SVKM'S NMIMS Shobhaben Pratapbhai Patel School of Pharmacy & Technology Management Programme! M.Pharm(P’ceutics/TP/PQA/PT)+MBA(PT&HCM) ‘Year: Ill Semester: V Academic Year: 2018-19 ‘Marks: 50, Subject: Financial Management-I ‘Time: 2:00 pm to 4:00 pm Duration: 2 hrs Date: 13 December 2018 No: of Pages :_o2 FINAL EXAMINATION Instructions: Candidates should read carefully the instructions printed on the question paper and on the cover of the answer book, which is provided for their use. 1. Question No. 1is compulsory 2. utof Question 2 to 6 attempt any 3 3. In all 4 questions to be attempted 4, Answer to each new question to be started on a fresh page 5. Figuresin bracket on the right hand side indicate full marks Question 1a} (5) Discuss in brief the determinants of capital structure. Question 1(b) (15) ‘A bottle manufacture has under consideration a proposal of production of high quality bottles. The equipment is expected to cost Rs.100,000 and would last for 5 years. Depreciation is charged at 20% p:a. on WDV basis. The expected salvage value is Rs.10,000. The bottles can be sold for Rs.4 each. Regardless of level of production the manufacturer will incur a cash cost of Rs.25,000 each year if the production is undertaken. The Overhead cost allocated to this new line would be Rs.5,000. The variable costs are estimated to be Rs.2 per bottle. The estimated sales are 75,000 bottles per year with applicable tax rate of 35%. Additional working capital of Rs.50,000 would be needed and the expected return is 20%. Based on NPV, should the new equipment be purchased? ~ sestion 2 (20) Prepare a working capital estimate to finance an activity level of 104,000 units a year (52 weeks) based on the following data: Raw Materials ~ Rs.80 per unit Direct Labour — Rs.30 per unit Overheads — Rs.60 per unit Selling Price ~ Rs.200 per unit, Raw materials & Finished Goods remain in stock for a month, work in process takes 1/2 month, Debtors are allowed 2 months for payment whereas creditors allow us 1 month. Lag in payment of overheads is a month & wages is 1 % weeks. 1/4 of the output is sold for cash & minimum cash balance expected is Rs.25,000. Debtors are valued at Selling Price. Question 3 (10) ‘ABC Corp Ltd. is considering relaxing its present credit policy and is in the process of evaluating two policies. Currently the firm has annual credit sales of Rs.S0 Lakhs and debtors turnover ratio of 4 times a year. The current level of loss Yedue to baddebts is Rs.150,000. The firm is required to give a return of 25% on investments ih new accounts receivable. The company’s variable costs are 70% of selling price. Given the following option, which is a better option? + Present Policy _| Option | Option if Annual Credit Sales '50,00,000 60,00,000__| 67,50,000 Debtors Turnover Ratio | 4times. «| 3 times 2.4 times Baddebt 150,000 300,000 450,000 Question 4 Following is the Capital Structure of a company. (Rs.Lakhs) Equity Shares of Rs.10 each 750 115% Preference Shares 125 18% Debentures 625 [3500 (10) Stock price is Rs.800, Dividend per share is Rs.200 expected to grow by 7% p.a. Tax rate is 40%. Calculate the weighted, average cost of capital. Question 5 (20) Based on the following, prepare an Income Statement and calculate ROI and Asset Leverage: Interest — Rs.1200, DFL-3, DOL-2, P/V Ratio— 1/3, interest Rate - 10%, Debt : Equity ~ 2: 1, Tax—50% Question 6 Pick the correct answer from the given options: ‘SINo. | Question’ Option 1 Option 2 Option Option 4 ‘Whaat is the value of Rs.1,000 . deposited today for 5 years at 8% 1| interest rate Rs.1,500 Rs.1,946 Rs.1,469 Rs.1,649 in 2 years you are to receNe ~y Rs.10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would - remains cannot be 2|-— fall tise unchanged determined What is the value of Rs.10,000 deposited today for 10 years at 10% 3 | interest rate _| 8s.25,379 Rs.25,973 25,793 R5.25,937 Which of the following investment alternatives would provide the 10% 10.5% 10.25% greatest ending wealth for your compounded | compounded | compounded —_| cannot be 4 | investment? daily annually quarterly determined What will be the approximate population of the country, if its current population of 280 crores grows at a compound rate of 2% 5 | annually for 25 years 413 crores__| 430 crores. 460 crores___| 488 crores A