Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2019 Summer 3rd Sem 3539901 Financial Management Previous Question Paper
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA(PART TIME) ? SEMESTER III ? EXAMINATION ? SUMMER 2019
Subject Code: 3539901 Date:13/05/2019
Subject Name: Financial Management
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1 Explain the terms
(a) Annuity
(b) Perpetuity
(c) Capital Structure
(d) Financial Leverage
(e) Inventory Management
(f) WACC
(g) Working Capital
14
Q.2 (a) What is Financial Management? Explain the four main functions of Financial
Management.
07
(b) The Arjun Company has the following capital structure on 30 June 2018.
Ordinary Share (200000 shares) 4,000,000
10% Preference Share 1,000,000
14% Debenture 3,000,000
The share of the company sells for Rs. 20. It is expected that company will pay
next year a dividend of Rs. 2 per share, which will grow at 8% forever. Assume
a 35 per cent tax rate. You are required to calculate WACC on the basis of
existing capital structure.
07
OR
(b) A firm has issued 9%, 10 year bond with Rs. 1000 par value that pays interest
annually, Compute the value of bond if required rate of return is 10%.
07
Q.3 (a) Alpha Ltd & Beta Ltd operate on the same line of business of manufacturers of
Rubber components. However their cost structure & Financial structures differs
substantially. An analysis of their financial performance is reveled in following
data.
Particular Alpha Ltd Beta Ltd
Sales 5,00,000 10,00,000
Less: Variable Cost 2,00,000 3,00,000
Contribution 3,00,000 7,00,000
Less: Fixed Cost 1,50,000 4,00,000
EBIT 1,50,000 3,00,000
Less: Interest 50,000 1,00,000
EBT 1,00,000 2,00,000
Calculate the following.
1. Degree of Operating leverage
2. Degree of Financial Leverage
07
FirstRanker.com - FirstRanker's Choice
1
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA(PART TIME) ? SEMESTER III ? EXAMINATION ? SUMMER 2019
Subject Code: 3539901 Date:13/05/2019
Subject Name: Financial Management
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1 Explain the terms
(a) Annuity
(b) Perpetuity
(c) Capital Structure
(d) Financial Leverage
(e) Inventory Management
(f) WACC
(g) Working Capital
14
Q.2 (a) What is Financial Management? Explain the four main functions of Financial
Management.
07
(b) The Arjun Company has the following capital structure on 30 June 2018.
Ordinary Share (200000 shares) 4,000,000
10% Preference Share 1,000,000
14% Debenture 3,000,000
The share of the company sells for Rs. 20. It is expected that company will pay
next year a dividend of Rs. 2 per share, which will grow at 8% forever. Assume
a 35 per cent tax rate. You are required to calculate WACC on the basis of
existing capital structure.
07
OR
(b) A firm has issued 9%, 10 year bond with Rs. 1000 par value that pays interest
annually, Compute the value of bond if required rate of return is 10%.
07
Q.3 (a) Alpha Ltd & Beta Ltd operate on the same line of business of manufacturers of
Rubber components. However their cost structure & Financial structures differs
substantially. An analysis of their financial performance is reveled in following
data.
Particular Alpha Ltd Beta Ltd
Sales 5,00,000 10,00,000
Less: Variable Cost 2,00,000 3,00,000
Contribution 3,00,000 7,00,000
Less: Fixed Cost 1,50,000 4,00,000
EBIT 1,50,000 3,00,000
Less: Interest 50,000 1,00,000
EBT 1,00,000 2,00,000
Calculate the following.
1. Degree of Operating leverage
2. Degree of Financial Leverage
07
2
3. Degree of Combined Leverage
(b) Explain the Gorden & Walter Model of Dividend Decision theory 07
OR
Q.3 (a) You are appointed as Finance Manager of Company. The company provides
the following data:
Direct Material: Rs. 52 per unit
Direct Labour: Rs. 19.5 per unit
Overheads: Rs. 39 per unit
Selling Price: Rs. 130 per unit
The following additional information are available:
Average raw material in stock: 1 Month, Average material in progress: 0.5
month, Average finished goods in stock: 1 month, Credit allowed by suppliers:
1 month, Credit allowed to debtors: 2 Months, Time lag in payment of wages:
1.5 weeks, overheads: 1 month. 25% of sales are on cash basis. Cash balance is
expected to be Rs. 1,20,000.
You are required to prepare a statement showing the working capital needed to
finance a level of activity of 70,000 units of output. You may assume that
production carried on evenly, throughout the year and wages and overhead
accrue similarly.
07
(b) Explain the Net Income (NI) and Net Operating Income (NOI) approaches with
graph.
07
Q.4 Zydus Ltd has two mutually exclusive proposal A & B requiring initial outlay of
Rs. 100,000 each. Both Projects have life of 7 Years with following cash flows.
Year Project
A
Project B
1 6,000 50,000
2 10,000 35,000
3 25,000 25,000
4 30,000 7,000
5 40,000 10,000
6 45,000 10,000
7 50,000 15,000
(a) Calculate NPV if Cost of Capital is 10% 07
(b) Calculate NPV if cost of capital is 15% 07
OR
Q.4 (a) Calculate PI if Cost of Capital is 10% 07
(b) Calculate PI if cost of capital is 15% 07
Q.5 As an investment advisor, you have been approached by a client called Sathya
for advice on some financial matters. Sathya is 40 years old and has Rs.3,000,000
in bank. He plans to work for 20 years more and retire at the age of 60. His
present salary is Rs.1,800,000 per year. Assume that yearly expenditure of
Sathya is Rs. 800,000.
