j

Trimester: ,Jan - April 2023

Examination: End term Examination
Program code: 01 \ Trimester: Ill
Program: MBA Cluss: FY( Div 1-IO) (SVU 2022)
Name of the Constituent College: Name of the department/Section/Center: Finance and
K. J. Somaiya Institute of Management Law

Course Code: 217\>01 C304 Name of the Course: Financial Management

Maximum Marks: 50 Date: 06/04/2023

Duration: 3 hours

Instructions:-

l. Ql is co mpulsory and carries 14 marks.

2. Attempt any 3 from the remaining, each carrying 12 marks

I. company has under consid~ration the proposal of manufacturing high-qua lity smart
w atches . T he necessary machinery to manufacture them \Yo uld cost ZIO crore aml wo uld last
5 years. The expected salvage value is n crore . The watches can be sold ~ a c h . If
the proj ect is undertaken, the manufacturer will incur cash overheads of z2.4:i.001JOO
regardl ess o f the level of production. The variable costs is estimated at { ~e r watch . T he
company estimated it will sell about watches-per year. Tax rate is 3 3/o. S ho~
machinery be purchased? Assume l 4% as the ~ of capital. 11101 workin g capital
requi red would be US ,0_9,0UO .
Calculate the follow'.111/
J Ji scounted payback period
~ ct l'rcsrnt Value .
3. 1ternc1l rate of return
Dcpn:c iation is · elow:
Yea r 1: U ,00,00,000
y ca r 2: z1.60.00,000 I• b
Yea r 3: zl.28,00,000 1-2,q
Ye a r 4 : zl ,02,40,000 /•02-~
Year 5: z81 ,92.000 D fl"I ,.
. I r: ctors are givc n bclo\\.
The present va uc ia •;. p
YF/\R rv
r-actor !t1! 14 " ~ :act or (<v, 30 %

J --%.ffi-----~
2
_ --· 0.675 ---------- 0.455
1- -- 4- 3 ~J- ------:~;:;--
o .59 2 -------- -
-D.35~
-
_ - o .s 19 -----------------
5 L---- ---
/ 2022-ZJ
/\ld •I I
O P/ 1O/()M S- 1. 1/Q ucsti on Paper
~ ~nandal analyst of an MNC, you are required lennine the weighle_d average
7':::~ 10
capital of the company using book value w · Is and market value weights. The
followmg mformation is available for your perusa .
The company' s present book value capital structure is:
Debenture (Rs. l 00 per debenture) Rs. 5,00,000
Preference shares (Rs. l O per share) Rs. I 0.00,000
Equity Shares (Rs.\ 0 per share) Rs. 25,00,000

Rs.40,00,000
AH these securities are traded in the capital markets. Recent prices are:
Debentures Rs.\\ 2 per debenture, Preference shares Rs.14 per share and Equity
shares Rs.24 per share.
Anticipated external financing opportunities are:

Y"Rs.100 per d e benture redeemable at p~emium of 10%. 10-year maturity, 12% coupon rate.
Flotation costs on face value, sale pnce Rs. I 05

/4s . l0 Preference share redeema~l e at par, 10-year _n:alurity._ I~% ~ate of dividend, 5%
,_/2~~ation costs on face value, sale pnc e Rs. I 2. (Ignore d1v1dend d1stnbut1on tax)

quity shares: _ Rs.2 per share fl?tation costs; sale price l~s_. 22; the dividend expected on the
ity share al the end of the year is Rs.2 per share; the ant1c1pated growth rate in d1· v1·d d, .
· · o 11 · · .111 the form of dividends. en s 1s
7% and the firm has the practice ot, pay1110 a Its earnmgs

co'J'male tax rate is 35%.

Ltd has at present annual sales level of I 000~ units at Rs 300 per unit. The v .
? 00 per unit and fixed cost amounts to Rs -',00J)00 per annum. The p . anabI_e
s - d by the company is I month. The company is considering a propos:t1:se1~t crectn
Penod a ll
. owe, .·10 d t0 2 months and -' mon ti1s and Ims ma de t I1e 1·o 1lowmg
. estima tes- o mcrease
the credit p1..:t

Exi sting Pro posed -

Credit period (months) I 2 3 -

~crease in sales(%) - 15% 30%
-
11ad debts(%) I\% 3% 5%

, , . ·11bca n1nc1 . ·ease in fixed cost byRs 50000 on account . uof inc .reuse in sak.s hL·vond
.. -
')-So/.o
fh1:: rc w t
, tl1 r •se nt 1eve 1·
T he company plans a iwc-tax return
.
ol 201/
· r I
Q on 111vestmen1 111 ri:ci:1 \'abks.
o l e P 1: . . . ,J calcul ate the most paying credt l policy ,or t 10 company• (c, murks)
You a rc rl:q u111: 10

OP/ IO/QMS- l . I /Qui.:stion Pupi.:r/Vi.:r-1. It 2022_ Pn~~ 2 of 4

23
3lb). ABC Co. Ltd. sells goods at 25% margm. rep,n, a statement of or mg ·
Annual F1gures are as follows: · p. W k' Capital Its
.
Particulars (6m~~
Sales \ month credit iven to customers Amount in crores
\iers ive 2 months credit 1200
480
uarterl , in advance) · 180
Administrative Ex incurred)
Cash Balance 240
Stock Of Raw Material 120
Stock Of Finished Goods 45
I month
2 months
10%

•lance Sheet and P&L of Omcx HmHed fonhe Financial yea, 202 I -22 a,c g i •·en be low.
E a\uate Omex ltd's perfoTillance will, ,efe"nce t the industry standards and give Your
·ntecpcctations. \ n addition, also calculate the fo\\owi mtios ronhe con, pany,

Eamings per share_ Price/Earning Ratio (MPs - 20). Dividend pe, share
Balance Sheet as on 31.03.2022

AMOUNT
1,00.00.000
2.2s.oo.ooo
1.2s.oo.00
1.so.00.0000
1.00.00.000
so.00.00
7,so.oo,oo00
3 .oo,00.000

__so,00.0
00
,so,00,00
0
0,00,000
 Interest
50,00,000 l
Profit before tax 1,0 J,00,000
Tax 50,00,000 I
Profit after tax 51,00,000 7
Dividends 1s,oo,ooo I
Retained Earnings JJ,00,000 I
Financial Ratios of the industry
1.5
0.80
1.5
e ratio (times) 3.5
er ratio 4.0
llection eriod 60 da s
12%
6%

~ u r company, a major electrical equipment manufacturer in the pri vate sec ro r. /ia.s
:cided to e x pand its activities by gelling into telecomm~nicarions as well. This cxp:u1 ~io n
:ercise is expected to cost you Rs . I.500 crore. As the Frnance manager of the co mpa ny.
)W woul you go about raising the funds required ? ( 6 marb)

,) ·scuss the factors affecting working capital. ( 6 m ar J.. s )