svEan9s NMIMs

ANIL SURENDRA MODE SCHOOL OF COMMERCE

Academi eout#
Program B.Sc qinance) ` Year: I Semester: 11
.Batch: 2017-20 \r-
Subject: Corporate Finance -I , fS: ,i` I-::P4::j ]j:g
Date : 23 April 2018 Time:10.00 am to 12.00 noon(2 Hrs.)

Marks: 60 No. of pages:

FINAlj`EXANINATI0N
> Q.1 is compulsory. Attempt any 3 questions from Q.2 to Q.5.
> Each Question carries 15 Marks.
> Both ordinary & scientific calculators allowed.

Question 1 ``
Dharma Ltd. an existing profit-making company, is planning to introduce a new product with a projected
life of 8 years. Initial equipment cost will be Rs. 240 1akhs and additional equipment costing Rs. 20 lakhs
will be needed at the beginning of third year. At the end of the 8 years, the original equipment will have
resale value equivalent to the cost of removal, but the additional equipment would be sold for Rs. 2 lakh.
Working capital of Rs. 25 lakhs will be needed at the beginning of the operations. The 100% capacity of
the plant is of 4,00,000 units per annrm, but the production and sales-volume expected are as under:
Year capacity in percentage
120
230
3-5 75
6-8 50
A sale price of Rs. 100 per unit with a profit volume ratio (Contribution /Sales) of 60% is likely to be
obtained. Fixed operating cash cost are likely t.6 be Rs. 16 lakhs per annum. In addition to this the
advertisement expenditure will have to be incurred as under:

Year I 2 3-5 6-8

Expenditure in Rs. Lakhs each year 30 15 10 4

The company is subjected to 50% tax, straight-line method of depreciation, (permissible for tax purposes
also) and taking 12% as appropriate after tax cost of capital, should the project,.be accepted?

Question 2
From the following information, find out missing figures & rewrite the balance sheet of Mul€esh enterprise
Current ratio 2: I
Acid test ratio 3 :2
Reserves & surplus = 20% of Equity Share Capital
Long term debt = 45% of net worth
Stock turnover velocity = I.5 months
Debtors turnover velocity = 2 months
You may assume closing debtors as average debtors.
Gross profit ratio = 20%
Sales = Rs.21,00,000/I ( 25% cash sales & balance on credit)
Closing is Rs.40,000 more than opening stock.
Accumulated depreciation is 1/6th of original cost of fixed assets.

Balanceshieett olfM k h emerprise itc[.

IvluKesn
Liabilities Assets
Equity share capital ? Fixed Assets (at Cost)
? Less: Accumulated depreciation P
Reserves & surplus
Long term loans 6,75,000 Stock ?
B ank overdraft 60,000 Debtors ?
Creditors ? Cash ?
Total ? Total ?

i-.:.--,
Question 3
Sonata world Co. Ltd. wishes to arrange overdraft facilities with its bankers from the period August
to October 2017. Prepare a cash budget for the above period from the following data given below:

Month Sales Purchases Wages Mfg. Exp. Office Exp. Selling Exp.
June 180000 124800 12000 3000 2000 2000

July 192000 144000 14000 4000 1000 400020005000400045005000

August 108000 243000 1 1000 3000 15002000250030003000

September 174000 246000 12000 4500

October 126000 268000 15000 5000
November 140000 280000 17000 5500

December 160000 300000 18000 6000

Additional Information:

(a) Cash on hand 1 /08`/2017 Rs.75,000.

the sale and the remaining 50% in
(b) 50°/o of credit sales are realized in the
the second month following.
(c) Plant & Machinery sold in the month of september for Rs.1,50,000/-
(d) Creditors are paid in the month following the month of purchase.
(e) Lag in payment of manufacturing expenses halfmonth.
(I) Lag in payment of wages and other expenses one month.

Question 4
(A) A firm has a current sale of Rs. 2,56,48,750. the firm has unutilised capacity. In order to boost its
sales, it is considering the relaxation in its credit policy. The proposed terms of credit will be 60 days
credit against the present policy of 45 days. As a result, the bad debts will increase from 1.5% to 2%
of sales. The firm's sales are expected to increase by loo/o. The variable operating costs are 72% of
the sales. The firm's Corporate tax rate is 35%, and it requires an after -tax return of 15% on its
investment. Should the flrm change its credit period? (10 marks)

(8) You plan to go abroad for higher studies after working for the next eight years and understand that an
amount of Rs.40,00,000 will be needed for this purpose at that time. You have decided to
accumulate this amount by investing a fixed amount at the end of each year in a safe scheme offering
a rate of interest at 12 percent. What amount should you invest every year to achieve the target
amount? (5 marks)

Question 5
Write Short notes (Attempt any 3 out of 5) ( 5 Marks each X 3 = 1 5 Marks)
(a) Profit Maximisation V/s Wealth Maximisation
(b) Du Pont Analysis
(c) Payback Period
(d) Working Capital Cycle
(e) Activity Ratio

24