Professional Documents
Culture Documents
Answer any 5 from Q1 to Q7 .Each one will carry equal 3 marks. Question number 8 is
compulsory.
Q1-Shivam & Anirban Mft. ltd has to make a choice between two projects namely A and B. The initial
capital outlay of two Projects are Rs 1, 35,000 and Rs 2,40,000 respectively for A and B. There will be no
scrap value at the end of the life of both the projects. The opportunity Cost of Capital of the company is
16%. The annual incomes are as under:
Rs Rs
1 − 60,000
2 30,000 84,000
3 1,32,000 96,000
4 84,000 1,02,000
5 84,000 90,000
You are required to calculate for each project:
Q2-Shubhashree have just won a lottery that promises to pay you Rs 50 lakh exactly 5 years from today.
Shubhashree can sell the claim today for an immediate lump-sum cash payment.
What is the minimum amount Shubhashree would sell claim for, if she could earn the following rates on
similar risk investments during the 5-year period: (1) 9 per cent and (2) 12 per cent?
Q3-You are considering an investment in Nalin Corp. During the last year the firm’s income statement
listed addition to retained earnings = Rs 4.8 million and common stock dividends = Rs 2.2 million. Nalin
Ltd year-end balance sheet shows common stockholders’ equity = Rs 35 million with 10 million shares of
common stock outstanding (Number of equity shares). The common stock’s market price per share = Rs
9.00. What is Nalin lts Corp EPS and Price to earning?
Q4-VAS Ltd ( Vaishnavi- Abhimanyu –Sayani Ltd ) is considering two different options for their
expansion proposal. The estimated cash flows of following two mutually exclusive projects. While the
company has a policy of evaluating the projects using all methods, it does not accept projects with a
payback of less than 3 years on its discounted cash flows.
Present a decision matrix table giving the result of the each of the evaluation method viz. Payback,
discounted payback, Net present value and Profitability Index. Will your decision remain same if the
projects were not mutually exclusive?
Q5-Manraj Ltd has been going through a severe cash crunch over the last one year. Advait, the new CFO
who has recently taken over has a look at the trend in the liquidity indicators. The current ratio over the
last 3 years are as follows: Year ending March 2014: 2.40; Year ending March 2013: 2,0, year ending
March 2012: 1.85. Advait wonders what could have gone wrong leading to the financial distress especially
when the current ratio has been moving up steadily.
Q6-For each of the actions listed below related Harshita Ltd, determine what would happen to the current
ratio. Assume nothing else on the balance sheet changes and that net working capital is positive. (Current
ratio does not change or Current ratio decreases or Current ratio increases)
Q7-What is meant by the term time value of money? Which capital budgeting methods take into
consideration this concept? How is it possible for the capital budgeting methods that do not consider
the time value of money, to lead to wrong capital budgeting decisions?
Q8- This question is Compulsory (15 marks)
Mr. Abhishek was hired by B & K Air.Inc.(Beauty & Ketika Ltd , Small Aircraft company) to assist the company
management to evaluate the company performance .He has to evaluate and do analysis on four major areas
( 1-liquidity or short term solvency , 2-Profitability, 3- Long term solvency or financial leverage & 4-Asset
management or turnover ).
Income statement for B & K Air Inc for year 2017 (All figures in $)
Sales 30,499,420
Cost of Goods Sold 22224580
Other Expenses 3867500
Depreciation 1366680
EBIT 3040660
Interest 478240
Taxable Income 2562420
Taxes ( 40%) 1024968
Net Income 1537452
Dividend 560000
Add to retained earnings 977452
Ratios Median
Using the financial statement provided for B & K Air, calculate each of the ratio listed in the for
the aircraft industry. Assist Mr. Abhishek with Compare & do analysis of performance of B & K
Air to the industry on