
with the indicated book value and market value weights.
Sources Cost B.V. Weights M.V.Weights
Equity Capital 0.20 0.50 0.60
Preference shares 0.15 0.25 0.15
Long term debt 0.10 0.25 0.25
1 1
Calculate the WACC using Book Value and Market value
weights.
(b) Write a short note on : Marks : 5
Reliance Co. issues 10 year, 10,000 10% preference shares
of Rs. 10 each. Commission paid to the brokers is Rs. 2 per
share. Calculate the cost of preference capital if these shares
are issued at par, 5% premium, 5% discount. Shares are to
be redeemed at 10% premium.
OR
Capital Asset Pricing Model.
P.T.O.
0442 -2- *0442*
UNIT – II

Q. No. 2. (a) Explain various factors which influence the capital structure
of a company. Marks : 9

OR
The following is the data regarding two companies x and y
belonging to the same equivalent risk class.
Particulars x y
No. of Equity shares 90,000 1,50,000
MP/share 1.2 1.0
6% Debentures 60,000 –
EBIT 18,000 18,000
All profits after debenture interest are distributed as dividend.
There are no retained earnings. Explain how under MM
approach, an investor holding 10% of shares in Co. x will be
better off in switching off his holdings to company y.
(b) Write a short note on : Marks : 5
Types of Dividend Policy.
OR
MM Approach under dividend theory.

UNIT – III

Q. No. 3. (a) Prepare an estimate of working capital requirement from the

following information of a trading concern. Marks : 9
a) Project annual sales 1,00,000 units
b) Selling price per unit Rs. 8
c) Percentage of net profit on sales is 25%
d) Average credit period allowed to customers 8 weeks
e) Average credit period allowed by suppliers 4 weeks
f) Average stock holding in terms of sales requirement is 12 weeks
g) Allow 10% for contingencies.
OR
Explain the techniques of Inventory Management.
*0442* -3- 0442
(b) Write a short note on : Marks : 5
Debtors Management.
OR
Cash Management.

UNIT – IV

Q. No. 4. (a) Bharat International, an India based multinational company,

is evaluating an overseas investment proposal. Bharat
Internationals exports of generic drugs have increased to
such an extent that it is considering a project to build a plant
in the U.K. The project will entail outlay of £ 50 million and is
expected to generate the following cash flows over its four
year life.
Year Cash flow (in million)
1 £ 20
2 £ 30
3 £ 20
4 £ 10
The current spot exchange rate is 70 per British pound, the
risk free rate in India is 10% and risk-free rate in U.K. is 6%.
Bharat international’s required rupee return on a project of
this is 20%. What is the NPV of the project ? Marks : 9
OR
Explain the following concepts of Multinational Working
Capital Management.
1) Cash Management
2) Credit Management
3) Inventory Management
(b) Write a short note on :
Multinational Capital Budgeting Decisions. Marks : 5
OR
Multinational Management Accounting.
0442 -4- *0442*
UNIT – V

Q. No. 5. (a) S Co. is being acquired by L Co. on a share exchange basis.

Their selected data are as follows :
Particulars L Co. S Co.
PAT 56 21
No. of shares 10 8.4
EPS 5.6 2.5
P/E ratio 12.5 7.5
MPS 70 18.75
Calculate the EPS of the surviving firm after the merger. If
the P/E ratio falls to 12 after the merger, what is the premium
received by the share holder of S Co. (using the surviving firm’s
new price) ? Is merger beneficial for L Co’s share holders ?
Marks : 9
OR
Vodafone Ltd. decides to take over Hutchison Ltd. following
is the data available.
Vodafone Ltd. Hutchison Ltd.
No. of shares 4,00,000 3,00,000
EPS 10 8
P/E 6 5
MPS 60 40
Exchange ratio is 0.8 shares for every share of Hutchison
Ltd.
Find out : Post merger EPS, P/E ratio and MP of shares.
(b) Write a short note on :
Reasons for mergers and Acquisitions. Marks : 5
OR
Types of mergers along with examples.
________________
*0432* 0432
Fourth Semester Five Year B.B.A., LL.B. Examination, December 2013
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 Questions. Subject to internal choice in each

question.
2. One essay type and one short note question or problem
from each unit have to be attempted, which is referred as
part (a) and (b) in all the units.
3. Figures to the right indicate marks.
UNIT – I
Q. No. 1. (a) A company has the following capital structure : Marks : 15
Source of capital Amount(Rs.) After Tax cost
Equity Capital 8,00,000 14%
Preference Capital 2,00,000 11%
Debentures 5,00,000 8%
Equity shares have the face value of Rs. 100 and market value
Rs. 125. Preference shares have face value of Rs. 100 and it
is traded in the market at Rs. 120. Debentures have face value
of Rs. 100 and currently traded at Rs. 90 in the market. Calculate
weighted average cost of capital at book value and market
value.
OR
Following is the capital structure of a company :
Source of Book Value Market Value Specific
Capital (Rs.) (Rs.) Cost
Equity Shares 1,20,000 1,80,000 26%
Preference shares 20,000 22,000 16%
Debentures 80,000 76,000 10%
Retained Earnings 40,000 60,000 18%
Determine weighted average cost of capital using book value
weights and market value weights.
(b) Write short notes on : Marks : 5
significance of cost of capital.
OR
Factors affecting weighted average cost of capital.
P.T.O.
0432 -2- *0432*
UNIT – II
Q. No. 2. (a) A company has capital structure exclusively comprising of
equity shares of Rs. 20,00,000. The firm now wishes to raise
additional Rs. 20,00,000 for its expansion project. The firm has
following four alternative financial plans. Marks : 15
a) It can raise the entire amount by issue of equity shares.
b) It can raise 50% by issue of equity shares and balance by
issue of 5% debentures.
c) It can raise the entire amount by issue of 6% debentures.
d) It can raise 50% by issue of equity shares and balance by
issue of 5% preference shares.
Assume that the EBIT is Rs. 2,40,000, tax rate is 35%
outstanding equity shares 20,000 and market price per
share is Rs. 100 under all financial plans.
Advise which financing plan should the firm select ?
OR
A company belongs to a risk class for which the appropriate
capitalisation rate is 10%. It currently has outstanding 5000
shares selling at Rs. 100 each. The firm is contemplating the
declaration of dividend of Rs. 6 per share at the end of the
current year. The company expects to have a net income of
Rs. 50,000/- and has a proposal for making new investments
of Rs. 1,00,000/-. Show that under MM hypothesis, the payment
of dividend does not affect value of the firm.
(b) Explain the traditional approach of capital structure. Marks : 5
OR
Discuss factors affecting dividend policy.
UNIT – III
Q. No. 3. (a) The following information is provided to you in respect of a company Marks : 15
a) Element of cost % of Selling Price
Raw material 50
Labour 15
Overheads 15
b) Raw materials remain in stores for about 2 months.
c) Processing time is 1 month.
d) Lag in payment of wages – 1 month.
e) Finished goods remain in stores for about 2 months.
f) Credit allowed to debtors : 3 months.
g) Credit allowed by suppliers : 2 months
h) Expected level of activity : 5,00,000 units.
i) Selling price per unit Rs. 80/-
Estimate working capital requirements. Add 10% for
contingencies.
OR
Explain the factors influencing the working capital requirements.
*0432* -3- 0432

