MADRAS CHRISTIAN COLLEGE (AUTONOMOUS)

B.COM. DEGREE END OF SEMESTER EXAMINATIONS NOVEMBER – 2021 (FEBRUARY)

GROUP/BRANCH: B.COM. COMMERCE
TITLE OF THE PAPER: FINANCIAL MANAGEMENT (084CO6M03)
TIME : 1½ Hours SEMESTER – VI TOTAL MARKS: 50
03/02 FN SECTION A

Write a short note on any FOUR out of EIGHT questions in 50 words each. (4x2=8)
1. Explain the term Finance.
2. What is meant by financial Management?
3. What is a cost capital?
4. What is meant by financial planning?
5. Write a note on “Leverages”
6. What is financial leverage?
7. What is working capital?
8. Expand and explain the term EOQ.
SECTION B
Answer any TWO out of FIVE questions in 250 words each. (2x8=16)
9. List out the types of sources of finance.
10. A Ltd expects the net operating income of Rs.120000. It has Rs.600000, 6% Debentures. The
overall Capitalization rate is 10 %. Calculate the value of the firm and cost of equity according
to the net operating income approach.
11. Calculate the operating, financial and combined leverages for the following data: Sales –
Rs.50000, Variable cost Rs.25000, Interest Rs.5000 & Fixed Costs Rs.15000.
12. A company’s cost of capital (k e) is 15 %. The average tax rate of share holders is 40% and
the brokerage cost for purchase of securities is 2%. Calculate the cost of retained earnings.
13. Differentiate profit maximisation and wealth maximisation.
SECTION C
Answer any TWO out of FIVE questions in 500 words each. (2x13=26)
14. Calculate Payback period for the following data: Project X has an initial investment of
Rs.5, 00,000. Its cash flow for 5 years are: (in Rs.) 150000, 180000, 150000, 132000 &
120000.
15. Find out average amount of working capital requirement for the following:

ITEMS Amount per annum (in Rs.)

Amount locked up in stock:
Stock of Finished Goods 10,000
Stock of raw materials 8,000
Average Credit Given:
Local Sales (2 weeks Credit) 1,04,000
Outside state sales (6 weeks credit) 3,12,000
Time available for payments:
For purchases (4 weeks) 78,000
For Wages (2 weeks) 2,60,000
Add 10% to allow for contingencies.

16. From the following calculate Average Collection Period.

Items Amount (in Rs.)

Total Sales 1,00,000
Cash Sales 20,000
Sales Return 7,000
Debtors at the end of the year 11,000
Bills Receivables 4,000
Creditors 15,000

17. From the following ascertain Net Present Value assuming the initial investment is Rs.2
Lakhs.

Year Cash Flow (in Rs.) Discount Factor @ 10%

I 90,000 0.909
II 90,000 0.826
III 80,000 0.751
IV 80,000 0.683
V 60,000 0.621

18. From the following Balance Sheet, Calculate Gross Working Capital and Net Working
Capital

Liabilities (in Rs.) Assets (in Rs.)

Share Capital 6,00,000 Fixed Assets 7,00,000
Reserve 1,00,000 Current Assets :
Cash 60,000
Investments 1,00,000
Debtors 1,40,000
Inventory 2,00,000
Debentures 3,00,000 -- --
Current Liabilities: -- --
Bank Loan 1,00,000
Creditors 60,000
Bills Payable 40,000
Total 12,00,000 Total 12,00,000

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 MADRAS CHRISTIAN COLLEGE (Autonomous)

B.COM DEGREE SEMESTER EXAMINATION –APRIL 2021

GROUP / BRANCH: B.COM (COMMERCE) SELF FINANCED STREAM

TITLE OF THE PAPER: FINANCIAL MANAGEMENT

TIME: 11/2 Hrs SEMESTER –VI MAX MARKS: 50

Date:24.04.2021 FN SECTION – A

Answer any FIVE out of EIGHT questions not exceeding 40 words: (5x2=10)

01. Define Financial Management.

02. What is meant by Investment?

03. What do you meant by Capital Structure?

04. List out the types of leverages.

05. Define Cost of Capital.

06. What is Future Cost?

07. What is meant by Cash Flows?

08. What is Operating Cycle?

SECTION – B

Answer any FOUR out of SIX questions each not exceeding 300 words (4 x 10 = 40)

09. Explain the various features of an appropriate Capital Structure.

10. Ravi Ltd. Issued 20,000 8% debentures of `100 each on 1st April 2009. The cost of issue

was `50,000. The company’s tax rate is 35%. Determine the cost of debentures (before

tax and after tax) if they issued a. at par. b. at a premium of 10%. c. at a discount of
10%.
11. Koushik Ltd. Is engaged in customer retailing. You are required to estimate its working
capital requirements from the following data:

Projected annual sales Rs.650000

Percentage of net profit to cost of sales 25%
Average credit allowed to debtors 10 weeks
Average credit allowed by creditors 4 weeks
Average stock carrying (in terms of sales requirements) 8 weeks
Add 20% to allow for contingencies.

