Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2016 Summer 3rd Sem 2830201 Strategic Financial Management Sfm Previous Question Paper
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER (3) ? EXAMINATION ? SUMMER 2016
Subject Code: 2830201 Date: 04/05/2016
Subject Name: Strategic Financial Management (SFM)
Time: 10.30 AM TO 01.30 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 (a) Attempt all MCQ 06
1 The end goal of planners should ideally be to achieve:
(a) Maximisation of shareholder value
(b) Maximisation of growth rate
(c) Maximisation of organizational efficiency
(d) Maximisation of customer satisfaction
2 In a situation where sustainable growth rate is to be calculated, which one of the
following ratio is assumed to remain unchanged?
(a) Inventory turnover ratio
(b) Current ratio
(c) Debt ? equity ratio
(d) Acid-test ratio
3 In which of the following, values of a set of variables are varied concurrently
by specified values?
(a) Scenario analysis
(b) Sensitivity analysis
(c) Simulation analysis
(d) Decision tree analysis
4 Walter model assumes that for future financing, a firm will rely only on
(a) debentures
(b) term loans
(c) retained earnings
(d) external equity
5 Financial break even occurs at the point of time when the
(a) Firm starts making operating profits
(b) Accumulated losses are wiped off
(c) Present value of investment becomes zero
(d) Cash flows become steady
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Page 1 of 4
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER (3) ? EXAMINATION ? SUMMER 2016
Subject Code: 2830201 Date: 04/05/2016
Subject Name: Strategic Financial Management (SFM)
Time: 10.30 AM TO 01.30 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 (a) Attempt all MCQ 06
1 The end goal of planners should ideally be to achieve:
(a) Maximisation of shareholder value
(b) Maximisation of growth rate
(c) Maximisation of organizational efficiency
(d) Maximisation of customer satisfaction
2 In a situation where sustainable growth rate is to be calculated, which one of the
following ratio is assumed to remain unchanged?
(a) Inventory turnover ratio
(b) Current ratio
(c) Debt ? equity ratio
(d) Acid-test ratio
3 In which of the following, values of a set of variables are varied concurrently
by specified values?
(a) Scenario analysis
(b) Sensitivity analysis
(c) Simulation analysis
(d) Decision tree analysis
4 Walter model assumes that for future financing, a firm will rely only on
(a) debentures
(b) term loans
(c) retained earnings
(d) external equity
5 Financial break even occurs at the point of time when the
(a) Firm starts making operating profits
(b) Accumulated losses are wiped off
(c) Present value of investment becomes zero
(d) Cash flows become steady
Page 2 of 4
6 Randomly selected values are used in
(a) Sensitivity analysis
(b) Break even analysis
(c) Decision tree analysis
(d) Simulation analysis
(b) Explain the terms: 1. Exchange ratio 2. Amalgamation
3. Liquidation value 4. Financial Leverage
04
(c) Write a short note on ?Sensitivity analysis? 04
Q.2 (a) What are the contents in Project Feasibility Report? 07
(b) Intuitively, the free cash flow to equity measures the cash left over for equity
investors after all reinvestment needs are met (net capital expenditures and
working capital needs) and after all debt commitments have been fulfilled
(interest expenses and principal payments). Explain the FCF approach of
business valuation.
07
OR
(b) Your chairman told in his speech at AGM ?Economic value added (EVA) is a
value enhancement concept that has caught the attention of both firms interested
in increasing their value and portfolio managers, looking for good investments.
EVA is a measure of dollar surplus value created by a firm or project.? You are
required to discuss EVA as better way of thinking about value creation. Also
show how EVA can be calculated?
07
Q.3 (a) Discuss the various factors affecting Dividend Decision. 07
(b) Discuss Risk Adjusted Discount rate and Certainty Equivalent method with
illustration as risk evaluation technique in capital budgeting.
07
OR
Q.3 The Balance sheet of Jaipan Ltd. on March 31 2015 is shown below
Liabilities Amount
(Rs. in
000)
Assets Amount
(Rs. in
000)
Share Capital
Retained Earnings
Term Loans
Short term Bank Borrowings
Trade Creditors
Provisions
150
180
080
200
140
050
Net Fixed
Assets
Inventories
Debtors
Cash
400
200
150
050
800 800
The sales for the year ending March 31, 2015 were 1000. Its profit margin on
sales was 6% and its dividend payout ratio was 50%. The tax rate was 60%
Jaipan expects its sales to increase by 30% in next year. The ratio of assets to
sales and spontaneous current liabilities to sales would remain unchanged.
You are required to
1. Estimate the external fund requirement for the year 2016
14
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Page 1 of 4
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER (3) ? EXAMINATION ? SUMMER 2016
Subject Code: 2830201 Date: 04/05/2016
Subject Name: Strategic Financial Management (SFM)
Time: 10.30 AM TO 01.30 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 (a) Attempt all MCQ 06
1 The end goal of planners should ideally be to achieve:
(a) Maximisation of shareholder value
(b) Maximisation of growth rate
(c) Maximisation of organizational efficiency
(d) Maximisation of customer satisfaction
2 In a situation where sustainable growth rate is to be calculated, which one of the
following ratio is assumed to remain unchanged?
