Download JNTUH MBA 4th Sem 2019 April Strategic Investment and Financing Decision Question Paper

Download JNTUH (Jawaharlal Nehru Technological University Hyderabad) MBA Fourth Year (4th Semester) 2019 April Strategic Investment and Financing Decision Question Paper.

HallTicketNo QuestionPaperCode:CMB419
.
.
MBAIVSemesterEndExaminations(Regular)-April,2019
Regulation: .?R16
StrategicInvestmentandFinancingDecision
(MBA)
Time:3Hours (Elective:Finance) MaxMarks: 70
AnswerONEQuestionfromeachUnit
AllQuestionsCarryEqualMarks
Allpartsofthequestionmustbeansweredinoneplaceonly
UNIT?I
1. (a) Di?erentiatebetweenspeculationandinvestment. [7M]
(b) FindoutthecompoundvalueRs.1000/-,bearinginterestrate12%perannumifcompounded
annuallyandsemi-annually.
[7M]
2. (a) De?necapitalrationing.Howwouldyouselecttheinvestmentprojectsunderone-periodcapital
constraint? [7M]
(b) SWouldcapitalrationingleadtosub-optimalinvestmentdecision? [7M]
UNIT?II
3. (a) WriteshortnotesonNetpresentvalueandInternalrateofreturn. [7M]
(b) ABCLtdisevaluatingaproposalinvolvingcashoutlayofRs.40,000atyear0andcashout?ows
ofRs.18,000,Rs.19,020,Rs.20,224andRs.21,438attheendofeachofthenext4yearsafter
whichtheprojectisexpectedtohaveascrapvalueofRs.4,000.Thecashin?owsareexpectedto
beRs.28,000,Rs.42,000,Rs.42,000andRs.34,000attheendofyear1to4respectively.Allthe
aboveestimatesofcash?owshavebeenmadeintermsofmoneyoftodayi.e.,year0.Evaluate
theproposalinrealtermsbyapplyingtheNPVtechniquegiventhatthein?ationrateis6%p.a
andthediscountrateis18%. [7M]
4. (a) DiscussaboutLoriesavageparadoxandexplaintheimpactofin?ationoncapitalbudgeting
decisions. [7M]
(b) TheearningspershareofacompanyisRs.10/-IthasanIRRof15%andcapitalizationrateof
itsriskclassis12.5%.
i. Whatwouldbetheoptimumpayoutratioofthe?rm?
ii. Whatwouldbethepriceofshareatthispayout?
[7M]
Page1of3
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HallTicketNo QuestionPaperCode:CMB419
.
.
MBAIVSemesterEndExaminations(Regular)-April,2019
Regulation: .?R16
StrategicInvestmentandFinancingDecision
(MBA)
Time:3Hours (Elective:Finance) MaxMarks: 70
AnswerONEQuestionfromeachUnit
AllQuestionsCarryEqualMarks
Allpartsofthequestionmustbeansweredinoneplaceonly
UNIT?I
1. (a) Di?erentiatebetweenspeculationandinvestment. [7M]
(b) FindoutthecompoundvalueRs.1000/-,bearinginterestrate12%perannumifcompounded
annuallyandsemi-annually.
[7M]
2. (a) De?necapitalrationing.Howwouldyouselecttheinvestmentprojectsunderone-periodcapital
constraint? [7M]
(b) SWouldcapitalrationingleadtosub-optimalinvestmentdecision? [7M]
UNIT?II
3. (a) WriteshortnotesonNetpresentvalueandInternalrateofreturn. [7M]
(b) ABCLtdisevaluatingaproposalinvolvingcashoutlayofRs.40,000atyear0andcashout?ows
ofRs.18,000,Rs.19,020,Rs.20,224andRs.21,438attheendofeachofthenext4yearsafter
whichtheprojectisexpectedtohaveascrapvalueofRs.4,000.Thecashin?owsareexpectedto
beRs.28,000,Rs.42,000,Rs.42,000andRs.34,000attheendofyear1to4respectively.Allthe
aboveestimatesofcash?owshavebeenmadeintermsofmoneyoftodayi.e.,year0.Evaluate
theproposalinrealtermsbyapplyingtheNPVtechniquegiventhatthein?ationrateis6%p.a
andthediscountrateis18%. [7M]
4. (a) DiscussaboutLoriesavageparadoxandexplaintheimpactofin?ationoncapitalbudgeting
decisions. [7M]
(b) TheearningspershareofacompanyisRs.10/-IthasanIRRof15%andcapitalizationrateof
itsriskclassis12.5%.