12. Following information is available with regards to the capital structure of Anu Ltd.

Amount (`in Rs. ) After tax cost of capital

( in %)
9 %Debentures 10,00,000 5%
7%Preference share capital 4,00,000 10%
Equity share capital(48000 shares ) 16,00,000 15%
Retained earnings 10,00,000 12%
The market price of equity share is Rs.80. A dividend of Rs.8 per share is proposed. The
company has marginal tax rate of 50% and share holder’s individual tax rate is 25 %.You
are required to calculate after tax,weighted average cost of capital (WACC) of the
company.

13. The management of J Ltd., decided to purchasen Machine X or Machine Y. The

followiong data is available :

Items Machine X Machine Y

Cost of Machine ( in Rs. ) 42000 15000

Estimated Life (in Years) 6 7
Sales (pa. “ in Rs” .) 30000 30000
Cost (pa. in Rs.):

Labour 2000 10000

Materials 12000 12000
Overheads 4000 3000
Advice the management regarding selection of the machine on the basis of pay back
period.

14. The following are the data related to 2 companies X & Y. You are required to calculate
the operating, financial and combined leverages of the 2 companies

Itesm XLtd., (in Rs.) Y Ltd., (in Rs.)

Sales 400000 800000
- Variable Cost 160000 240000
Contribution 240000 560000
- Fixed Cost 128000 280000
OperatingProfit( EBIT) 112000 280000
- Interest 48000 120000
ProfitBefore Tax 64000 160000
 ,

Np' r i l2 0 1 9
. E G R EEEX A M I N A T I OA
B . C o mD
FINANCIAL N{ANAGEMENT
Max' marlcs: 100
T i m e: 3 h o u r s
zQlfnt SEC'IION A-(8 x 2 : 1 6m a r k s )

AnswerALL Questions
tlanagctncnt'
i . Sratc tiie iniportance of financial
planning?
2. What is the neeclof financial
3. What is EBIT-EB'| analYsis?
point?
4. What is the meaningof indifference
5 . W h a ti s w o r k i n gc a p i t a nl r a n a g e n t e t t t ' ' )
(r. What arethe componentsof rvorkingcapital?
costof capital?
7. What do )'Iotlmeallby weightedaverage
8. What do you understancl by time valtleoi.ttlouel'?
:
SECTION B -_ (3 x 8 24 marks)

AnsweranYT'tIRIJE'questions'
capitalbudgettng
g.Differentiatebetr,veenNPVnretlrodandlR'I{rrrethoduseclin
leveragestiom thc lbllo$'ins
i 0. Calculateoperating,financialand cornbirred
inforrnztir"n:
anclflxedcostRs.
SalesRs.50,000:variabiecostRs'25'000:interestRs'-5'000
15,000.
extracted h'om thc books ol- a urtrnrtfiicturlrlg
1 1. From the following information

[^u,out.tials cortsumption per allrlllnl

Annual costof Production
A n n u a lc o s to f s a l e s
Annual sales
A""t"g. t"l,'" assetsheld:
"fburrent
a) Rar,vmaterialsRs' 1,24,000
b) Work-in-Progress Its' 72'000
c) IlinishedgoodsRS.l'22.000
d) DebtorsRs. 2,60,000
All saiestlracie
its sr-rppliers' b1'tnirlrf|rl
Thc companygets30 dayscrcdittionl
as equalto 365 da1's'
areon credito'''ty' Vou mal' takeone \''z1r
capitalstrttctltrclor a compan'v' thc fbllgw'ttrs
the mostdesirabie
12.In consider:ing
bcetrmatlcat
tax) har',c
(a1tc:r
estimatesof the costof ciebtandcquitl'capital
variouslevelsof Debt-Equityrnix:
C o s to f e q u i t l (' % )
..l.rrt
r'z'r l-
ffil-a;rt "f
totq!gryltultryLol"A --l
 rt

