Postgraduate-Pg Mcom Semester-2 2019 May Corporate-Finance-Cbcgs

77 9 F6 A6 EE A A FE 87 D2
77 098 8F63 3A6 EE2 2ADDA0 0FE 587 D29 938

0 E 5 D 0
70 98F F63AA6E E2AAD A0F FE5 87D 293 380 C2D
98 63 6 E2 D A0 E5 87 29 80 C2 7
98 F63 A6 EE2 AD A0 FE5 87 D29 380 C2 D7 770
F E D 7 9
8F 63AA6E E2AADAA0F FE58 87D 293 380C C2DD77 709 8F6
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A
63 A6E E2 AD A0 FE5 87D 29 380 C2 D77 709 8F 63A 6E
A F D 6 E
3A 6E E2AADAA0F E58 87D 293 380C C2D 777 7098 8F6 3A6 6EE 2A
E E 7 2 8 7 3 2 D
A6 6EE 2ADDA 0FE 587 D2 938 0C2 2D7 770 098F F63 A6E EE2 AD A0
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD A0 FE
6E 2A DA 0F 5 7D 93 0 2D 7 09 F6 A EE A A FE 58
E
72257
D 0 E 87 2 8 C2 7 70 8F 3 6E 2 D 0F 5 7D
E2 2AD A0 FE5 587DD29 9380 0C2 D77 7709 98F 63AA6E E2AADAA0F E58 87D 293
A A F 3 D 6 E E 2 8
Leverage.
2A DA 0F E58 87D 293 80C C2D 777 7098 8F63 3A6 6EE 2ADDA0 0FE 587 7D2 938 0C2
DA 0F E58 7D 293 80C 2D 777 09 F6 A6 EE 2A A FE 587 D2 938 0C D7
Rs.100 each)
0F E58 7D 293 80C 2D 777 09 8F6 3A6 EE 2A DA 0FE 587 D2 938 0C 2D7 770
Tax (%)
Time: 2 Hours
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
10% Debentures
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
Sundry Creditors
Particulars
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
Interest (Rs.)
Liabilities
93 0C 2D 777 098 F6 A6 EE AD A0 FE 587 D2 38 0C2 D7 770 98F 63 6E
Sales (in units)

80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Current Liabilities:
Fixed cost (Rs.)

Reserves and Surplus
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E 2A DA
Equity Share Capital (of
Other Current Liabilities

77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2 D 0F
09 F6 A EE A A FE 58 D2 38 0C D 77 98 63 6 E2 AD A0 E
8F 3A 6E 2A DA 0F 58 7D 93 0C 2D 77 09 F6 A EE A A FE 58
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
10. Current Ratio 1.6:1

A6 E AD A FE 87 2 38 C2 D7 70 8F 63 6E E2 D 0 E5 7D 29
Number of Equity Shares

EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD A0 FE 87 29 380
Selling price per unit (Rs.)

Variable cost per unit (Rs.)
2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2
7. Earnings Per Share Rs.20

2. Gross Profit Ratio is 25%
9. Debt Equity Ratio 0.25: 1

Following information is available:
?
?
?
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
?
1. Sales for the year Rs.48,00,000
3. Net Profit after tax Rs.2,00,000

D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
2,00,000
4,00,000
8. Stock Turnover Ratio = 10 times

40
10
15
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Amount(Rs.)
Rita
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
5,000
15,000
30,000
20,000
(3) Round off upto two decimal points.
(4) Use of simple calculator is allowed.
4. Purchases and Sales are on credit basis

OR
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
Stock
Debtors
Page 1 of 4
40
15
20
Fixed Assets
Mita
9,000
25,000
40,000
25,000
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
5. Debtors Turnover Ratio (Sales/ Debtors) = 12 times

87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
(2) Support your answer with required working notes.
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
Current Assets:

N. B.: (1) All questions are compulsory carrying equal marks.
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Assets
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
0C2D777098F63A6EE2ADA0FE587D2938
Other Current Assets

Balance Sheet as on 31st March, 2018
Firms
6. Creditors Turnover Ratio (Cost of sales/ Creditors) = 12 times