(b) Explain motives for holding inventories. Marks : 5

OR
Explain in brief techniques of inventory control.
UNIT – IV
Q. No. 4. (a) A company is planning to invest in a new machine costing
Rs. 15,00,000/–. The cash flows associated with the
machine are given below : Marks : 15
Years Cash flows (Rs.)
1 4,50,000
2 6,00,000
3 7,50,000
4 6,00,000
5 2,00,000
Evaluate the proposal using following criteria.
a) Payback period
b) Net present value @ 12%
c) Profitability Index
d) Internal Rate of Return
e) Accounting rate of Return
OR
A US MNC is planning to instal a manufacturing unit to produce
5,00,000 units of an automobile component in India. This
involves an investment outlay of Rs. 50 million. The plant is
expected to have a useful life of 5 years with Rs. 10 million
salvage value. MNC will follow the straight line method of
depreciation. To support the running of business, working
capital of Rs. 5 million will have to be invested. Variable cost
of production will be Rs. 20 per unit. Fixed cost per annum is
estimated at Rs. 2 million. The forecasted selling price is
Rs. 70 per unit. The MNC will be subjected to 40% tax in India.
Its required rate of return is 15%.
It is forecasted that the rupee will depreciate in relation to US$
@ 3% p.a.with an initial exchange rate of Rs. 48 per $. Advise
the MNC regarding the financial viability of the project.
(b) Write a note on management of working capital by an MNC. Marks : 5
OR
Explain factors influencing capital structure of an MNC.
0432 -4- *0432*
UNIT – V
Q. No. 5. (a) Company A wishes to takeover company B. Marks : 15
The financial details of the two companies are as follows :
Particulars Company A Company B
Rs. Rs.
Equity shares of Rs. 10 each. 1,00,000 50,000
Share premium – 2,000
P & L A/c 38,000 4,000
Preference shares 20,000 –
10% debentures 15,000 5000
1,73,000 61,000
Fixed Assets 1,22,000 35,000
Net current assets 51,000 26,000
1,73,000 61,000
Annual profits available
to equity shareholders (Rs) 24,000 15,000
Market price per share (Rs) 24 27
P/E ratio 10 9
What offer do you think company A could make to company B
in terms of exchange ratio based on :-
a) Net assets value
b) E. P. S.
c) M. P. S.
Which method would you prefer from company A’s point of
view ?
OR
Company X requires company Y. The position before take over
was as follows :
Company X Company Y
Total Earnings (Rs.) 2,00,000 1,00,000
No. of Shares (Rs) 20,000 10,000
Market Price Per Share (Rs.) 20 15
The share holders of company Y are offered 7500 shares of
company X for 10,000 shares.
Calculate EPS of the merged company vis-a-vis before
takeover and gain or loss of the shareholders of two the
companies consequent to merger.
(b) Explain different types of mergers. Marks : 5
OR
What are the benefits of merger and acquisition ?
________________
*0432* 0432

Fourth Semester 5 Years B.B.A. LL.B. Examination, December 2014

FINANCIAL MANAGEMENT

Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer Q. No. 9 and any five of the remaining questions.

2. Q. No. 9 carries 20 marks and the remaining questions
carry 16 marks each.
3. Answers should be written in English completely.
4. Use simple Calculator.

Q. No. 1. The capital structure of Sun Ltd. is as follows : Marks : 4×16=64

Equity share capital 10,00,000
6% Preference share capital 5,00,000
8% Debentures 15,00,000
The company has made a profit of Rs. 25,000. The company is
under 50% tax bracket. It has 1000 equity shares of Rs. 100
each and market price of whcih is Rs. 145 each and the growth
in dividend is 8%.
(a) Calculate the weighted average cost of capital.
(b) Also calculate the new weighted average cost of capital if the company
raises an additional Rs. 10,00,000 debt by issuing 10% debentures.
This would result in an increase in the expected dividend by Rs. 5
per share, growth rate in dividend has increased to 9% and the market
price will come upto Rs. 150 per share.

Q. No. 2. What are the factors that influence dividend policy ?

Q. No. 3. A company is planning to invest in a new machine costing

P.T.O.
0432 -2- *0432*
Rs. 15,00,000/-. The cash flows associated with the machine
are given below :
Year Cash flows (Rs.)
1 4,50,000
2 6,00,000
3 7,50,000
4 6,00,000
5 2,00,000

Evaluate the proposal using following criteria :

a) Payback period
b) Net present value @ 12%
c) Inter rate of return
d) Profitability index
e) Accounting rate of return.

Q. No. 4. Explain the factors influencing the working capital requirements.

Q. No. 5. Company A acquires comapny B. The position before takeover

was as follows :
Company Company
A B
Total Earnings (Rs.) 4,00,000 2,00,000
No. of Shares (Rs.) 40,000 20,000
Market price per share (Rs.) 40 30
The share holders of Company B are offered 15,000 shares of
Company A for 20,000 shares.
Calculate EPS of the merged company before takeover and gain
or loss of the share holders of two companies consequent to
merger.

Q. No. 6. Explain traditional and Modigliani propositions under capital

structure theories.

Q. No. 7. Explain various factors peculiar to multinational firms.

Q. No. 8. Write short note on any two of the following : Marks : 2×8=16
a) Inventory Management
b) Advantages of cost of capital
c) Deed structuring.
*0432* -3- 0432
Q. No. 9. Solve any two of the following problems : Marks : 2×10=20
a) An Indian based multinational firm is considering a project to be set
up in the UK. The project will entail an initial outlay of Rs. 200 million
and is expected to generate the following cash flow over its lifetime.
Year : 1 2 3 4 5
Cash flow (in million) : Rs. 50 Rs. 70 Rs. 90 Rs. 105 Rs. 80
The current spot exchange rate is Rs. 95/UK£. The risk free rate in
India is 11% and in UK is 6%. The firm required rupee return on the
project is 18%.
Calculate NPV of the project using home currency approach.
b) Following are the details regarding capital structure of XYZ Co. Ltd.
Sources of Book Market Specific
Capital Value Value Cost
Debentures 80,000 76,000 10%
Preference shares 20,000 22,000 15%
Equity shares 1,20,000 1,80,000 30%
Retained earnings 40,000 60,000 15%
You are required to determine WACC of capital using market value
as weights.
c) You are given below the estimates. As a finance manager, set up
your calculations for the average amount of the working capital
required for the year ending 30-9-2013 after making a provision of
25% for contingencies.
Rs.
Stock of finished products 10,000
Stock of stores, materials etc 20,000
Domestic credit sales 6 weeks 1,75,000
Export credit sales 3 weeks 45,000
Lag in payment of wages and other out goings :
Wages 1.5 weeks 1,50,000
Cost of materials 1.5 months 36,000
Rent 6 months 15,000
Clerical staff 0.5 month 55,000
Manager 0.5 month 4,800
Miscellaneous expenses 1.5 months 50,000
Prepaid sundry expenses quarterly 8,000
________________
*0432* 0432
Fourth Semester 5 Years B.B.A. LL.B. Examination, December 2012

FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note question or problem
from each Unit have to be attempted, which is reffered as
Part (a) and Part (b).
3. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) Following are the details regarding capital structure of

Infosys Co. Ltd. Marks : 15
Sources Amount Cost
Equity shares 15,00,000 20%
Preference shares 6,00,000 15%
Retained Earnings 3,00,000 10%
Long term debt 6,00,000 10%
You are required to calculate WACC using
a) Book value as weights.
b) Book value as total cost.
OR
Wipro Ltd. has the following capital structure
Equity share capital 20,00,000
(200000 shares of Rs. 10 each)
6% Preference share capital 5,00,000
8% Debentures 15,00,000
The market price of equity shares is Rs. 20 per share. The
company is expected to pay dividend of Rs. 2 per share
which will grow at 8%.
a) Calculate WACC assuming that the company is under
50% tax bracket.
b) Also calculate the new WACC if the company raises an
additional Rs. 10,00,000 debt by issuing 10% debentures.
This would result in increase in the expected dividend to
Rs. 3 per share and leave the growth rate unchanged but
the market price of the share will come down to Rs. 15
per share.

P.T.O.
0432 -2- *0432*
(b) Write a short note on : Marks :5
Advantages of cost of capital.
OR
Cost of retained earnings.
UNIT – II

Q. No. 2. (a) A company has a total capitalization of Rs. 10,00,000 and it

normally earns Rs. 1,00,000 (before interest and taxes). The
financial manager of the firm wants to take a decision
regarding the capital structure. After a study of the capital
market, he gathers the following data : Marks : 15
Amount of debt Interest Equity Capitalisation
rate % rate (%)
0 – 10.0
1,00,000 4.0 10.5
2,00,000 4.0 11.0
3,00,000 4.5 11.6
4,00,000 5.0 12.4
5,00,000 5.5 13.5
6,00,000 6.0 16.0
7,00,000 8.0 20.0
What amount of debt should be employed by the firm if the
traditional approach is held valid ?
OR
Explain various factors which influence the capital structure
of a company.
(b) Write a short note on : Marks : 5
Difference between capital structure and financial structure.
OR
MM Approach under capital structure theory.
UNIT – III
Q. No. 3. (a) What is working capital management ? Explain the
determinants of working capital management. Marks : 15
OR
A proforma cost sheet of a company provides the following
particulars :
Elements of cost Amount/unit
Materials 40%
Direct labour 20%
Overheads 20%
*0432* -3- 0432

The following further particulars are available :

a) It is proposed to maintain a level of activity of 200000
units.
b) Raw materials are expected to remain in stores for an
average period of 1 month.
c) Materials will be in process, on average of half a month.
d) Selling price is Rs. 12 per unit.
e) Finished goods are required to be in stock for an average
period of one month.
f) Credit allowed to debtors is two months.
g) Credit allowed by suppliers is one month.
You may assume that sales and production follow a
consistent pattern.
(b) Write a short note on : Marks :5
Inventory Management.
OR
Need of working capital management.