--_r
5.0 I 12.0
0
5.0 l 12.0
10 IL.)
20 5.0
5.5 1 30
30 14.0
40 6.0
6.5 1 60
s0 20.0
60 7.0
debr-equity
rheoprimal fbr thc corrlPanl b1
ffie
calculatingcornposite costo1'capital'
to
is cotrsicicrtng
ar-rci
13.Pe,votf'Ltd.is piciucir-rgarticlcsiiiosilyorriranciiabour
ol-the
repiaceit by a ner.l,machine. Thereare tr'voalternativemodelsM and N
showingthe pal'-bacltpcriocl
new machine.Preparea statementof profitability
from the followinginfbrmation;ignoretaxation
MachineM MachineN
Parliculars
4 years 5 years
Estimatedlife of machiue
Rs.9,000 R s .18,000
Cost of machine
500 800I
Estirnatedsavirrgin scraP
6.000 8,000 i
Estimatcdsavingir-rdircct wages
c o s to f m a i n t c n a t t c c 8 0 0 1 . 0 010
Additional
1,200 1,8W l
L
Additionalcost o1'superllllon

SECTION C - (3 X 20 - 60 marks)
'iFiR'FiF'questions
r a*y
Ans-'ve
beforeinterestandtaxes
14. Assumingno taxesand giventhe earnings
rate(ke)
(EBIT) , interestrateat i0% and equitycapitalisation
firm
below, calculatethe total marketvalueof each I

Firnrs E BI T( i n R s I l l n t e r e s t ) ( iRni l
A 2.00,000 20,000
B 3,00,000 60,000
C 5,00,000 2,00,000
D 6,00,000 2,40,000
'ugt tott of caPitalfor eachf-irm'
operalionof a firm duringa perioclo1'
15.'l'hefbilowilg arethe detailsregardingthe
I 2 Ittortths:
'r 'l R s ' 1 2 '0 0 ' u o 0
Sales
l0
SellingnricePerunit
VariablecostPricePeruuit :
l ' o t r l c o s tP e rt r n i t
one nlonth
Creditperiodallowedto customers
liberalextensiol.t of crcdit br
The frrm is consideringa proposaltbr a more 'l'his
average collection period from one month to two tronths
increasingthe
25%'
relaxationis expectedto increasethe salesby
 rt

1"6. A companyis consideringan investmentproposalto installa new machine.Theproject

and will havea lifeof 5 yearsand no salvage
will costRs.50,000 value.Thecompany's
t a x r a t ei s 5 O %a n d n o i n v e s t m e natl l o w a n cies a l l o w e d .T h ef i r m u s e ss t r a i g hlti n e
methodof depreciation.Theestimatednet incomebeforedepreciation andtax from
the proposed investment proposal is a asfollows:

Year Net lncomebeforeDepreciation

& Tax P vf a c t o ra t t 0 %
Rs.
1, 10,000 0.909
2 l_1,000 0.826
3 14,000 o.751
4 1_5,000 0.683
5 25,000 o.621
Compute:

l-) period
Pay-back 3) Net presentvalueat ro% discountrate

2) Averagerateof return 4) Profitability

Index10%discountrate.

17. Thefollowingis the capitalstructureof XYZLtd.,

Source Amount Specific

costof
(Rs.) capital

Equitysharecapital(2,00,000
sharesof Rs.10each) 20,00,000 11%

sharecapital(50,000sharesof Rs.i.0
Preference 5,00,000 8%
each)

RetainedEarnings 10,00,000 1"L%

9% Debentures
of Rs.1000
each L5,00,000 4.s%

P r e s e n t l tyh, e d e b e n t u r easr eb e i n gt r a d e da t 9 4 Y op, r e f e r e n cseh a r e sa t p a ra n dt h e

equitysharesat Rs.13per share.Findoutthe weightedAverageof costof capitalbased
on bookvalueweightsand'marketvalueweights.

18. Explainin detailthe factorsdetermining

capitalstructure.

i<*(*,k************
 s

MADRAS CHRISTIAN COLLEGE AUTOI\OMOU S

B.COM. DEGREE END OF SEMESTE,REXAMINATTON APRIL _ 2018
GROUP/ BRANCH : B.COM (COMMERCE) SELF FII{ANCED STREAM
TITLE OF THE PAPER: FINANCIAL MANAGEMENT (084CO6M03)
Time:3HRS SEMESTtrR-V (SX2:16)
e3 lfn.l -A
sECrroN
Answer all questions.