63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
40
20
25
Paper / Subject Code: 66703 / Corporate Finance
Rishi
10,000
35,000
50,000
30,000
Q.1: Complete the following Balance Sheet from the information given below:
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE
40
25
30
?
?
?
?
?
Miti
D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E
12,000
40,000
60,000
40,000
77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2
09 F6 A EE A A FE 58 D2 38 0C D 77 98 63 6 E2
8F 3A 6E 2A DA 0F 58 7D 93 0C 2D 77 09 F6 A EE A
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A
[15 Marks]
Total Marks: 60
[15 Marks]
Q.1: From the following information available for 4 firms, calculate the Earnings Before
Interest and Tax (EBIT), Earnings Per Share (EPS), the Operating Leverage and the Financial
Amount(Rs.)
A6 E AD A FE 87 2 38 C2 D7 70 8F 63 6E E2 D
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD
2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A
DA 0F E58 7D 293 80C 2D 777 09 F6 A6 EE 2A A
0F E58 7D 293 80C 2D 777 09 8F6 3A6 EE 2A DA 0F
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E
D2 38 0C D 77 98 63 6 E2 AD A0 E
93 0C 2D 777 098 F6 A6 EE AD A0 FE 5
80 2D 77 09 F6 3A EE 2A A F 58
C2 7 70 8F 3A 6E 2 D 0F E5 7
D 77 98 63 6 E AD A0 E 87
77 9 F6 A6 EE A A FE 87 D2
77 098 8F63 3A6 EE2 2ADDA0 0FE 587 D29 938
0 E 5 D 0
98 63 6 E2 D A0 E5 87 29 80 C2 7
98 F63 A6 EE2 AD A0 FE5 87 D29 380 C2 D7 770
F E D 7 9
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A
63 A6E E2 AD A0 FE5 87D 29 380 C2 D77 709 8F 63A 6E
A F D 6 E
E E 7 2 8 7 3 2 D
E
72257
D 0 E 87 2 8 C2 7 70 8F 3 6E 2 D 0F 5 7D
A A F 3 D 6 E E 2 8
shares.
TOTAL
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
c) 25%
a) 50%
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
Capial.
b) 75% and
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
12% Debentures

Earnings per share

@ 10% per annum.

63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
Cost of Equity Capital

Internal Rate of Return
corporate rate of tax is 35%.

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
a. By issuing equity shares only.

87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
The dividend growth rate is 6%:
when the dividend payout ratio is:

80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
10% Preference Shares (of Rs.100 each)
Rs.8
10%
15%
A Ltd
OR
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
c. By raising term loan only at 10% per annum.

Equity Shares: 10,000 shares (of Rs.100 each)
OR
Page 2 of 4
The company plans the following financing alternatives:

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
5%
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
Rs.8
10%
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
B Ltd
of Rs.10 per share would be declared for the year 2018.
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
0C2D777098F63A6EE2ADA0FE587D2938
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
Rs.8
10%
10%
Rs.20,00,000
C Ltd
Rs. 6,00,000
Rs. 4,00,000
Rs.10,00,000

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE
price of equity share is expected to decline from Rs.110 to Rs.105 per share.
D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E

77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2
09 F6 A EE A A FE 58 D2 38 0C D 77 98 63 6 E2
Q.2: The following is the Capital Structure of Simons Company Ltd as on 31st March, 2018:
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A
[15 Marks]
It wishes to raise further Rs.3, 00,000 for expansion cum-modernisation scheme. [15 Marks]
Q.3: Following are the details regarding three companies A Ltd, B Ltd and C Ltd.[15 Marks]
Q.2: One-up Ltd has equity share capital of Rs.5, 00,000 divided into shares of Rs.100 each.
expected to increase dividend from Rs.10 to Rs.12 per share. However, the market
estimated Earnings Before Interest and Taxes (EBIT) after expansion is Rs.1, 50,000 and
2. Assuming that in order to finance an expansion plan , the company intends to
1. If the company is in the 50% tax bracket, compute the Weighted Average Cost of
b. Rs.1,00,000 by issuing equity shares and Rs.2,00,000 through debentures or term loan
borrow a fund of Rs.10,00,000 bearing 14% rate of interest , what will be the
company’s revised weighted average cost of capital? This financing decision is
The market price of the company’s share is Rs.110 and it is expected that a dividend
Calculate value of an equity share of each of these companies as per Walter’s Model
You are required to suggest the best alternative, giving your comments assuming that the
d. Rs.1,00,000 by issuing equity shares and Rs.2,00,000 by issuing 8% preference
A6 E AD A FE 87 2 38 C2 D7 70 8F 63 6E E2 D
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD
2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A
DA 0F E58 7D 293 80C 2D 777 09 F6 A6 EE 2A A
0F E58 7D 293 80C 2D 777 09 8F6 3A6 EE 2A DA 0F
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E
D2 38 0C D 77 98 63 6 E2 AD A0 E
93 0C 2D 777 098 F6 A6 EE AD A0 FE 5
80 2D 77 09 F6 3A EE 2A A F 58
C2 7 70 8F 3A 6E 2 D 0F E5 7
D 77 98 63 6 E AD A0 E 87
77 9 F6 A6 EE A A FE 87 D2
77 098 8F63 3A6 EE2 2ADDA0 0FE 587 D29 938
0 E 5 D 0
98 63 6 E2 D A0 E5 87 29 80 C2 7
98 F63 A6 EE2 AD A0 FE5 87 D29 380 C2 D7 770
F E D 7 9
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A
63 A6E E2 AD A0 FE5 87D 29 380 C2 D77 709 8F 63A 6E
A F D 6 E
E E 7 2 8 7 3 2 D
E
72257
D 0 E 87 2 8 C2 7 70 8F 3 6E 2 D 0F 5 7D
A A F 3 D 6 E E 2 8
8.
7.
6.
5.
4.
3.
Debts
Debts
4
3
2
1
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
Sources
Year
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
Ratio
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Annuity
Equity Capital
Equity Capital
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
1. Dividend
2. Liquidity
most appropriate basis:
A
Retained Earnings
Retained Earnings
Preference Capital
Historical Cost
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD A0 FE 87 29 380 two digits after decimal)
Preference Share Capital