UNIT – IV

Q. No. 4. (a) TATA International, an India-based multinational company,

is evaluating an overseas investment proposal. Tata
International’s exports of generic drugs have increased to
such an extent that it is considering a project to build a plant
in the UK. The project will entail outlay of ` 50 million and is
expected to generate the following cash flows over its four
year life.
Marks : 15
Year Cash flow (in million)
1 ` 20
2 ` 30
3 ` 20
4 ` 10
The current spot exchange rate is 70 per British pound, the
risk free rate in India is 10% and risk free rate in UK is 6%.
Tata International’s required rupee return on a project of this
is 20%. What is the NPV of the project ?
OR
0432 -4- *0432*
Videsh ventures, a India-based Co. is considering a project
to be set up in the US. The project will entail an intial outlay
of $ 200 million and is expected to generate the following
cash flow over its year life.
Year : 1 2 3 4 5
Cash flow : $ 50 $ 70 $ 90 $ 105 $ 80
(in million)
The current spot exchange rate is Rs. 40/US $. The risk free
rate in India is 11% and in US is 6%. Videsh venture’s required
rupee return on a project of this kind is 18%.
Calculate the NPV of the project using the home currency
approach.
(b) Write a short note on : Marks :5
Factors peculiar to multinational firms.
OR
Management accounting by Multinationals.
UNIT – V

Q. No. 5. (a) Tata Co. is acquiring Corus Co. Tata will pay 0.5 of its shares
to the share holder of Corus Co. for each share held by
them. The data for the two Co.’s are as given below : Marks : 15
Tata Co. Corus Co.
PAT 150 30
No. of shares 25 8
EPS 6 3.75
MP/Share 78 33.75
P/E ratio 13 9
Calculate the earnings per share of the surviving firm after
the merger. If the P/E ratio falls to 12 after the merger. What
is the premium received by the share holder of Corus Co.
(using the surviving firm’s new price) Is merger is beneficial
for Tata Co. share holders.
OR
What is merger ? Explain various reasons for merger.
(b) Write a short note on : Marks : 5
Types of Merger
OR
Deed structuring
________________
*0432* 0432
Fourth Semester Five Year B.B.A.,LL.B. Examination, January 2012
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 Questions.

2. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) Following are the details of ENKAY Ltd. Marks : 15

Types of Book Market Specific

capital value value cost

Debt 4,00,000 3,80,000 5%

Preference capital 1,00,000 1,10,000 8%

Equity shares 6,00,000 12,00,000 15%

Retained earnings 2,00,000 – 13%

13,00,000 16,90,000

Determine the weighted average cost of capital using :

i) Book value weights ii) Market value weights.

OR

Q. No. 1. (a) Manu Ltd. has the following capital structure :

Equity share capital

(2,00,000 share of ` 20 each) 40,00,000

6% preference share capital 10,00,000

8% debentures 30,00,000

The market price of equity share is ` 20 per share. The company

is expected to pay dividend of ` 2 per share which will grow at 7%.
P.T.O.
0432 -2- *0432*

a) Calculate weighted average cost of capital assuming that

the company is under 50% tax bracket.

b) Also calculate the new weighted average cost of capital if

the company raises an additional ` 20,00,000 debt by issuing
10%, debentures. This would result in increase in the
expected dividend to ` 3 per share and leave the growth
rate unchanged, but the market price of the share will come
down to `15 per share.

Q. No. 1. (b) Write a short note on Sharpe Lintner Model. Marks : 5

OR

Write a short note on empirical evaluation of a model.

UNIT – II

Q. No. 2.(a) Mr. Bean has a company which belong to a risk class for which
the appropriate capitalisation rate is 10%. It currently has
outstanding 25,000 shares selling at ` 100 each. The firm is
contemplating the declaration of a dividend of ` 5 per share at
the end of the current financial year. The company expects to
have a net income of ` 2,50,000 and has a proposal for making
new investments of ` 5,00,000. Show that under the MM
assumptions, the payment of dividend does not affect the
value of the firm. Marks : 15

OR

Q. No. 2. (a) Define “dividend policy” and explain its nature. Explain the types
of dividend policy with examples. What are the objectives of
dividend policy ?

Q. No. 2. (b) What are the factors that influence the dividend policy ? Marks : 5

OR

Write a short note on traditional proposition of dividend policy.

*0432* -3- 0432

UNIT – III

Q. No. 3. (a) The board of directors of Ram Engineering Ltd. request you to
advise them the average amount of working capital required in
the first year’s working. You are given the following estimates
and are instructed to add 10% to your computed figure to allow
for contingencies. Marks : 15

1) Amount blocked up for stocks

stock of finished product 7,000
Stock of stores materials 10,000
2) Average credit given
Inland sales 6 weeks credit 2,08,000
Export sales 1 12 week credit 78,000

3) Lag in payment of wages and other out

going wages 2 weeks 2,60,000
Stock of materials etc. 1 12 month 48,000
Rent Royalties etc. 6 months 10,000
Clerical staff 1
2 month (ie 0.5 month) 62,400
Manager salary 1
2 month (ie 0.5 month) 4,800
Miscellaneous expenses 1 12 months 48,000

4) Payment in advance
sundry expenses
(paid quarterly in advance) 8,000

5) Undrawn profit on the average throughout

the year 13,000

OR

Q. No. 3. (a) Define working capital. What are the different classification of
working capital ? What are the merits and demerits of working
capital ?
0432 -4- *0432*
Q. No. 3. (b) Explain any 2 inventory techniques being adopted by business
concerns. Marks : 5
OR
Write a short note on working capital cycle.

UNIT – IV

Q. No. 4. (a) A company is considering an investment proposal to install

new machine at a cost of Rs. 50,000. The facility has a life of
5 years and no salvage value. The tax rate is 35%. Assume the
firm uses straight line depreciation for tax purposes. Marks : 15
Year CFBT ( ` )
1 10,000
2 10,692
3 12,769
4 13,462
5 20,383
Calculate :
a) Payback period
b) ARR
c) IRR
d) NPV @ 10%
e) PI @ 12%
OR

Q. No. 4. (a) XYZ Company Ltd. has got ` 20,000 to invest. The following
proposals are under consideration.
Project Initial Annual Life in
outlay cash flow years
A 10,000 2,500 5
B 8,000 2,600 7
*0432* -5- 0432

C 4,000 1,000 15

D 10,000 2,400 20

E 5,000 1,125 15

F 6,000 2,400 6

G 2,000 1,000 2
a) Rank these projects in order of their desirability under the
pay back period method.
b) Rank these projects under the net present values index
assuming the cost of capital to be 10%.

Q. No. 4. (b) What do you understand by a capital budgeting decision ?

Why is capital budgeting so important to management ? Marks : 5

OR

Write a short note on managing finance in multinational

corporations with examples.

UNIT – V

Q. No. 5. (a) Girish Ltd. acquires Suresh Ltd. for a consideration of

Rs. 76,00,000 to be satisfied in the form of fully paid equity
shares of ` 10 each. The balance sheets of the two companies
on 31-12-2010, the date of acquisition were as follows : Marks : 15
Liabilities Girish Suresh Assets Girish Suresh

Equity share
capital shares
of `10 each 80,00,000 50,00,000 Sundry

General Assets 1,92,00,000 1,16,00,000

reserves 30,00,000 6,00,000

Development
rebate reserve 6,00,000 2,00,000
0432 -6- *0432*
Export profit
reserve 12,00,000 8,00,000

P/L Account 24,00,000 18,00,000

Sundry
liabilities 40,00,000 32,00,000

1,92,00,000 1,16,00,000 1,92,00,000 1,16,00,000

You are required to pase incorporation journal entries in the

books of Girish Ltd. (Transfer Company) when amalgamation is
a) By way of purchase
b) Prepare the balance sheet after amalgamation presuming
that the development rebate reserve and export profit reserve
are required to be maintained.
OR

Q. No. 5. (a) Priya Ltd. wants to take over Ram Ltd. and the financial details
of both the companies are as below.
Liabilities Priya Ram
Equity share capital of ` 50 each 10,00,000 5,00,000
Preference share capital 2,00,000 –
Share premium – 20,000
Profit and loss account 3,80,000 40,000
6% debentures 1,50,000 50,000
Total liabilities 17,30,000 6,10,000
Assets
Fixed assets 12,20,000 3,50,000
Current assets 5,10,000 2,60,000
Total assets 17,30,000 6,10,000
Profit after tax and preference dividend 2,40,000 1,50,000
Market price per share 120 135
*0432* -7- 0432
You are required to determine the share exchange ratio to be
offered to the share holders of Ram Ltd. based on :
a) Net assets value
b) Earnings per share and
c) Market value of share.
Which method would you prefer from Priya Company’s point of
view ?