01. DefineFinancial Management

02. What is dividend policy?

03. Define capital structure.

04. What do you mean by over capitalization and under capitalization?

05. What is cost of capital?

06. What is Time Value of MoneY?

07. Write a note on risk.

08. Mention the sources of working capital.

SECTION-B (3X8:24)

AnsweranyThreequestions.
09. What are the objectivesof FinancialManagement?
10. Discussthe importanceof costof capital.
11. Explain the typesof working capital.
12. Kumar Ltd hasas EBIT of '100000.The costof debt is 107" and the outstanding
debt is '4,00,000.The overallcapitalizationrate is (ko) is l2.5oh. Calculatethe total
valueof the firm and equity capitalizationrate under NOI approach.
13. ABC limitedis considering2 project. Eachrequiresan investmentof Rs.10,000.
The net cashinflows from investmentin the tlvo projectsX and Y are as follorvs:

Year I 2 3 4 5 6
X 5000 4000 3000 1000
Y 1000 2000 3000 4000 s000 6000
 sr

T h e c o m p a n yh a s f i x e d 3 y e a r sp a y - b a c k p e r i o d a s t h e c u t - o f f p o i n t . E v a l u a t et h e t w o

projects.

SECTION-C (3X20:60)

Anslver any Three questions.

14. P r o j e c tX i n i t i a l l yc o s t R s . 2 5 0 0 0 .l t g e n e r a t e st h e f o l l o w i n gc a s hf l o w s :

year L 2 3 4 5

C a s hl n f l o w s 9000 8000 7000 6000 5000

PresentValue of Re t @tO% .909 .826 .751, .683 . 621.

T a k i n gc u t - o f f r a t e a s L O %s u g g e s w
t h e t h e r t h e p r o j e c t s h o u l db e a c c e p t e do r n o t .

15. D i s c u stsh e v a r i o u sf u n c t i o n so f a f i n a n c em a n a g e r .

16. A c o m p a n yh a st o c h o o s eo n e o f t h e f o l l o w i n gt w o m u t u a l l ye x c l u s i v ep r o j e c t s .

l n v e s t m e n tr e q u i r e df o r e a c h p r o j e c ti s 1 5 , 0 0 0 . B o t h t h e p r o j e c t sh a v et o b e

d e p r e c i a t e do n s t r a i g h tl i n e b a s i s .T h e t a x r a t e i s 5 0 % .

Years t 2 3 4 5

Project A 4200 4800 7000 8000 2000

Project B 4200 4200 4000 5000 10000
C a l c u l a tpea y b a cpk e r i o d .

17. Y o u a r e s u p p l i e dw i t h t h e f o l l o w i n gi n f o r m a t i o ni n r e s p e c to f X Y ZL t d f o r t h e e n s u i n g

year.

P r o d u c t i o nf o r t h e y e a r 69,000 units
F i n i s h e dg o o d si n s t o r e 3 months
Rawmaterials
in store 2 months
P r o d u c t i o np r o c e s s L month
C r e d i ta l l o w e d b y c r e d i t o r s 2 months

C r e d i tg i v e nt o D e b t o r s 3 months
 w

Raw m a t e r i a l5 0 % o f s e l l i n gp r i c e .

D i r e c tW a g e s t O % o f s e l l i n gp r i c e .

s 0 % s e l l i n gp r i c e .
Overhead2

T h e r ei s a r e g u l a rp r o d u c t i o na n d s a l e sc y c e
f a n d w a g e sa n d o v e r h e a d sa c c r u ee v e n l y .

W a g e sa r e p a i d i n t h e n e x t m o n t h o f a c c r u a l .M a t e r i a li s i n t r o d u c e di n t h e b e g i n n i n go f

p r o d u c t i o nc y c l e . E s t i m a t et h e w o r k i n gc a p i t a lr e q u i r e m e n t .

18. E x p l a i nt h e f a c t o r sd e t e r m i n i n gt h e w o r k i n gc a p i t a l .
* * * , k * * * * * , k , k* * * * * * , k
 MADRAS CHRISTIAN COLLEGE (AUTONOMOUS)

B.COM. DEGREE EXAMINATION NOVEMBER - 2020

GROUP/BRANCH: B.COM. COMMERCE
SELF FINANCED STREAM
TITLE OF THE PAPER: FINANCIAL MANAGEMENT (084CO6M03)
TIME : 1½ HRS SEMESTER –VI TOTAL MARKS: 50
30.12.2020 SECTION – A (5 x 2 =10 Marks)
Answer any Five out of EIGHT questions each not exceeding 40 words.
01. Write a note on “Financial Management”.
02. State the two basic objectives of financial management.
03. What is meant by capital Structure?
04. Write a note on Operation Leverage.
05. What is cost of capital?
06. What is gross working capital?
07. What do you mean by working capital?
08. What do you mean by EOQ?
SECTION – B (4 X 10 = 40 Marks)
Answer Any FOUR out of SIX questions each not exceeding 300 words.