i. Whatwouldbetheoptimumpayoutratioofthe?rm?
ii. Whatwouldbethepriceofshareatthispayout?
[7M]
Page1of3
UNIT?III
5. (a) Explainthesigni?canceofinformationanddatabankinprojectselection. [7M]
(b) AlphaLtdisconsideringtwomachinesAandB.Thoughdesigneddi?erently,theyservethesame
function. MachineA,astandardmodel,costsRs. 75,000andlastsfor?veyears. Itsannual
operatingcostswillbeRs.12,000.MachineB,aneconomymodel,costsRs.50,000butlastsfor
onlyThreeyears. ItsannualoperatingcostswillbeRs. 20,000. HowshouldAlphaLtdchoose
betweenthetwomachinesifthecostofcapitalis12%?
[7M]
6. (a) WriteinbriefaboutHertzsimulationandHillerapproach. [7M]
(b) Discusstheprocedureandprosandconsofsimulationanalysis. [7M]
UNIT?IV
7. (a) Writeaboutlease?nancingandwriteaboutitsadvantages. [7M]
(b) ApexSteelsrequiresanassetcostingRs.2million.LaxmiFinanceo?ersahire-purchaseproposal
foraperiodof3yearsata?atinterestrateof12percent. Laxmialsogivesaleaseproposal
whereintheleaserentalwouldbeRs.280perRs.1,000peryearforthe?rst5years(primary
period)andRs.20,000peryearforthenext5years(secondaryperiod). Thereafter,theasset
wouldreverttoLaxmi. Thedepreciationrateontheassetis25%(WDV)anditsnetsalvage
valueafter10yearswouldbeRs.2,00,000. Apexhasataxrateof40percentanditspost-tax
costofdebtis10percent.ShouldApexchoosethehire-purchaseortheLeasingoption?
[7M]
8. (a) WhatismeantbyHire-purchasearrangement? Whatareitsfeatures? Howisitdi?erentfrom
Leasing? [7M]
(b) HowLease?nancingisusedtominimizetheriskinRiskmanagement. [7M]
Page2of3
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HallTicketNo QuestionPaperCode:CMB419
.
.
MBAIVSemesterEndExaminations(Regular)-April,2019
Regulation: .?R16
StrategicInvestmentandFinancingDecision
(MBA)
Time:3Hours (Elective:Finance) MaxMarks: 70
AnswerONEQuestionfromeachUnit
AllQuestionsCarryEqualMarks
Allpartsofthequestionmustbeansweredinoneplaceonly
UNIT?I
1. (a) Di?erentiatebetweenspeculationandinvestment. [7M]
(b) FindoutthecompoundvalueRs.1000/-,bearinginterestrate12%perannumifcompounded
annuallyandsemi-annually.
