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Paper / Subject Code: 44804 / Financial Management - II

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6B
7F

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66
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66
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9

4
F
Duration :2.30 hours Marks :75

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7
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EC

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9

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F
N.B.: 1. All Questions are compulsory.

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A
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6
F7

9F
5
2. Working Notes should from part of answer.

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3B

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6
5A
0
90

9F
Q1.A. State whether following statement True or False (Any 8) (08)

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C

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3B
66

F4
F
E

36
5A
0
BD

B
1. Gross Profit and Net Profit both gives the same amount of profit.

F7
E
9

FB
EC

F
B
6

69
46

BB
6

03

A
0
D
2. Capitalization is generally found to be of three types : Normal, Over and Under.

B3
6C

7
BE

5
9
B

9F
EC

F
6

AF
6
9F

BB
6

03

36
4
3. The interest on debentures is a tax deductive expenditure.

E0
D
C
F4

F5
9

FB
B

EC
F6

3B
6
46
F7

BB
D6
4. Capital assets are subject to depreciation.

5A
49

0
90
C
69

BE
B

EC
F

BF
66
B3

6
7

9F
5. IRR method ignores the time value of money.

3
C4
F

A
0
D

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9

4
AF

F5
9
B
6

F6

3B
6
6. At the point of IRR; NPV is Positive.
B3

46
F7

0E

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D6
5

49
BF

90
C
9
F

BE
B

EC
36

7F

6
A

7. EBIT is also known operating profits.

66
CB

6
F
F5

03
B

4
F

E0
D
C
9

4
AF
E

9
6B
6
8. Hybrid Dividend Policy is a combination between the residual and stable dividend policy.

F6

3B
E0

66
B

B3

7
F5

C4
9F
C

49

D
3B

90
F
E

9. The unit capital of a fund is the number of units issued X NAV of the fund.

6B
36

7F

F6
A
E0

66
90

CB

C4
9F

49

BD
F
3B
66

10.Cash sales results in account receivable.

E

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36

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5A
0
BD

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46
7
BE

F
C

49
BF
66

Q1.B. Match the Column (Any 7) (07)

6C
69
AF
46

0E
3

7F
BD

CB

B3
C

9F
E

F5
9

9F
F6

B
66

Column A Column B

F4
AF
46

0E

BB
3

36
49

BD

1. Cash Profit a. Shareholder funds

C

F7
E

F5
9

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C
7F

F6

B
6

69
46

2. Debt Equity Ratio b. Creditors

6

03
9F

5A
49

E0
D

B3
C

69
6B

3. Retained Earnings c. Face Value = Issue Price

C
36

7F

F6

BF
3B

AF
0E
6
FB

4
9F

49

4. Lenders d. Issues Price > Face value

BD

CB
C

BE

F5
69
36

7F

6
5A

5. Shareholders e. Net Asset Value

46
9F

0E

BB
6

03
FB

9F

BD
BF

6. Dividend Relevance Theory f. Sell

6C
F4

BE
69

EC
36
5A
B

46
F7

9F

7. Entry Load g. Profit after Tax + Equity

D6

03
FB
EC

E0
BF

6C
9

69

8. NAV h. Leverage ratio

6B
36

7F
5A

3B
B

9F

6
FB

9. Exit Entry i. Buy

4
F
EC

BD
BF

90
6C
9

F4
36
5A

10. Issues at Par j. Owners

E0

66
B

46
F7

9F
FB
EC

BD
BF
B

k. Value of a firm is affected by its

6C
69

F4
03

5A
E0

dividend policy
B3

46
F7

F
9

EC

49
BF
B
66

6C
69
AF
03

7F
E0

B3

9F
F5
9

9F

Q2.A. AB Ltd is considering the purchase of a new machine for the immediate (15)
EC
B
66

F4
F
B
03

36
5A
E0

expansion programme. There are three types of machines in the market for this purpose.
D

F7
9

FB
6B

EC

BF
B
66

Their details are as follows:

69
03
C4

5A
E0
D

B3

Particulars Machine A Machine B Machine C

9
6B

C
F6

BF
B
66

AF
0E
03

Cost of Machine 35,000 25,000 18,000

4

B
6C

BE

F5
9
6B

EC

Estimated saving in scrap per year 800 1500 500

66
F

BB
03
4
49

E0
D

Estimated savings in direct wags per year 5,500 12,000 4,500

6C

9
6B

EC
7F

B
66

Additional Cost of Indirect Materials per annum - 400 -

F

3
4
9F

49

E0
BD

0
6C

Expected Saving in direct materials per annum 100 - 250

9
36

7F

3B
66
46
F

Additional Cost of Maintenance per year 750 550 500

F

49

90
6C
69

6B

Additional Cost of Supervision - 800 -

7F

66
B3

4
F

49

Estimated life of Machine 10 5 5

BD
6C
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F

7F
5A

B3

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ECBBF5AFB369F7F49F6C46BD66903BE0
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Paper / Subject Code: 44804 / Financial Management - II