09. Explain the importance of cost of capital.

10. a) Kamal Limited issued Rs.60,000 15% Irredeemable preference shares of
Rs.100 each. The issue expenses were Rs.60,000. Determine the cost of preference
capital, if shares are issued (a) at par and (b) at a premium of 10%.
b) Rahima Limited is engaged in customer retailing. You are required to estimate
its working capital requirements from the following data:
Projected Annual Sales Rs.10,80,000
Percentage of Net Profit to Cost of Sales 20%
Average Credit allowed to Debtors 1 Month
Average Credit allowed by Creditors 2 Months
Average stock carrying(in terms of sales requirements) 2.5. Months
Add 10% to allow for contingencies.
11. Discuss the objectives of financial management.
 Contd -2-
-2-
12. The following figures of Majestic Limited are presented to you:
Rs Rs
Earnings before Interest and Taxes ---- 20,00,000
Less: Debenture Interests @ 9% 90,000
Interest on Long – Term Loan @ 10% 3,00,000 3,90,000
16,10,000
Less : Income Tax 8,05,000
Earnings after tax 8,05,000
Number of equity shares of Rs.10 each 4,50,000
Earnings per share Rs.3
Market price per share Rs.30
P/E ratio 10
The company has undistributed reserves and surplus of Rs.15,00,000. It is in need of
Rs.25,00,000 to pay of Debentures and modernize its plant. It seeks your advice on
the following alternative modes of raising finance.
Alternative I : Raising entire amount as terms loan from bank @15%
Alternative II: Raising part of the funds by issue of 50,000 shares of Rs.30 each and
the rest by the term loan at 15%. The company expects to improve its
rate of return by 5% as a result of modernization but P/E Ratio is likely
to go down to 8 if the entire amount is raised as term loan. Advise the
company on the financial plan to be selected.
13. A company was recently formed to manufacture a new product. It has the following
capital structure:
Rs
a) 8 % Debentures 10,00,000
b) 9% Preference Share Capital 4,00,000
c) Equity Share Capital (48,000 Shares) 16,00,000
d) Retained Earnings 10,00,000
 40,00,000
The market price of each equity share is Rs.80. A dividend of Rs.8 per share is
proposed.
The company has marginal tax rate of 50% and the shareholder’s individual tax rate
is 25%. Compute after tax Weighted Average Cost of Capital of the company.

14. A company has prepared its annual budget, relevant details which are
reproduced below:
(a) Sales Rs.46,80,000 (25% Cash sales and balance on credit) :78,000 units
(b) Raw Materials cost :30%of sales value
(c) Labour cost :Rs.6 per unit
(d) Variable overheads : Re.1 per unit
(e) Fixed overheads (including Rs.1,10,000 as depreciation) : Rs.5,00,000
(f) Budgeted stock levels:
Raw materials : 3 weeks
Work-in-progress : 1 week
(Material 100 % Labour and Overheads approximately 50%)
Finished goods : 2 weeks
(g) Credit period allowed to Customers : 4 weeks
(h) Credit period allowed by suppliers of raw materials : 4 weeks
(i) Lag in payment of wages : 2 weeks
(j) Lag in payment of overhead : 2 weeks
(k) Cash in hand required : Rs.50,000
Prepare the working capital budget for the year for the company making whatever
assumptions that you may find necessary.