[7M]
2. (a) De?necapitalrationing.Howwouldyouselecttheinvestmentprojectsunderone-periodcapital
constraint? [7M]
(b) SWouldcapitalrationingleadtosub-optimalinvestmentdecision? [7M]
UNIT?II
3. (a) WriteshortnotesonNetpresentvalueandInternalrateofreturn. [7M]
(b) ABCLtdisevaluatingaproposalinvolvingcashoutlayofRs.40,000atyear0andcashout?ows
ofRs.18,000,Rs.19,020,Rs.20,224andRs.21,438attheendofeachofthenext4yearsafter
whichtheprojectisexpectedtohaveascrapvalueofRs.4,000.Thecashin?owsareexpectedto
beRs.28,000,Rs.42,000,Rs.42,000andRs.34,000attheendofyear1to4respectively.Allthe
aboveestimatesofcash?owshavebeenmadeintermsofmoneyoftodayi.e.,year0.Evaluate
theproposalinrealtermsbyapplyingtheNPVtechniquegiventhatthein?ationrateis6%p.a
andthediscountrateis18%. [7M]
4. (a) DiscussaboutLoriesavageparadoxandexplaintheimpactofin?ationoncapitalbudgeting
decisions. [7M]
(b) TheearningspershareofacompanyisRs.10/-IthasanIRRof15%andcapitalizationrateof
itsriskclassis12.5%.
i. Whatwouldbetheoptimumpayoutratioofthe?rm?
ii. Whatwouldbethepriceofshareatthispayout?
[7M]
Page1of3
UNIT?III
5. (a) Explainthesigni?canceofinformationanddatabankinprojectselection. [7M]
(b) AlphaLtdisconsideringtwomachinesAandB.Thoughdesigneddi?erently,theyservethesame
function. MachineA,astandardmodel,costsRs. 75,000andlastsfor?veyears. Itsannual
operatingcostswillbeRs.12,000.MachineB,aneconomymodel,costsRs.50,000butlastsfor
onlyThreeyears. ItsannualoperatingcostswillbeRs. 20,000. HowshouldAlphaLtdchoose
betweenthetwomachinesifthecostofcapitalis12%?
[7M]
6. (a) WriteinbriefaboutHertzsimulationandHillerapproach. [7M]
(b) Discusstheprocedureandprosandconsofsimulationanalysis. [7M]
UNIT?IV
7. (a) Writeaboutlease?nancingandwriteaboutitsadvantages. [7M]
(b) ApexSteelsrequiresanassetcostingRs.2million.LaxmiFinanceo?ersahire-purchaseproposal
foraperiodof3yearsata?atinterestrateof12percent. Laxmialsogivesaleaseproposal
whereintheleaserentalwouldbeRs.280perRs.1,000peryearforthe?rst5years(primary
period)andRs.20,000peryearforthenext5years(secondaryperiod). Thereafter,theasset
wouldreverttoLaxmi. Thedepreciationrateontheassetis25%(WDV)anditsnetsalvage
valueafter10yearswouldbeRs.2,00,000. Apexhasataxrateof40percentanditspost-tax
costofdebtis10percent.ShouldApexchoosethehire-purchaseortheLeasingoption?
[7M]
8. (a) WhatismeantbyHire-purchasearrangement? Whatareitsfeatures? Howisitdi?erentfrom
Leasing? [7M]
(b) HowLease?nancingisusedtominimizetheriskinRiskmanagement. [7M]
Page2of3
UNIT?V
9. (a) Explainthethegovernmentguidelinesfortakeoverandproblemsaftermergingandacquisition.
[7M]
(b) Di?erentiateaboutmergersandacquisitions.Explainabouttypesofmergersanditstheories.
[7M]
10. (a) Describethehorizontal,verticalandconglomeratemergerswithsuitableexamplesintheIndian
Context. [7M]
(b) GamaFertilizersCompanyistakingoverThetaPetrochemicalsCompany. Theshareholdersof
Thetawouldreceive0.8sharesofGamaforeachshareheldbythem.Themergerisnotexpected
toyieldineconomiesofscaleandoperatingsynergy. Therelevantdataforthetwocompanies
areasfollows: [7M]
Table1
? Gama Theta
Netsales(RsCr) 335 118
Pro?taftertax(RsCr) 58 12
Numberofshare(Cr) 12 3
Earningspershare(Rs) 4.83 4
Marketvaluepershare(Rs) 30 20
Price-earningsratio 6.21 5
Forthecombinedcompanyaftermerger,youarerequiredtocalculate(i)EPS,(ii)P/Eratio.
? ? ? ? ? ? ?
Page3of3
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