Q. No. 5. (b) What are the characteristics of Mergers and Acquisitions ? Marks : 5
OR
Explain the reasons for mergers and acquisitions.

________________
*0432* 0432
Fourth Semester Five Year B.B.A., LL.B. Examination, June 2011
FINANCIAL MANAGEMENT (Course – II)
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note question or problem from
each Unit have to be attempted, which is referred as Part (a)
and (b) in all the Units.
3. Figures to the right indicate marks.

UNIT – I

Q. No.1. a) The capital structure of Sun Ltd. is as follows : Marks : 15

Equity share capital 10,00,000
6% Preference share capital 5,00,000
8% Debentures 15,00,000
The company has made a profit of ` 25,000. The company is
under 50% tax bracket. It has 1000 equity shares of ` 100
each and market price of which is ` 145 each and the growth
in dividend is 8%.
a) Calculate the weighted average cost of capital.
b) Also calculate the new weighted average cost of capital if
the company raises an additional ` 10,00,000 debt by
issuing 10% debentures. This would result in an increase
in the expected dividend by ` 5 per share, growth rate in
dividend has increased to 9% and the market price will
come upto ` 150 per share.

OR

P.T.O.
0432 -2- *0432*
Q. No. 1. a) Following is the capital structure of Supermoon Ltd.
Sources Amount Specific cost
Equity shares of ` 10 each 25,00,000 12%
Preference shares of ` 10 each 10,00,000 10%
10% debentures of ` 10 each 15,00,000 5%
Presently debentures are traded in the market at 98%, preference
shares at ` 12 per share and equity share at ` 15 per share.
Find out weighted average cost of capital using book value
and market value method.
i) Based on weights ii) Based on total cost.

Q. No. 1. b) Explain how an empirical evaluation of a model is done. Marks : 5

OR
Q. No. 1. b) Explain the advantages and limitations of cost of capital.

UNIT – II

Q. No. 2. a) DMK Ltd. has 2,00,000 shares outstanding and is planning

to declare a dividend to ` 5/- at the end of current financial
year. The present market price is ` 100. The cost of equity
capital K e may be taken at 10%. Using MM model and
assuming no taxes, ascertain the price of the company’s share
as it is likely to prevail at the end of the year.
i) When dividend is declared and
ii) When no dividend is declared ?
The company expects to have a net income of ` 20,00,000
during the year I and is planning to make an investment of
` 40,00,000 at the end of the year. Also the value of the firm. Marks : 15
OR
Q. No. 2. a) What are the factors that influence dividend policy ?
*0432* -3- 0432

Q. No. 2. b) Explain traditional proposition V/s M Hypothesis in dividend

policy. Marks : 5
OR
Q. No. 2. b) Forms of dividend policy.

UNIT – III

Q. No. 3. a) You are given below the estimates. As a finance manager, set
up your calculations for the average amount of the working
capital required for the year ending 30-09-2010 after making
a provision of 20% for contingencies. Marks : 15
`
Stock of finished products 5,000
Stock of stores, materials etc. 10,000
Domestic credit sales – 6 weeks 1,52,000
Export credit sales – 3 weeks 39,000
Lag in payment of wages and other outgoings :
– Wages – 1.5 weeks 1,30,000
– Cost of materials 1.5 months 24,000
– Rent – 6 months 5,000
– Clerical staff – 0.5 month 31,200
– Manager – 0.5 month 2,400
– Miscellaneous expenses – 1.5 months 24,000
Prepaid sundry expenses – Quarterly 4,000

OR
Q. No. 3. a) What is working capital management ? Explain the factors responsible
for working capital management. Marks : 5
0432 -4- *0432*
Q. No. 3. b) What is the significance of working capital management ? Marks : 5
OR
Q. No. 3. b) What are the different techniques being adopted while
managing inventories ? Explain them. Marks : 5

UNIT – IV

Q. No. 4. a) One of the 3 projects of a company is doing poorly and being

considered for replacement. The projects A, B, C are expected
to require ` 2,00,000, each having estimated life of 5, 4 and 3
years respectively. Anticipated cash flows of the projects are
given below (after tax) Marks : 15
Year A B C
` ` `
1 50,000 80,000 1,00,000
2 50,000 80,000 1,00,000
3 50,000 80,000 10,000
4 5,000 30,000 –
5 1,90,000 – –
Rank each project applying NPV and pay-back period.
OR
Q. No. 4. a) Shiva Ltd. is planning to invest into a new equipment costing
` 80,00,000. The equipment has economic life of 5 years with
nil salvage value. The tax rate is 40%, original cost method is
used for depreciation.
Year CFBT (Before dep. and tax)
1 20,00,000
2 30,00,000
3 40,00,000
4 60,00,000
5 50,00,000
Calculate :
1) Payable period 2) NPV @ 15%
3) ARR 4) IRR
5) BCR @ 15%.
*0432* -5- 0432

Q. No. 4. b) Brief the financial management of multinational corporations. Marks : 5

OR

Q. No. 4. b) Explain factors determining capital structure of a multinational

corporation.

UNIT – V

Q. No. 5. a) Rakesh Ltd. is absorbed by Nitin Ltd. given below are the balance
sheets of two companies as on 31-12-2010. Marks : 15

Liabilities Rakesh Nitin Assets Rakesh Nitin

Share capital Cash in hand 1,750 14,000

4500 shares (equity) Land and

of ` 135 each 6,07,500 – Building 5,42,500 11,78,500

20000 Equity shares – Plant and

of 75 each – 15,00,000 Machinery3,00,00010,00,000

General reserves 2,01,750 6,42,500

Profit and loss A/c 7,500 17,500

Creditors 27,500 32,500

8,44,250 21,92,500 8,44,250 21,92,500

The holder of every 3 shares in Rakesh Ltd. was to receive five

shares in Nitin Ltd.

0432 -6- *0432*

You are required :

1) Pass the closing journal entries and prepare the necessary

ledger account.

2) Pass the incorporation journal entries.

3) Prepare the Balance Sheet after amalgamation.

OR

Q. No. 5. a) What is the difference between merger and amalgamation ?

Kiran company wishes to take over Sharad company. The

financial details of the two companies are as under :

Liabilities Kiran Sharad

15% debentures 75,000 25,000

Profit and loss account 1,90,000 20,000

Share premium account – 10,000

Equity shares of ` 50/share 5,00,000 2,50,000

Preference shares 1,00,000 –

Total liabilities 8,65,000 3,05,000

Assets

Current assets 2,55,000 1,30,000

Fixed assets 6,10,000 1,75,000

Total assets 8,65,000 3,05,000

*0432* -7- 0432

Kiran Sharad
Annual profit available for equity
shareholders after tax and preference
dividend 1,20,000 75,000
Market price/equity share 100 130
What offer do you think that the Kiran company could make
to Sharad company in terms of exchange ratio based on :
1) Net assets value
2) Earnings per share and
3) Market value of share.
Which method would you prefer from Kiran Company’s point
of view ?

Q. No. 5. b) Explain different methods of mergers along with examples. Marks : 5

OR
Q. No. 5. b) Explain different types of mergers along with examples.

________________
*0442* 0442
Fourth Semester Five Year B.B.A., LL.B. (Hon’s) Examination, June/July 2012
FINANCIAL MANAGEMENT

Duration : 21/2 Hours Max. Marks : 70

Instructions : 1. Answer all 5 Questions.

