Code No: D-14604
FACULTY OF COMMERCE
[Link].1-Semester (CBCS) Examination, May 2022
Subject: Financial Management
Paper: COM 4 (Elective - ) (FIATIVBICA)
Time: 3 Hours Max. Marks: 80
PART A
Note: Answer all the questions. (5 x 4 20 Marks)
1. Investment decision.
2. Importance of capital budgeting.
3. Permanent Vs variable working capital.
EBIT- EPS analysis.
5. Stable dividend policy.
PART B
Note: Answer all the questions. (5x 12 60 Marks)
6. a) What are the major types of financial management decisions that business firms
make? Describe each.
(OR)
b) For each of the following cases, calculate the amournt of money in the account at
theend of the deposit period:
Case Amount Annual interest| Deposit Compounding
deposited rate period(years)|period(monthsS)
11% 10 | 12
Rs.1,000
2,000 10%
4,000 8%
3,000 12
5,000 12%
|4.000 16%
7.a) Differentiate between NPV method and IRR method
(OR)
b) A company employs the certainty-equivalent approach in valuation of risky
investments. The capital budgeting department of the company has developed
the following information
regarding the new project
Year Expected CFAT Certainty
Rs. equivalent
quotient
-2,00,000 1.0
1,60,000 0.8
1,40,000 0.7
1,30,000 0.6
Z0,000 0.4
80.000 O.3
The firm's cost of equity capital is 18%: its cost of debt is 9% and the riskless
rate of interest in the market on the govermment securilies is 6%. Should the
project be accepted7
Code No: D-14604
2
for an enterprise.
the determinants of working capital
8. a) Kplain (OR)
the following information.
capital of a company from
b) Estimate the net working Per unit (RS.)
Elements of Cost
Raw Materal
Direct Labour
Overheads
85
Total
Profit
Selling Price 100
Addlitional Information:
52,000 unils
annum
Level of activily per average 2 weeks
Raw Material in stoCk average 1 week
Work-in-progress
(Stage of completion 50%) average 2 weeks
Finished goods in slock a v e r a g e 2 weeksS
Credil allowed by suppliers
Credit allowed to Debtors
average4 weeks
average 1 week
wages
Lag in payment of kaverage 1 week
Lag in payment of overheads Rs, 50,000
C a s h at Bank the
carried out on every throughout
YOu many that the production is
assume
Assume 52 weeks in a year.
and overheads accrue similarity.
year. wages
of a firm?
structure and value
with respect to capital
theory realistic
(mtim a) he
not, what are its main eaknesses
If (OR) Calculale a n d
Ltd. is given below.
income statement of zenith
b) A simplilied leverage, degree of
financial leverage and
interpret is degree of operalng
degree ol combined leverage.
Income slatement of Zenilh Ltd, 1or the
year ended 31 March 2005
S.
Sales
10.50.000
Variable cOst 7,67,000
Fixed cost 75,000
EBIT 2,08,0
1,10,000
Interest
Tax (30%) 29,400
Nel income 68.600
n o C o p o r á l e d i v i d e n d
nD tauu
Ohsets
tramsaelior e lest
no
A w e t a
Code No: D-14604
firm follow such a policy?
policy? Why should
a
is stable dividend
10.a)What (OR) theoretical
determine the
following
information supplied to you, model:
b) From thevalue of equity shares of a company as per
Walter's
market Rs.5,00,000
Earnings of the company Rs.3,00,000
Dividend paid Rs 1,00,000
Number of shares oulstanding
8%
Price earning ratio
15%
of return on investment
Rate