Wealth Maximisation
Standard Liquid Ratio

Standard Current Ratio

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
40,000
30,000
24,000
20,000
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
Cash Inflow (Rs.)
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
B) Following is the Capital Structure of a firm:
13%
10%
14%
4.5%
Cost
Page 3 of 4
f. 1:1
e. 2:1
Q.3: A) A project involves cash inflows as given below:
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Calculate Weighted Average Cost of Capital of the firm.

C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
0C2D777098F63A6EE2ADA0FE587D2938
10,00,000
3,00,000
1,00,000
1,50,000
4,50,000
Rs.
at regular interval
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
B
c. Convertibility into cash
h. Part of profit distributed

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
a. Cost which has been incurred

87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
d. Proportion between two figures

80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6
g. Objective of financial management

C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE
D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E
The firm’s after tax component costs of various sources of finance are as follows:
77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2

09 F6 A EE A A FE 58 D2 38 0C D 77 98 63 6 E2
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A
[08 Marks]
[07 Marks]
If the rate of interest is 15%, find out present value of cash inflows. (Consider upto
Q.4: A) Match the following by rewriting the columns A & B by matching on an overall
b. Stream of constant cash flows occurring

[08 Marks]
A6 E AD A FE 87 2 38 C2 D7 70 8F 63 6E E2 D
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD
2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A
DA 0F E58 7D 293 80C 2D 777 09 F6 A6 EE 2A A
0F E58 7D 293 80C 2D 777 09 8F6 3A6 EE 2A DA 0F
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E
D2 38 0C D 77 98 63 6 E2 AD A0 E
93 0C 2D 777 098 F6 A6 EE AD A0 FE 5
80 2D 77 09 F6 3A EE 2A A F 58
C2 7 70 8F 3A 6E 2 D 0F E5 7
D 77 98 63 6 E AD A0 E 87
77 9 F6 A6 EE A A FE 87 D2
77 098 8F63 3A6 EE2 2ADDA0 0FE 587 D29 938
0 E 5 D 0
98 63 6 E2 D A0 E5 87 29 80 C2 7
98 F63 A6 EE2 AD A0 FE5 87 D29 380 C2 D7 770
F E D 7 9
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A
63 A6E E2 AD A0 FE5 87D 29 380 C2 D77 709 8F 63A 6E
A F D 6 E
E E 7 2 8 7 3 2 D
7.
6.
5.
4.
3.
2.
1.
E
72257
D 0 E 87 2 8 C2 7 70 8F 3 6E 2 D 0F 5 7D
A A F 3 D 6 E E 2 8
5.
4.
3.
2.
1.
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
Business Risk
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
cash flows and ignores risk.
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
93 0C 2D 777 098 F6 A6 EE AD A0 FE 587 D2 38 0C2 D7 770 98F 63 6E Q.4: Write Short Notes on any Three:
Modigliani and Miller Theory

80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
Classification of Cost of Capital
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
Factors determining Dividend Policy

All current liabilities are quick liabilities.
8F 3A 6E 2A DA 0F 58 7D 93 0C 2D 77 09 F6 A EE A A FE 58Importance of Financial Management

63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D
Trading on Equity is used to increase EPS.
OR
Compounding technique shows present value.
Page 4 of 4
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
Dividend to equity shareholders reduces tax liability.
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
********************
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6 E
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE 2A
0C2D777098F63A6EE2ADA0FE587D2938
B) State whether the following statement are True or False:

63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A DA 0F 58 7D

External loan affects the dividend paying ability of the organisation.