2. One essay type and one short note question or problem from
each Unit have to be attempted, which is referred to as Part (a)
and Part (b) in all the Units.
3. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) You are required to determine the WACC of Bata Ltd.
The following information is available for your perusal. Marks : 9

Rs.

Debentures (Rs. 100 per debenture) 8,00,000

Preference shares (Rs. 100 per share) 2,00,000

i) Rs. 100 per debenture redeemable at par: 20 year maturity,
8% coupon rate, 4% floatation costs, sale price Rs. 100.
ii) Rs.100 preference share redeemable at par : 15 year
maturity 10% dividend rate, 5% floatation costs,
sale price Rs. 100.

OR

Explain the following concepts :

1) Cost of Equity Capital
2) Cost of Preference Capital
3) Cost of Debenture Capital
4) Cost of Retained Earnings
5) Overall cost of capital.
P.T.O.
0442 -2- *0442*
(b) Write a short note on : Marks : 5
Advantages of cost of capital.
OR
Total company issued 15000 ten years 8% debentures of
Rs. 100 each at 4% discount. Under the terms of debentures
trust, these debentures are to be redeemed after 10 years at
5% premium. The cost of issue is 2%. Calculate the cost of
debt capital presuming a tax rate of 50%.

UNIT – II

Q. No. 2. (a) Explain various factors which influence dividend policy of

a firm. Marks : 9
OR
Company U and L are identical in every aspect, except that
U is unlevered while L is levered. Company L has Rs. 20 lakh
of 8% debentures outstanding. Assume :
1) that all the MM assumptions are met,
2) that the tax rate is 35%
3) that EBIT is Rs. 6 lakh and Equity capitalisation rate for
company U is 10%.
a) What would be the value for each firm according to the
MM’s approach ?
b) Suppose VU = Rs. 25,00,000 and VL = Rs. 35,00,000
According to MM do they represent equilibrium values ? If not,
explain the process by which equilibrium will be resorted.
(b) Write a short note on : Marks : 5
Traditional Approach under dividend theory.
OR
Types of Dividend Policy.
*0442* -3- 0442
UNIT – III

Q. No. 3. (a) Prepare an estimate for working capital requirement from the
following information of a trading concern : Marks : 9
a) Project annual sales 1,00,000 units
b) Selling price per unit Rs. 8
c) Average credit period allowed by suppliers – 4 weeks
d) Average credit period allowed to customers – 8 weeks
e) Percentage of net profits on sales is 25%
f) Average stock holding in terms of sales requirements – 12 weeks
g) Allow 10% for contingencies.
OR
What is working capital ? Explain the importance of working
capital management.
(b) Write short note on : Marks : 5
Inventory Management.
OR
Debtors Management.

UNIT – IV

Q. No. 4. (a) Videsh Ventures, a India based Co., is considering a project to

be set up in the US. The project will entail an initial outlay of
$ 200 million and is expected to generate the following cash
flow over its year life. Marks : 9
Year : 1 2 3 4 5
Cash flow (in million) : $ 50 $ 70 $ 90 $105 $ 80
The current spot exchange rate is Rs. 40/ US $. The risk free
rate in India is 11% and in US is 6%. Videsh ventures required
rupee return on a project of this kind is 18%.
Calculate the NPV of the project using the home currency
approach.
OR
Explain various factors which are peculiar to multinational firms.
(b) Write a short note on : Marks : 5
Multinational Working Capital Management.
OR
Multinational Capital Budgeting decisions.
0442 -4- *0442*
UNIT – V

Q. No. 5. (a) Gama Co. is taking over Theta Co. The share holders of theta
would receive 0.8 shares of Gama for each shares held by
them. The merger is not expected to yield in economies of
scale and operating synergy. The relevant information for the
two companies are as follows : Marks : 9
Particulars Gama Theta
Net sales (Rs. in crores) 335 118
No. of shares (in crores) 12 3
EPS 4.83 4
Market value/share 30.00 20.00
P/E ratio 6.21 5.00
PAT (Rs. in crores) 58 12
For the Combined Co. (After merger), you are required to
calculate :
a) EPS
b) P/E ratio
c) Market value of shares.
OR
Tata company is acquiring Corus company. Tata company will
pay 0.5 of its shares to the share holders of Corus Co. for each
share held by them. The data for the two companies are as
given below :
Tata Corus
PAT 150 30
No. of shares 25 8
EPS 6 3.75
MPS 78 33.75
P/E ratio 13 9
Calculate the earnings per share of the surviving firm after the
merger. If the P/E ratio falls to 12 after the merger, what is the
premium received by the share holders of Corus Co. (Using
the surviving firm’s new price) ? Is merger beneficial for Tata
Co.’s share holders ?
(b) Write a short note on : Marks : 5
Characteristics of Mergers and Acquisitions.
OR
Types of Mergers.
________________
*0442* 0442
Fourth Semester Five Year B.B.A. LL.B. (Hon’s) Examination, June 2013
FINANCIAL MANAGEMENT

Duration : 21/2 Hours Max. Marks : 70

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note questions from each
Unit to be attempted, referred as part (a) and (b).
3. Figures to the right indicate marks.
4. Use of simple calculators only.

UNIT – I

Q. No. 1. (a) Explain the advantages and limitations of cost of capital. Marks : 9
OR
Following is the capital structure of Sun Ltd.
1) Equity shares 1,000 of Rs. 100 each.
Market price Rs. 150 each, Ke = 12%
2) Debentures 10,000 of Rs.100 each
Market price Rs. 120 each Kd (After tax) = 11%
You are required to determine WACC using :
a) Book value as weights and total cost.
b) Market value as weights and total cost.
(b) Write a short note on : Marks : 5
Cost of retained earnings.
OR
CAPM.

UNIT – II

Q. No. 2. (a) Explain the concept of Traditional Approach of capital structure

theories with the help of graphical representation. Marks : 9
OR
Explain Walter and Gordon’s model of dividend theory.
P.T.O.
0442 -2- *0442*
(b) Write a short note on : Marks : 5

MM Approach of dividend theory.

OR

Factors influencing dividend policy.

UNIT – III

Q. No. 3. (a) What is working capital ? What are the different classifications
of working capital ? Marks : 9
OR

You are supplied with the following information in respect of

TATA Ltd. for the ensuring year
Productions for the year 69000 units
Finished goods in store 3 months
Raw material in store 2 months
Production process 1 month
Credit allowed by creditors 2 months
Credit given to debtors 3 months
Selling price per unit Rs. 50
Raw material 50% of selling price
Direct wages 10% of selling price
Overheads 20% of selling price

There is a regular production and sales cycle and wages and

overheads accrue evenly. Wages are paid in the next month
of accrual. Material is introduced in the beginning of production
cycle.

You are required to find out its working capital requirement.

(b) Write a short note on : Marks : 5

Methods of Inventory Management.
OR
*0442* -3- 0442
The following information is available in respect A Ltd.
a) Stock holding : Raw material – 1 month
WIP – 15 days, Finsished goods – 1 month
b) Average collection period : 2 months
c) Time lag in payment of bills = 45 days

Calculate :
a) Operating cycle
b) Cash cycle
c) Number of Operating cycles and cash cycles.

UNIT – IV

Q. No. 4. (a) One of the 2 machines A and B is to be purchased. From the

following information find out which of the two will be more
profitable, with the help of NPV method. Discount factor is
assumed to be at 10%. The averages rate of tax may be
taken at 50%. Marks : 9
Particulars Machine A Machine B
Cost of machine 50,000 80,000
Working life 4 yrs. 6 yrs.
Earnings before tax and after depreciation :
Years
1 10,000 8,000
2 15,000 14,000
3 20,000 25,000
4 15,000 30,000
5 – 18,000
6 – 13,000
OR

Explain different methods of capital budgeting.

0442 -4- *0442*
(b) Write a short note on : Marks : 5
Multinational cost of capital.
OR
Multinational capital budgeting.

UNIT – V

Q. No. 5. (a) Explain the motives behind merger. Marks : 9

OR
Large company is acquiring small company. Large Co. will
pay 0.5 of its shares to the shareholders of small Co. for
each share hold by them. The data for the two companies
are given bellow.
Large Co. Small Co.
Profit after-tax (Rs. lakh) 150 30
Number of shares (lakh) 25 8
EPS (Rs.) 6.00 3.75
MPS (Rs.) 78.00 33.75
P.E. ratio 13 9
Calculate the EPS of the surviving firm after the merger. If
the price-earnings ratio falls to 12 after the merger, what is
the premium received by the shareholders of small Co. (using
the surviving firm’s new price) ? Is the merger beneficial for
XYZ’s shareholder ?
(b) Write a short note on : Marks : 5
Problems of post-merger integration.
OR
Concepts of horizontal, vertical and conglomerate merger
with examples.
________________
*0442* 0442
Fourth Semester 5 Year B.B.A., LL.B. (Hons) Examination, June/July 2014
FINANCIAL MANAGEMENT

Duration : 21/2 Hours Max. Marks : 70

Instructions : 1. Answer all 5 Questions.

