Maharaja Agrasen Institute of Management Studies

Affiliated to GGS IP University, Recognized u/s 2(f) of UGC

Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in

Department of Business Administration

Academic Year: 2022-23
Semester: 4th
Assignment-2 (Unit -3 & 4)

Course/ Subject Code: BBA 204 Subject Title: Financial Management

Issue Date: 1/05/2024 Last Date of Submission: 10/05/2024

Note:
1. The student should attach proper cover page for each assignment clearly mentioning Student’s complete
Name, University Enrolment No., Program, Semester, Class, Section, Assignment Number, and Subject
Title. Format of Cover page is attached herewith.
2. Each assignment should be prepared by the student individually in his/her own handwriting. A4
size ruled sheets should be used for writing the assignment.
3. Black or Blue pens should be used for writing the assignment.
4. Assignment pages should be serially numbered at the bottom of page.
5. The student should use examples and illustrations in support of the answers.

Questions All questions are compulsory. CO No.

Q1: While preparing a project report on behalf of a client you have collected the following CO5
facts. Estimate the net working capital required for that project. Add 10 per cent to your
computed figure to allow contingencies:

Particulars Amount per unit

Estimated cost per unit of production:

Raw material Rs80
Direct labour 30
Overheads (exclusive of depreciation, Rs 10 per unit) 60
Total cash cost 170

Additional information:
Selling price, Rs 200 per unit
Level of activity, 1,04,000 units of production per annum
Raw materials in stock, average 4 weeks
Work in progress (assume 50 per cent completion stage in respect of conversion
costs and 100 per cent completion in respect of materials), average 2 weeks
Finished goods in stock, average 4 weeks
Credit allowed by suppliers, average 4 weeks
Credit allowed to debtors, average 8 weeks
Lag in payment of wages, average 1.5 weeks
Cash at bank is expected to be, Rs 25,000.
You may assume that production is carried on evenly throughout the year (52
Weeks) and wages and overheads accrue similarly. All sales are on credit basis only.
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in

OR
Q1: Bob owns a bakery and he's trying to determine how well operations are running at his
shop. The particulars of his business are given below. Calculate current Working Capital Cycle
and number of operating cycles the firm has in a year.
Raw Material Stock Turnover 20 days
Credit Received 40 Days
WIP Turnover 15 Days
Finished Goods Stock Turnover 40 Days
Debtors’ Collection Period 60 Days
Sales(Credit) 6000
Cost of Production 4200
Credit Purchase 1200
Average Raw Material Stock 190
Average WIP 170
Average Finished Goods Stock 360
Average Creditors 150
Average Debtors 700

CO2
Q2: A project requires an initial outlay of ₹50,000 and has life of 5 years. It generates year
ending profits before depreciation and taxes (PBDT) of ₹11000, ₹12000, ₹48000, ₹60000,
₹15000. It is depreciated on using SLM. The rate of tax is 35% and cut-off rate is 16%.
Compute the following:
(1)Accounting Rate of
return
(2)Payback period
(3) NPV
(4) PI

OR
Q2. A company is considering whether to purchase a new machine. Machines A and B
are available for Rs. 80,000 each. Earnings after taxation are as follows:

Year Machine A Machine B

1 24000 8000
2 32000 24000
3 40000 32000
4 24000 48000
5 16000 32000
 Maharaja Agrasen Institute of Management Studies
Affiliated to GGS IP University, Recognized u/s 2(f) of UGC
Recognized by Bar Council of India, ISO 9001: 2015 Certified Institution
Sector 22, Rohini, Delhi -110086, India; www.maims.ac.in

Evaluate the two alternatives using the following: (a) payback method, (b) Net present
value method. You should use a discount rate of 10%.

Q3: The Vikas Engineering Co. Ltd., currently has one lakh outstanding shares selling at CO4
₹100 each. The firm has net profits of ₹10 lakh and wants to make new investments of ₹20
lakh during the period. The firm is also thinking of declaring a dividend of ₹5 per share at
the end of the current fiscal year. The firm’s opportunity cost of capital is 10 per cent. What
will be the price of the share at the end of the year if (i) a dividend is not declared; (ii) a
dividend is declared. (iii) How many new shares must be issued?
OR
Q3: The earnings per share of a company are ₹10. It has an internal rate of return of 15 per
cent and the capitalization rate of its risk class is 12.5 per cent. If Walter’s model is used: (I)
What should be the optimum pay-out ratio of the firm? (ii) What would be the price of the
share at this pay out? (iii) How shall the price of the share be affected if a different pay out
were employed?