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6B
7F

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9F

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BD

90
AF

36

7F

F6

66
6
F5

C4
F

BD
9

4
F
You are required to advise the management which type of machine should be purchased on

BB

F6
A

46
7
F5

B
the basis of payback period ? Tax Rate= 40 %

F
EC

6C
9

F4
F
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36
A
E0

6
F7

9F
5
OR

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3B

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6
5A
0
90

9F
Q2.B. T Ltd is considering the following projects: (8)

9F
C

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3B
66

F4
F
E

36
5A
0
BD

F7
Project Outlay (Rs) NPV

E
9

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F
B
6

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46
A 7,00,000 2,50,000

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6

03

A
0
D

B3
6C

7
BE

5
9
B 8,00,000 3,50,000

9F
EC

F
6

AF
6
9F

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6

03

36
4
C 9,00,000 4,00,000

E0
D
C
F4

F5
9

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B

EC
F6
D 10,00,000 4,50,000

3B
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46
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5A
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0
90
E 15,00,000 5,00,000

C
69

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B

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F

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6
7

9F
Capital Budget constraint Rs 25,00,000. Choose the feasible combination that has the highest

3
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F

A
0
D

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4
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NPV. Give Reason.

9
B
6

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5

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90
C
9
F

BE
Q2.C. X Ltd is considering a project with the following Cash flow: (7)

EC
36

7F

6
A

66
CB

6
F
F5

03
Year Purchase of Plant Rs) Running Cost (Rs) Savings (Rs)
B

4
F

E0
D
C
9

4
AF
E

9
6B
6

F6
0 1,40,000 -

3B
E0

66
B

B3

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9F
C

49

D
1 - 40,000 1,20,000
3B

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F
E

6B
36

7F

F6
A
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66
90

CB

2 - 50,000 1,40,000
5

C4
9F

49

BD
F
3B
66

The Cost of Capital is 8%. Measure the sensitivity of the project to change in the level of
E

BB

36

F6
5A
0
BD

90

46
7
BE

running cost, savings and plant cot. Which factor is the most sensitive? The present value of
B

F
C

49
BF
66

6C
69
AF
46

0E
3

7F
Rs 1 at 8% for year 1 and Year 2 are respectively 0.9259 and 0.8573
BD

CB

B3
C

9F
E

F5
9

9F
F6

B
66

F4
AF
46

0E

BB
3

36
49

BD

Q3.A AB ltd has an EBIT of Rs 3 lakhs. The company has 8% debentures of Rs 7 lakhs (15)
C

F7
E

F5
9

FB
C
7F

F6

B
6

69
46

Rs 7 lakhs. Presuming the overall capitalization rate as 10 %, compute the present total value
B
6

03
9F

5A
49

E0
D

B3
C

69

of the company and equity capitalization rate. The company decides to raise a sum of Rs 2
6B

C
36

7F

F6

BF
3B

AF
0E
6
FB

4
9F

49

lakhs through debt at 8% and use the proceeds to pay off the equity shareholders. Compute
BD

CB
C

BE

F5
69
36

7F

6
5A

the proposed total value of the company and also the proposed equity capitalization rate. Use
46
9F

0E

BB
6

03
FB

9F

BD
BF

6C

Net Operating Income Approach

F4

BE
69

EC
36
5A
B

46
F7

9F

D6

OR
03
FB
EC

E0
BF

6C
9

69
6B
36

7F
5A

3B
B

9F

Q3.B. Calculate the duration of Bond from the following details. (8)
6
FB

4
F
EC

BD
BF

90
6C
9

F4

Face Value = Rs 1000

36
5A
E0

66
B

46
F7

9F
FB
EC

Coupon Rate = 10 % P.a

BD
BF
B

6C
69

F4
03

5A
E0

Years to Maturity = 5 Years

B

B3

46
F7

F
9

EC

49
BF
B
66

6C
69

Redemption Value = Rs 1,000

AF
03

7F
E0

B3

9F
F5

Current Market Price = Rs 1036

9

9F
EC
B
66

F4
F
B
03

36

Yield to maturity= 12 %
5A
E0
D

F7
9

FB
6B

EC

BF
B
66

69
03
C4

5A
E0
D

B3

Q3.C. From the following data calculate the market price of a share of SK ltd under (7)
9
6B

C
F6

BF
B
66

AF
0E

i) Walter Formula ii) Gordon model

03
4

B
6C

BE

F5
9

EPS =Rs 12
6B

EC
66
F

BB
03
4

DPS = Rs 3
49

E0
D
6C

9
6B

EC
7F

Cost of Capital = 18 %
B
66
F

3
4
9F

49

E0
BD

Internal rate of Return on investment = 22%

0
6C

9
36

7F

3B
66

Retention Ratio = 75%

46
F
F

49

90
6C
69

6B
7F

66
B3

4
F

49

BD
6C
69
F

7F
5A

B3

27285 Page 2 of 3
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9F

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F

6C
F
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5A

9F
B

F
BF

69

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ECBBF5AFB369F7F49F6C46BD66903BE0
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F7
Paper / Subject Code: 44804 / Financial Management - II