2. One essay type and one short note question or problem
from each Unit have to be attempted.

UNIT – I

Q. No. 1. (a) Define financial management. Explain the objectives of

financial management. Marks : 9
OR

Following are the details regarding the capital structure of a

company.
Sources of Capital Book Value Market Value Specific Cost
Debentures Rs. 80,000 Rs. 76,000 10%
Preference shares Rs. 20,000 Rs. 22,000 15%
Equity shares Rs. 1,20,000 Rs.1,80,000 30%
Retained earnings Rs. 40,000 Rs. 60,000 15%

You are required to calculate WACC using

a) Book value as weights and total cost.

b) Market value as weights and total cost.

(b) Write a short note on : Marks : 5

CAPM
OR

Functions of Financial Management.

P.T.O.
0442 -2- *0442*

UNIT – II

Q. No. 2. (a) What is Dividend Policy ? State the various factors affect
the dividend policy. Marks : 9
OR
Explain in brief various theories of capital structure.
(b) Write a short note on : Marks : 5
Dividend payout policy.
OR
Walter's dividend model.

UNIT – III

Q. No. 3. (a) What you mean by Inventory Management ? State its

significance. Marks : 9
OR
From the following information estimate the amount of working
capital by taking 360 days in a year.
Sales 80,000 units at Rs. 20 per unit
Material cost Rs. 10 per unit
Labour cost Rs. 5 per unit
Overheads Rs. 3 per unit
Customers are given 45 days credit and 60 days credit is
taken from suppliers. Raw materials for 30 days and finished
goods for 15 days are kept in stock, production cycle 24 days.
A cash balance equal to one third of average of other working
capital is kept for contingencies.
(b) Write short note on : Marks : 5
Credit Management (Receivable)
OR
Working Capital Management.
*0442* -3- 0442

UNIT – IV

Q. No. 4. (a) From the following information compute Marks : 9

i) Payback period
ii) Net Present value.
Cash outlay Rs. 70,000
Cash inflows :
1st year Rs. 10,000
2nd year Rs. 20,000
3rd year Rs. 30,000
4th year Rs. 45,000
5th year Rs. 60,000
Cost of capital is 10%.
OR
What is Capital Budgeting ? Explain the methods of capital
budgeting.
(b) Write a short note on : Marks : 5
International Capital Budgeting.
OR
Multinational Working Capital Management.

UNIT – V

Q. No. 5. (a) Gama Fertilizers Company is taking over Theta Petrochemical

Company. The shareholders of Theta would receive 0.8
shares of Gama for each shares held by them. The data for
the two companies are as follows. Marks : 9
Gama Theta
Net sales (Rs. crore) 335.00 118.00
Profit after tax (Rs. crore) 58.00 12.00
No. of shares (Rs. crore) 12.00 03.00
0442 -4- *0442*

Earnings per share (Rs.) 4.83 4.00

Market value per share (Rs.) 30.00 20.00
Price-earnings ratio 6.21 5.00
For the combined company (after merger)
You are required to calculate :
a) EPS
b) P/E Ratio
c) Market value per share.
OR
Explain the different types of mergers.

(b) Write a short note on : Marks : 5

Acquisition
OR
Benefits of mergers.
________________
*0442* 0442
Fourth Semester 5 Years B.B.A. LL.B. (Hon’s.)
Examination, June/July 2015
FINANCIAL MANAGEMENT
Duration : 2½ Hours Max. Marks : 70

Instructions : 1. Answer any 8 and any five of the remaining questions.

2. Q. No. 8 carries 20 marks and the remaining questions
carry 10 marks each.
3. Answers should be written in English.
4. Use simple calculator.

Q. No. 1. Following is the capital structure of Sun Ltd. Marks : 4×10=40

1) Equity Shares 1000 of Rs. 100 each market price Rs. 150 each,
ke = 12%.
2) Debentures 10000 of Rs. 100 each market price Rs. 120
each kd (After tax) = 11%.
You are required to determine WACC using :
a) Book value as weights and total cost.
b) Market value as weights and total cost.

Q. No. 2. What is Dividend Policy ? State the various factors affect the
dividend policy.

Q. No. 3. From the following information estimate the amount of working

capital by taking 360 days in a year.
Sales 80000 units at Rs. 20 per unit
Material cost Rs. 10 per unit
Labour cost Rs. 5 per unit
Overheads Rs. 3 per unit
Customers are given 45 days credit and 60 days credit is taken
from suppliers. Raw materials for 30 days and finished goods
for 15 days are kept in stock, production cycle 24 days. A cash
balance equal to one third of average of other working capital is
kept for contingencies.
P.T.O.
0442 -2- *0442*
Q. No. 4. Explain the different types of mergers and acquisitions with
examples.

Q. No. 5. You are a Financial Analyst for the little company. The director
of capital has asked you to analyze two proposed capital
investments – Project X and Project Y. Each project has a cost
of Rs. 10,000 and the cost of capital for each project is 10%.
The project expected net cash flows are as follows :
Year Project X Project Y
1 6500 3500
2 3000 3500
3 3000 3500
4 1000 3500
Calculate each project’s pay back period, net present value and
profitability index.

Q. No. 6. X company is acquiring Y company. X company will pay 0.5 of

its shares to the shareholders of Y company for each share
hold by them. The data for the two companies are given below.
X Co. Y Co.
Profit after tax (Rs. lakh) 150 30
Number of shares (lakhs) 25 8
EPS (Rs.) 6.00 3.75
MPS (Rs.) 78.00 33.75
P.E. Ratio 13 9
Calculate :
1) Combined firm EPS.
2) Combined firm P.E. Ratio.
3) MPS.
*0442* -3- 0442
Q. No. 7. Write a short note on any two of the following : Marks : 2×5=10
a) Capital structure.
b) Working Capital Management.
c) Functions of Financial Management.

Q. No. 8. Solve any two of the following problems : Marks : 2×10=20

a) From the following data, state which project is better ?
Project A B
Cash flows
Year
0 – 25,000 – 25,000
1 10,000 12,500
2 10,000 15,000
3 5,000 7,500
The discount rate of project A is 12% and B is 15%
respectively.
b) The following information is available in respect of A Ltd.
a) Stock holding : Raw material – 1 month
WIP – 15 days.
Finished goods – 1 month
b) Average collection period – 2 months.
c) Time lag in payment of bills – 45 days
Calculate :
a) Operating Cycle
b) Cash Cycle
c) No. of operating cycles in a year.
c) Ten years 10% debentures of a company are sold at the rate
of Rs. 90. The face value of debentures is Rs. 100. Tax rate
is 40%. Find the cost of debt.
________________
*0432* 0432
Fourth Semester Five Year B.B.A., LL.B. Examination, June 2013
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note question or problem
from each Unit have to be attempted, which is referred as
Part (a) and Part (b).
3. Figures to the right indicate marks.
4. Use simple calculators only.
UNIT – I
Q. No. 1. (a) The Ganga Company is planning to expand its business and
accordingly the company desires to increase assets by 50%
by the end of the year 2012. The existing capital structure
representing the optimum capital structure of the company
as given below : Marks : 15
Particulars Rs.
8% Debentures 4,00,000
(Par value Rs. 1,000 per debenture)
9% Preference shares 1,00,000
(Par value of Rs. 100 per share)
Equity shares 5,00,000
(Par value of Rs. 100 per share)
10,00,000
New debentures can be sold at par at 10% interest rate.
Preference shares will have a 12% dividend rate and can be
sold at par. Equity shares can be sold to net Rs. 90 per
share. The shareholder’s required rate of return is 8% which
is expected to grow at 4%. Retained earnings for the year
are estimated to be Rs. 50,000.
You are required to compute the cost of individual capital
components and the overall cost of capital.
OR
P.T.O.
0432 -2- *0432*
From the following information compute WACC based on
weights as book value and market value.
Sources of Funds Face value Market value
Debentures 100 110
Preference shares 100 120
Equity shares 10 22

(b) Write a short note on : Marks : 5

Cost of Equity and Preference shares.
OR
CAPM.
UNIT – II

Q. No. 2. (a) Explain various factors affecting dividend policy. Marks :15
OR
Explain Traditional and Modigliani propositions under capital
structure theories.