Sathya has decided to invest his bank balance and future savings in a
balanced mutual fund scheme which he believes will provide a return of 12
percent per year.
Sathya seeks your help in answering several questions given below. In answering
these questions, ignore the tax factor.
FirstRanker.com - FirstRanker's Choice
1
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA(PART TIME) ? SEMESTER III ? EXAMINATION ? SUMMER 2019
Subject Code: 3539901 Date:13/05/2019
Subject Name: Financial Management
Time: 02:30 PM To 05:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1 Explain the terms
(a) Annuity
(b) Perpetuity
(c) Capital Structure
(d) Financial Leverage
(e) Inventory Management
(f) WACC
(g) Working Capital
14
Q.2 (a) What is Financial Management? Explain the four main functions of Financial
Management.
07
(b) The Arjun Company has the following capital structure on 30 June 2018.
Ordinary Share (200000 shares) 4,000,000
10% Preference Share 1,000,000
14% Debenture 3,000,000
The share of the company sells for Rs. 20. It is expected that company will pay
next year a dividend of Rs. 2 per share, which will grow at 8% forever. Assume
a 35 per cent tax rate. You are required to calculate WACC on the basis of
existing capital structure.
07
OR
(b) A firm has issued 9%, 10 year bond with Rs. 1000 par value that pays interest
annually, Compute the value of bond if required rate of return is 10%.
07
Q.3 (a) Alpha Ltd & Beta Ltd operate on the same line of business of manufacturers of
Rubber components. However their cost structure & Financial structures differs
substantially. An analysis of their financial performance is reveled in following
data.
Particular Alpha Ltd Beta Ltd
Sales 5,00,000 10,00,000
Less: Variable Cost 2,00,000 3,00,000
Contribution 3,00,000 7,00,000
Less: Fixed Cost 1,50,000 4,00,000
EBIT 1,50,000 3,00,000
Less: Interest 50,000 1,00,000
EBT 1,00,000 2,00,000
Calculate the following.
1. Degree of Operating leverage
2. Degree of Financial Leverage
07
2
3. Degree of Combined Leverage
(b) Explain the Gorden & Walter Model of Dividend Decision theory 07
OR
Q.3 (a) You are appointed as Finance Manager of Company. The company provides
the following data:
Direct Material: Rs. 52 per unit
Direct Labour: Rs. 19.5 per unit
Overheads: Rs. 39 per unit
Selling Price: Rs. 130 per unit
The following additional information are available:
Average raw material in stock: 1 Month, Average material in progress: 0.5
month, Average finished goods in stock: 1 month, Credit allowed by suppliers:
1 month, Credit allowed to debtors: 2 Months, Time lag in payment of wages:
1.5 weeks, overheads: 1 month. 25% of sales are on cash basis. Cash balance is
expected to be Rs. 1,20,000.
You are required to prepare a statement showing the working capital needed to
finance a level of activity of 70,000 units of output. You may assume that
production carried on evenly, throughout the year and wages and overhead
accrue similarly.
07
(b) Explain the Net Income (NI) and Net Operating Income (NOI) approaches with
graph.
07
Q.4 Zydus Ltd has two mutually exclusive proposal A & B requiring initial outlay of
Rs. 100,000 each. Both Projects have life of 7 Years with following cash flows.
Year Project
A
Project B
1 6,000 50,000
2 10,000 35,000
3 25,000 25,000
4 30,000 7,000
5 40,000 10,000
6 45,000 10,000
7 50,000 15,000
(a) Calculate NPV if Cost of Capital is 10% 07
(b) Calculate NPV if cost of capital is 15% 07
OR
Q.4 (a) Calculate PI if Cost of Capital is 10% 07
(b) Calculate PI if cost of capital is 15% 07
Q.5 As an investment advisor, you have been approached by a client called Sathya
for advice on some financial matters. Sathya is 40 years old and has Rs.3,000,000
in bank. He plans to work for 20 years more and retire at the age of 60. His
present salary is Rs.1,800,000 per year. Assume that yearly expenditure of
Sathya is Rs. 800,000.
Sathya has decided to invest his bank balance and future savings in a
balanced mutual fund scheme which he believes will provide a return of 12
percent per year.
Sathya seeks your help in answering several questions given below. In answering
these questions, ignore the tax factor.
3
(a) Calculate amount of saving (Balance Mutual Fund) at the age of 60 years of Mr.
Sathya. For simplicity assume that he receive full salary at the end of year.
07
(b) From his saving (Balance Mutual Fund) if Mr. Sathya wants to receive equal
annual amount at the end of each year for consumption for next 20 Year (Life
Expectancy 80 Years), calculate the annual amount.
07
OR
Q.5 (a) Calculate amount of saving (Balance Mutual Fund) at the age of 60 years of Mr.
Sathya if yearly expenditure of Mr. Sathya is Rs. 1,000,000 & return on Balance
mutual fund is 13%. For simplicity assume that he receive full salary at the end
of year.
07
(b) From his saving (Balance Mutual Fund) if yearly expenditure of Mr. Sathya is
Rs. 1,000,000 & return on Balance mutual fund is 13%., if Mr. Sathya wants to
receive equal annual amount at the end of each year for consumption for next 20
Year (Life Expectancy 80 Years), calculate the annual amount.
07
*************
FirstRanker.com - FirstRanker's Choice
This post was last modified on 19 February 2020