E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F 58 D 93 0C 2D 77 98
An ideal capital structure is one which maximises market value per share.
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E5 7D 29 80 2D 77 09 F6
D2 38 0C D 77 98 63 6 E2 AD A0 E 87 29 38 C2 7 70 8F 3A
80 2D 77 09 F6 3A EE 2A A F 58 D 93 0C D 77 98 63 A6
C2 7 70 8F 3A 6E 2 D 0F E5 7D 29 80 2D 77 09 F6 A EE
D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E
77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2
09 F6 A EE A A FE 58 D2 38 0C D 77 98 63 6 E2
The profit maximization goal ignores the timing of returns, does not directly consider
63 6E E2 D 0 E5 7D 29 80 2 77 709 8F 3A 6E 2A
[15 Marks]
[07 Marks]
A6 E AD A FE 87 2 38 C2 D7 70 8F 63 6E E2 D
EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD
2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A
DA 0F E58 7D 293 80C 2D 777 09 F6 A6 EE 2A A
0F E58 7D 293 80C 2D 777 09 8F6 3A6 EE 2A DA 0F
E5 7D 29 80 2D 77 09 8F 3A E 2A DA 0F
87 29 38 C2 7 70 8F 63A 6E E2 D 0F E
D2 38 0C D 77 98 63 6 E2 AD A0 E
93 0C 2D 777 098 F6 A6 EE AD A0 FE 5
80 2D 77 09 F6 3A EE 2A A F 58
C2 7 70 8F 3A 6E 2 D 0F E5 7
D 77 98 63 6 E AD A0 E 87

Postgraduate-Pg Mcom Semester-2 2019 May Corporate-Finance-Cbcgs

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Postgraduate-Pg Mcom Semester-2 2019 May Corporate-Finance-Cbcgs

Uploaded by

Copyright:

Available Formats

77 9 F6 A6 EE A A FE 87 D2

77 098 8F63 3A6 EE2 2ADDA0 0FE 587 D29 938

Sales (in units)

Fixed cost (Rs.)

Equity Share Capital (of

Other Current Liabilities

10. Current Ratio 1.6:1

Number of Equity Shares

Selling price per unit (Rs.)

7. Earnings Per Share Rs.20

9. Debt Equity Ratio 0.25: 1

1. Sales for the year Rs.48,00,000

3. Net Profit after tax Rs.2,00,000

8. Stock Turnover Ratio = 10 times

4. Purchases and Sales are on credit basis

2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2

5. Debtors Turnover Ratio (Sales/ Debtors) = 12 times

93 0C 2D 777 098 F6 A6 EE AD A0 FE 587 D2 38 0C2 D7 770 98F 63 6E

D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E 2A DA

6. Creditors Turnover Ratio (Cost of sales/ Creditors) = 12 times

D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E 2A DA

Earnings per share

@ 10% per annum.

Cost of Equity Capital

corporate rate of tax is 35%.

a. By issuing equity shares only.

93 0C 2D 777 098 F6 A6 EE AD A0 FE 587 D2 38 0C2 D7 770 98F 63 6E

when the dividend payout ratio is:

c. By raising term loan only at 10% per annum.

2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2

The company plans the following financing alternatives:

EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD A0 FE 87 29 380

2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2

D7 770 98 63 6E E2 AD A0 E5 87D 29 380 C2 77 70 8F 3A 6E

Preference Share Capital

Standard Liquid Ratio

Standard Current Ratio

Calculate Weighted Average Cost of Capital of the firm.

77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2 D 0F

c. Convertibility into cash

h. Part of profit distributed

a. Cost which has been incurred

d. Proportion between two figures

g. Objective of financial management

77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2

b. Stream of constant cash flows occurring

Modigliani and Miller Theory

Factors determining Dividend Policy

8F 3A 6E 2A DA 0F 58 7D 93 0C 2D 77 09 F6 A EE A A FE 58Importance of Financial Management

2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2

77 98 F63 A6 E2 AD A0 FE 87 29 38 C2 D7 70 98F 63A 6E E2 D 0F

EE 2A A 0FE 58 D2 938 0C D7 77 98 63 A6 E2 AD A0 FE 87 29 380

2A DA 0F 58 7D 93 0C 2D 77 098 F63 A6 EE AD A0 FE 587 D2 38 C2

You might also like