(b) Write a short note on : Marks : 5

Types of dividend policies.
OR
Factors affecting capital structure theories.

UNIT – III

Q. No. 3. (a) Explain advantages and disadvantages of working capital. Marks : 15

OR
A proforma of cost sheet of a company provides the
following particulars :
Elements of Cost Units
Materials 40%
Direct labour 20%
Overheads 20%
*0432* -3- 0432

The following further particular are available :

a) It is proposed to maintain a level of activity of 2,00,000 units.
b) Raw materials are expected to remain in stores for an average
period of one month.
c) Materials will be in process, on average of half a month.
d) Selling price is Rs.12 per unit.
e) Finished goods are required to be in stock for an average period
of one month.
f) Credit allowed to debtors is two months.
g) Credit allowed by suppliers is one month.

(b) Write a short note on : Marks : 5

Operating cycle and cash cycle
OR
Inventory Management

UNIT – IV

Q. No. 4. (a) Explain various factors peculiar to multi-national firms. Marks :15
OR
An Indian based multinational firm is considering a project to
be set up in the UK. The project will entail an initial outlay of
<
200 million and is expected to generate the following cash
flow over its year life.
Year : 1 2 3 4 5
Cash flow : <
50 <
70 <
90 <
105 <
80
(in million)

The current spot exchange rate is Rs. 80/UK . The risk free
<

rate in India is 11% and in US is 6%. The firm required rupee

return on a project of this kind is18%.
Calculate NPV of the project using the home currency
approach.
0432 -4- *0432*

(b) Write a short note on : Marks :5

Multinational working capital management.
OR
Multinational capital budgeting.

UNIT – V

Q. No. 5. (a) What is merger ? Explain various reasons for merger. Marks :15
OR
S company is being acquired by L company on a share
exchange basis. Their selected data are as follows :
L. Co. S. Co.
Profit after-tax 5,60,000 2,10,000
Number of shares 10,00,000 8,40,000
Earning per share 5.6 2.5
Price-earnings ratio 12.5 7.5
Determine :

a) Pre-merger, market value per share

b) The maximum exchange ratio L company should offer without the

dilution of EPS and MPS.

(b) Write a short note on : Marks : 5

Advantages of Merger and Takeover.
OR

Problems of post merger intersection.

––––––––––––––––
*0432* 0432
Fourth Semester 5 Year B.B.A.,LL.B. Examination, June/July 2012
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 questions.

2. One essay type and one short note question or problem
from each unit have to be attempted.
3. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) Following are the details regarding the capital structure of a
company. Marks : 15
Sources of Capital Book Value Market Value Specific Cost
Debentures 80,000 76,000 10%
Preference shares 20,000 22,000 15%
Equity shares 1,20,000 1,80,000 30%
Retained Earnings 40,000 60,000 15%
You are required to determine the weighted average cost of
capital using
a) Book value as weights
b) Mark value as weights.
OR
Following is the capital structure of Reliance Ltd.
1) Equity shares 10,000 of Rs. 10 each.
Market price Rs.15 each, Ke = 12%.
2) Debentures 10,000 of Rs. 100 each
Market price Rs. 120 each Kd (after tax) = 11%.
You are required to determine WACC using :
a) Book value as weights and total cost.
b) Market value as weights and total cost.
(b) Write a short note on :
CAPM Marks : 5
OR
Various sources of capital.
P.T.O.
0432 -2- *0432*
UNIT – II
Q. No. 2. (a) Explain concept of Traditional Approach and MM Approach under
capital structure theories. Marks : 15
OR
The management of a firm believes that the cost of equity and
debt for different proportions of equity and debt in capital
structure are as follows :
Proportion of Proportion of Cost of equity Cost of debt
Equity Debt Ke Kd
1.00 0.00 11.0 6.0
0.90 0.10 11.0 6.5
0.80 0.20 11.5 7.0
0.70 0.30 12.5 7.5
0.60 0.40 13.0 8.5
0.50 0.50 14.0 9.5
0.40 0.60 15.0 11.0
0.30 0.70 16.0 12.0
0.20 0.80 18.0 13.0
0.10 0.90 20.0 14.0
Construct a graph in terms of Kd, K e and KA based on the
above data. What is the optimal structure of the firm ?
(b) Write a short note on :
MM Approach under dividend theory Marks : 5
OR
Types of Dividend Policy.
UNIT – III
Q. No. 3. (a) From the following data compute duration of operating cycle : Marks : 15
Rs.’000
Particulars Year 1 Year 2
Raw materials 20 27
Work in progress 14 18
Finished goods 21 24
Purchases 96 135
Cost of goods sold 140 180
Sales 160 200
Debtors 32 15
Creditors 16 18
*0432* -3- 0432
Assume 360 days per year for computation purpose. Draw a
reconciliation statement
OR
What is working capital ? What are the different classifications
of working capital ? What are the merits and demerits of working
capital ?
(b) Write a short note on :
Working Capital Cycle. Marks : 5
OR
Techniques of inventory management.

UNIT – IV
Q. No. 4. (a) Assume that the exchange rate of Rs/US dollar during 0 – 1
year remains unchanged at Rs. 47/$. For the subsequent
4 years, it is forecasted that the rupee will depreciate vis-a-vis
the US dollar by 2 per cent after the first year. As a result, the
exchange rates for years 2 – 5 will be as fallows : Marks : 15
Year 2 Rs. 47.94 (Rs. 47 × 1.02)
3 48.8988 (47.94 × 1.02)
4 49.8768 (48.8988 × 1.02)
5 50.8743 (49.8768 × 1.02)
Give the exchange rate of Rs. 47/$ in year 1, the equivalent
rupees of $ 125.5 million will be ($ 125.5 million × Rs. 47) =
Rs. 5898.5 million. This is the incremental operating CFAT in
Indian currency, that the project is expected to generate in all
the 5 years (given the assumption of no variation in exchange
rates).
Assuming full repatriation every year, with no withholding taxes
and full tax credit available in US, advise the US multinational
regarding the financial viability of having a subsidiary in India.
OR
Explain various factors which are peculiar to multinational firms.
(b) Write a short note on : Marks : 5
Multinational working capital management.
OR
Management Accounting by Multinational firms.
0432 -4- *0432*
UNIT – V
Q. No. 5. (a) M Ltd. decides to take over A Ltd., following is the data available. Marks : 15
M Ltd. A Ltd.
No. of shares 4,00,000 3,00,000
EPS 10 8
P/E ratio 6 5
MP of shares 60 40
Exchange ratio is 0.8 shares for every share of A Ltd.
Find out :
1) Post Marger EPS
2) P/E ratio
3) MP of shares.
OR
Small Co. is being acquired by large company on a share
exchange basis. Their selected data are as follows :
Particulars Large Co. Small Co.
PAT 56 21
No. of shares 10 8.4
EPS 5.6 2.5
P/E ratio 12.5 7.5
Calculate the EPS of the surviving firm after the merger. If the
P/E ratio falls to 12 after the merger, what is the premium
received by the share holders of small company (Using the
surviving firm’s new price) ?
Is merger is beneficial for large Co’s share holders ?
(b) Write a short note on :
Reasons for Merger.
OR
Advantages of Merger. Marks : 5

________________
*0432* 0432
Fourth Semester 5 Year B.B.A. LL.B. Examination, June/July 2014
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer all 5 questions.

2. Figures to the right indicate marks.

UNIT – I

Q. No. 1. (a) Ravindra Ltd. has the following capital : Marks : 15

Equity share capital
(2,00,000 shares of Rs. 20 each) 40,00,000
6% Preference share capital 10,00,000
8% Debentures 30,00,000
The market price of equity share is Rs. 20/share. The
company is expected to pay dividend of Rs. 2 per share
which will grow at 7%.
1) Calculate weighted average cost of capital assuming that
the company is under 50% tax bracket.
2) Also calculate the new weighted average cost of capital,
if the company raises an additional Rs. 20,00,000 debt
by issuing 10% debentures. This would result in increase
in the expected dividend to Rs. 3 per share and leave the
growth rate unchanged, but the market price of the share
will comes down to Rs. 15 per share.
OR
Following are the details regarding the capital structure of a
company :
Sources of capital Book value Market-Value Specific cost
Debentures 40000 38000 10%
Equity shares 60000 90000 26%
Preference shares 10000 11000 16%
Retained earnings 20000 30000 18%
You are required to determine the weighted average cost of
capital using :
1) Book value as weights
2) Market value as weights.
P.T.O.
0432 -2- *0432*
(b) Explain the importance of cost of capital. Marks : 5
OR
Explain how an empirical evaluation of a model is done.