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 Ur

MADRAS CHRISTIAN COLLEGE (AUTONOMOUS)

B.COM. DEGREE EXAMINATION OCTOBEruNOVF],MBER- 2OI9
GROUP/BRANCH:B.COM. COMMERCE
TITLtr OF THtr PAPER: FINANCIAL MANAGEMENT (084CO6M03)
TIME : 3 HRS SEMESTER- IV TOTAL MARKS: 100
01th A.N" SECTION - A (8x2:16)
01. E x p l a i nt h ei m p o r t a n coef F i n a n c i aMl a n a g e m e n t .
A2. Whatis dividend?
03. Explaincapitalstructure.
04" Whatdo you meanby over capitalization
andundercapitalization?
05. Whatis costof capital?
06. Whatis workingcapital?
07. Whatis risk?
08. Mentionthe typesof workingcapital.
SECTION.B
AnswerANY THREE Questions (3 x 8 -24)
09. KumarLtd hasan EBIT of 1,00.000.
Thecostof debtis 10%andtheoutstanding debtis
rateis (ko) is 12.5%.Calculatethe totalvalueof the
4,00,000.The overallcapitalization
rateunderNOI approach.
firm andequalitycapitalization
10. 2 projects.
ABC limitedis considering Eachrequires
in investment
of Rs.10,000.
Thenet
in thetwo projectsX andY areas fbllows.
cashirrflowsfrom investment
,) ,
Year I L ''l
+ 5 6
X 5,000 4,000 3,000 1,000
Y 1,000 2,000 3,000 4.000 5.000 6,000
The cornpanyhasfixed 3 yearspay-bacl<
periodasthe cut-offpoirrt.
ll. X Ltd.,is expecting
an annualEBIT of Rs.l Lakh. Theconrpany
hasRs.4.0.
lal<hin 10o/o
debentures.
The costof equitycapitalor capitalization
rateis 125%. You arerequired
to calculate
thetotalvalueof the firm. Also statetheoverallcostof capital.
12. theaverageageof receivables
Calculate for the follorvirrg
data: Crcditsales1'ortlie year
1 9 9 8R s . 6 0 . 0 0 A
0 .c c o u n trse c e i v a b al eso n I . l . 9 8 . R s . 7 , 0 0a0n do n 3 I . 1 2 . 9 8R. s . 5 . 0 0 0 .

Contd-2-
 vr

-z-

13. F r o m t h e f o l l o w i n g i n f o r m a t i o ne x t r a c t e df r o r n t h e b o o k so l ' a m a n u f ' a c t u r i ncgo m p a n y ,

c o m p t t t et h e o p e r a t i n gc y c l e i n d a y s : P e r i o dc o v e r e d :3 6 5 d a y sA v e r a g ep e r i o do f c r e d i t

a l l o w e db y s u p p l i e r s l:6 d a y s .

Averagetotal of debtorsoutstanding 4,80,000

Raw Materialsconsumption 44,00,000
Total productioncost r.00"00.000
Totalcostof sales 1,05,00,000
Salesfor the vear 1,60,00,000
Value of averagestock maintained:

Raw materials 3,20,000

Work-in-progress 3,50,000
Firrished
soods 2,60,000

SECTIOI\-C (3x20:60)
Answerany THREE questions.All questionscarry equalmarks.

14. Two firms R and S are identicalexceptin the methodof financing.Firm R hasno clebt.
while firm S has 3,00,0008% Debentures
in financing. Bothe the firms havea Net
peratingincome(EBIT) of 1,20,000andequity capitalization
rateo{' 12%.Thecorporate
tax rateis 35oh.Calculate
the valueof the firm usingMM approach.
15. RadhaLtd.Issued of 100eachon l't April -2009. Thecostof issue
20,0008% debentures
was50,000.Thecompany'stax rateis 35%. Determine (beforetax
thecostof debentures
andaftertax) if they issuedat par.
16. Explainin detailthe factorsaffecting
capitalstructure
decisions.
17. Koushil<
Ltd is engagedin cttstomer
retailing.You arereqLtired
to estimate
its ivorkipg
capitalreqLlirements
from the follorvingdata.

Clontd-3-
 ?rr

-3-

Proiected
annualsales 9,00,000
of net profit to cost of sales
Percentage 20%
Averagecredit allowed to debtors I rnontlr

Averagecredit allowed by creditors 2 montl-rs

Averagestock carrying(in terrnsof sales 2 % months
requirement)
Add I 0o/oto allow for contingencies.

t8. A c o m p a n yh a st o c h o o s eo n e o f t h e f o l l o w i n gt w o m u t u a l l ye x c l u s i v ep r o j e c t s .I n v e s t m e n t
r e q u i r e f o r e a c h p r o j e c t 1i s5 , 0 0 0 .B o t h t h e p r o j e c t s h a v e t o b e d e p l e c i a t e d o n s t r a i g h t l i n e

basis. The tax rate is 50%

ProjectA 4,200 4,800 7,000 8,000 2.000

ProiectB 4,204 4,200 4,000 5,000 10,000

paybackperiod.
Calculate

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