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69

6B
7F

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3B
66
B3

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9F

49

BD

90
AF

36

7F

F6

66
6
F5

C4
F

BD
9

4
F
Q4.A. Moon Mutual fund provides you with the following data related to unbalanced (15)

BB

F6
A

46
7
F5
mutual fund scheme. You are required to compute Net asset Value on per unit basis as on 30th

F
EC

6C
9

F4
F
BB

36
A
Sept 2022.

E0

6
F7

9F
5

FB

C4
EC

F
3B
Particulars Rs

F4
BB

36

6
5A
0
90

9F
Managers Salary 20,000

9F
C

BF
3B
66

F4
F
E
Operational Expenses 80,000

36
5A
0
BD

F7
E
9

FB
Amount Payable on Shares 25,000

EC

F
B
6

69
46

BB
6

03

A
Bonds and debentures at cost 60,000

0
D

B3
6C

7
BE

5
9
B

9F
EC

F
6
Interest Income 32,000

AF
6
9F

BB
6

03

36
4

E0
D
C
Listed securities at cost 93,000 F4

F5
9

FB
B

EC
F6

3B
6
46
F7
Dividend Income 10,000

BB
D6

5A
49

0
90
C
69

BE
Cash in Hand 24,000

EC
F

BF
66
B3

6
7

9F

3
C4
F

A
Other Information :

0
D

CB
9

4
AF

F5
9
B
6

F6

3B
6
B3

46
F7

0E

BB
D6
5

a. Value of listed bonds and debentures is appreciated by 15 % cost while unlisted display a

49
BF

90
C
9
F

BE
B

EC
36

7F

6
A

downfall of 5% from cost.

66
CB

6
F
F5

03
B

4
F

E0
D
b. All the listed securities were purchased when market index was 9500 and currently it is

C
9

4
AF
E

9
6B
6

F6

3B
E0

66
B

B3

7
9,300.
F5

C4
9F
C

49

D
3B

90
F
E

c. Out of total bonds quoted above 30 % of them are unlisted.

6B
36

7F

F6
A
E0

66
90

CB

C4
9F
d. No of outstanding units is 35,000.

49

BD
F
3B
66

F
E

BB

36

F6
5A
0
BD

Also calculate the amount receivable by an investor who wishes to sell 125 units at NAV
90

46
7
BE

F
C

49
BF
66

as on 30th September with 5 % exit load.

6C
69
AF
46

0E
3

7F
BD

CB

B3
C

9F
E

F5
9

9F
F6

B
66

OR

F4
AF
46

0E

BB
3

36
49

BD

0
C

F7
Q4.B. The present cash discount of AB Company is 1%. Its annual sales are Rs.80 lakhs, (15)
E

F5
9

FB
C
7F

F6

B
6

69
46

B
6

its average collection period is 20 days. Its variable cost to sales is 0.85 and fixed cost
03
9F

5A
49

E0
D

B3
C

69
6B

C
36

Rs.8,00,000 respectively and its cost of capital is 10 per cent. The proportion of sales on which
7F

F6

BF
3B

AF
0E
6
FB

4
9F

49

BD

customers currently take discount is 0.5.AB company is considering relaxing its discount terms
0

CB
C

BE

F5
69
36

7F

6
5A

to 2%. Such relaxation is expected to increase sales by Rs.5 lakhs, reduce the average collection
46
9F

0E

BB
6

03
FB

9F

BD
BF

6C
F4

BE

period to 14 days and increase the proportion of discount sales to 0.80. What will be the effect
69

EC
36
5A
B

46
F7

9F

D6

03

of relaxing the discount policy on company's profit?

FB
EC

E0
BF

6C
9

69
6B
36

7F
5A

Take year as 360 days.

3B
B

9F

6
FB

4
F
EC

BD
BF

90
6C
9

F4
36

Q5.A.State the objectives of finance management ? (08)

5A
E0

66
B

46
F7

9F
FB
EC

BD
BF

Q5.B. Discuss the phases of capital budgeting (07)

B

6C
69

F4
03

5A
E0

B3

46

OR
F7

F
9

EC

49
BF
B
66

6C
69
AF
03

7F
E0

Q5.C. Write note on the following (Any 3) (15)

B3

9F
F5
9

9F
EC
B
66

F4
F

a. Capital Rationing
B
03

36
5A
E0
D

F7

b. Net Income Approach

9

FB
6B

EC

BF
B
66

69
03
C4

c. Types of Dividend Policies

5A
E0
D

B3
9
6B

C
F6

BF
B

d. Net Asset Value

66

AF
0E
03
4

B
6C

e. Collection Cost
BE

F5
9
6B

EC
66
F

BB
03
4
49

E0
D
6C

9
6B

EC
7F

B
66
F

3
4
9F

49

E0
BD

0
6C

9
36

7F

3B
66

**************
46
F
F

49

90
6C
69

6B
7F

66
B3

4
F

49

BD
6C
69
F

7F
5A

B3

27285 Page 3 of 3
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9F

49
F

6C
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36

7F
5A

9F
B

F
BF

69

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CB

ECBBF5AFB369F7F49F6C46BD66903BE0
B3

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F5