UNIT – II

Q. No. 2. (a) A company belongs to a risk class for which the appropriate
discount rate is 10%. It currently has 25000 outstanding
shares selling at Rs. 100 each. The firm is contemplating a
dividend payment of Rs. 5 per share at the end of current
financial year. It expects to have a net income of Rs. 2,50,000
and a proposal for making new investments of Rs. 5,00,000.
Show that under the MM assumptions. The payment of
dividend does not affect the value of the firm. Marks : 15
OR
Explain the factors determining dividend policy.
(b) Explain the types of dividend policy. Marks : 5
OR
Explain the assumptions of MM approach under dividend
theory.

UNIT – III

Q. No. 3.(a) You are given the following estimates. As a Finance Manager,
set up your calculations for the average amount of working
capital required for the year, after making a provision of 10%
for contingencies. Marks : 15
`
1) Amount blocked up for stocks :
Stock of finished products 2,500
Stock of stores, materials 4,000
2) Average credit given
Inland sales : 6 weeks credit 1,56,000
Export sales : 1½ weeks 39,000
*0432* -3- 0432
3) Lag in payment of wages and other
outgoings : Wages : 1½ weeks
Stock of materials : 1½ month 24,000
Rent, Royalties etc. : 6 months 5,000
Clerical staff : ½ month 31,200
Manager : ½ month 2,400
Miscellaneous expenses : 1½ months 24,000
4) Payment in advance :
Sundry expenses paid quarterly in advance 4,000
OR
What is Working Capital Management ? Explain the types of
working capital and its significance.
(b) Explain the advantages of Working Capital Management. Marks : 5
OR
Write a short note on : Inventory Management.

UNIT – IV

Q. No. 4. (a) You are a Financial analyst for the little company. The director
of capital has asked you to analyze two proposed capital
investments – Projects X and Y. Each project has a cost of
Rs. 10,000 and the cost of capital for each project is
12%. The project’s expected net cash flows are as follows : Marks : 15
Year Project X Project Y
1 6500 3500
2 3000 3500
3 3000 3500
4 1000 3500
Calculate each project’s payback period, net present value,
internal rate of return and profitability index.
OR
Explain the working capital management in the multinational
firms.
0432 -4- *0432*
(b) Write a short note on : Marks : 5
Financial management of multinational corporations.
OR
Explain the various factors which are peculiar to multinational
corporations.

UNIT – V

Q. No. 5.(a) A company wishes to take over company B. The Financial

details of the two companies are as under : Marks : 15
Liabilities Company A Company B
Equity shares (Rs 10 per share) 1,00,000 50,000
Share premium account – 2,000
Profit and loss account 38,000 4,000
Preference shares 20,000 -
10% Debentures 15,000 5,000
Total liabilities 1,73,000 61,000
Fixed Assets 1,22,000 35,000
Net current Assets 51,000 26,000
Total Assets 1,73,000 61,000
Maintainable annual profit
(after tax) for equity shareholder 24,000 15,000
Market price per equity share 24 27
Price-earning ratio 10 09

What offer do you think company-A could make to company-B

in terms of exchange ratio, based on :
a) net assets value
b) earning per share and
c) market price per share which method would you prefer
from Company-A point of view ?
OR
Explain the different types of mergers along with examples.
(b) Explain the characteristics of mergers. Marks : 5
OR
Explain the difference between mergers and take-overs.
________________
*0432* 0432
Fourth Semester of 5 Yrs. B.B.A. LL.B. Examination, June/July 2015
FINANCIAL MANAGEMENT
Duration : 3 Hours Max. Marks : 100

Instructions : 1. Answer Q. No. 9 and any five of the remaining questions.

2. Q. No. 9 carries 20 marks and the remaining questions
carry 16 marks each.
3. Answers should be written either in English or Kannada
completely and use simple calculator.

Q. No. 1. The Kaveri company is planning to expand its business and

accordingly the company desires to increase assets by 50% by
the end of the year 2013. The existing capital structure is as
given below : Marks : 4×16=64
OR
Particulars Rs.
Equity Shares 10,00,000
(Par value of Rs. 100 per share)
10% Preference Shares 2,00,000
(Par value of Rs. 100 per share)
9% Debentures 8,00,000
(Par value Rs. 1000 per debenture)
20,00,000
New debentures can be sold at par at 12% interest rate.
Preference shares will have a 14% dividend rate and sold at par. Equity
shares can be sold at net Rs. 90 per share. The shareholders required
rate of return is 9% which is expected to grow at 5%. Retained earnings
for the year are estimated to be Rs. 1,00,000.
You are required to compute the cost of individual capital components
and the overall cost of capital.

P.T.O.
0432 -2- *0432*
Q. No. 2. Explain various factors which influence the capital structure of
a company.

Q. No. 3. What is working capital ? What are the different classifications

of working capital ? What are the merits and demerits of working
capital ?

Q. No. 4. Shiva Ltd. is planning to invest into a new equipment costing

Rs. 80,00,000. The equipment has economic life of 5 years with
nil salvage value. The tax rate is 40%. Original cost method is
used for depreciation.
Year CFBDT
(Cash Flow Before Depreciation and Tax)
1 20,00,000
2 30,00,000
3 40,00,000
4 60,00,000
5 50,00,000
Calculate :
1) Pay back period
2) NPV @ 12%
3) ARR
4) IRR
5) BCR @ 15%

Q. No. 5. What is Merger ? Explain various reasons for merger.

Q. No. 6. A company belongs to a risk class for which the appropriate

discount rate is 10%. It currently has 50000 outstanding shares
selling at Rs. 100 each. The firm is contemplating a dividend
payment of Rs. 5 per share at the end of current financial year.
It expects to have a net income of Rs. 5,00,000 and a proposal
for making new investments of Rs. 10,00,000. Show that under
the MM assumptions, the payment of dividend does not affect
the value of the firm.
*0432* -3- 0432
Q. No. 7. M Ltd. decides to takeover X Ltd. Following data is available.
M Ltd. X Ltd.
No. of Shares 400000 300000
EPS 12 10
P/E ratio 6 5
MP of shares 70 50
Exchange rario is 0.8 shares for every share of X Ltd.
Find out :
1) Post merger EPS
2) P/E ratio
3) MP of shares.

Q. No. 8. Write short note any two of the following : Marks : 2×8=16
a) Advantages and limitations of cost of capital.
b) Working capital cycle.
c) Multinational capital budgeting.

Q. No. 9. Solve any two of the following problems : Marks : 2×10=20

a) ABC Company Ltd. has got Rs. 20,000 to invest. The following
proposals are under consideration :
Project Initial Annual Life in
Outlay Cash flow Years
A 10,000 2,500 5
B 8,000 2,600 7
C 5,000 1,200 15
D 10,000 2,400 20
E 5,000 1,150 15
F 6,000 2,400 6
G 3,000 1,500 2
0432 -4- *0432*
a) Rank these projects in order of their desirability under the pay
back period method.
b) Rank these projects under the net present values assuming the
cost of capital to be 10%.
b) Mr. A has a company which belong to a risk class for which
the appropriate capitalisation rate is 10%. It currently has
outstanding 5000 shares selling at Rs. 100 each. The firm is
contemplating the declaration of dividend of Rs. 6 per share.
The company expects to have a net income of Rs. 50,000
and has a proposal for new investment of Rs. 1,00,000. Show
that the payment of dividend does not affect the value of the
firm.
c) From the following data compute duration of operating cycle :
Rs. ‘000
Particulars Year 1 Year 2
Raw materials 25 32
Work in progress 15 18
Finished goods 21 24
Purchases 95 140
Cost of goods sold 145 175
Sales 170 215
Debtors 32 15
Creditors 16 20
Assume 360 days per year for computation purpose.

________________