(a) Inventory turnover ratio
(b) Current ratio
(c) Debt ? equity ratio
(d) Acid-test ratio
3 In which of the following, values of a set of variables are varied concurrently
by specified values?
(a) Scenario analysis
(b) Sensitivity analysis
(c) Simulation analysis
(d) Decision tree analysis
4 Walter model assumes that for future financing, a firm will rely only on
(a) debentures
(b) term loans
(c) retained earnings
(d) external equity
5 Financial break even occurs at the point of time when the
(a) Firm starts making operating profits
(b) Accumulated losses are wiped off
(c) Present value of investment becomes zero
(d) Cash flows become steady
Page 2 of 4
6 Randomly selected values are used in
(a) Sensitivity analysis
(b) Break even analysis
(c) Decision tree analysis
(d) Simulation analysis
(b) Explain the terms: 1. Exchange ratio 2. Amalgamation
3. Liquidation value 4. Financial Leverage
04
(c) Write a short note on ?Sensitivity analysis? 04
Q.2 (a) What are the contents in Project Feasibility Report? 07
(b) Intuitively, the free cash flow to equity measures the cash left over for equity
investors after all reinvestment needs are met (net capital expenditures and
working capital needs) and after all debt commitments have been fulfilled
(interest expenses and principal payments). Explain the FCF approach of
business valuation.
07
OR
(b) Your chairman told in his speech at AGM ?Economic value added (EVA) is a
value enhancement concept that has caught the attention of both firms interested
in increasing their value and portfolio managers, looking for good investments.
EVA is a measure of dollar surplus value created by a firm or project.? You are
required to discuss EVA as better way of thinking about value creation. Also
show how EVA can be calculated?
07
Q.3 (a) Discuss the various factors affecting Dividend Decision. 07
(b) Discuss Risk Adjusted Discount rate and Certainty Equivalent method with
illustration as risk evaluation technique in capital budgeting.
07
OR
Q.3 The Balance sheet of Jaipan Ltd. on March 31 2015 is shown below
Liabilities Amount
(Rs. in
000)
Assets Amount
(Rs. in
000)
Share Capital
Retained Earnings
Term Loans
Short term Bank Borrowings
Trade Creditors
Provisions
150
180
080
200
140
050
Net Fixed
Assets
Inventories
Debtors
Cash
400
200
150
050
800 800
The sales for the year ending March 31, 2015 were 1000. Its profit margin on
sales was 6% and its dividend payout ratio was 50%. The tax rate was 60%
Jaipan expects its sales to increase by 30% in next year. The ratio of assets to
sales and spontaneous current liabilities to sales would remain unchanged.
You are required to
1. Estimate the external fund requirement for the year 2016
14
Page 3 of 4
2. Prepare the following statements, assuming that the external fund
requirement would be raised equally term loans and short term bank
borrowings (i) Projected Balance sheet and (ii) Projected Profit and Loss
A/c
Q. 4 (a) Explain the term ?Bonus Share? and ?Stock Split? along with its rational. 07
(b) Define the ?Industrial Sickness? and Causes of sickness. 07
OR
Q. 4 Jet Airways is planning to acquire a light commercial aircraft for flying class
clients at an investment of Rs 50,00,000. The expected cash flow after tax for
the next three years is as follows:
Amount in Rs. Lakh
YEAR 1 YEAR 2 YEAR 3
CFAT Prob. CFAT Prob. CFAT Prob.
14 0.1 15 0.1 18 0.2
18 0.2 20 0.3 25 0.5
25 0.4 32 0.4 35 0.2
40 0.3 45 0.2 48 0.1
The Company wishes to take into consideration all possible risk factors relating
to airline operations. The Company wants to know: (i) The expected NPV of
this venture assuming independent probability distribution with 6 per cent risk
free rate of interest. (ii) The possible deviation in expected value (iii) How
would standard deviation of the present value distribution help in capital
budgeting decisions.
14
Q.5 Skyline Software Ltd has appointed you as its finance manager. The company
wants to implement a project for which Rs 30 lakh is required to be raised from
the market as a means of financing the project. The following financing plans
and options are at hand: (Number in thousands)
Particulars Plan A Plan B Plan C
Option: 1
Equity Shares 30 30 30
Option: 2
Equity Shares 15 20 10
12% Preference Shares Nil 10 10
10% Non convertible Debentures 15 Nil 10
Assuming corporate tax to be 35 per cent and the face value of all the shares
and debentures to be Rs 100 each, calculate the indifference points and earnings
per share (EPS) for each of the financing plans. Which plan should be accepted
by the company?
14
OR
Q.5 The Modern Chemicals Ltd requires Rs 25,00,000 for a new plant. This plant is
expected to yield earnings before interest and taxes of Rs 5,00,000. While
deciding about the financial plan, the company considers the objective of
maximising earnings per share. It has three alternatives to finance the project?
14
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Page 1 of 4
Seat No.: ________ Enrolment No.___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER (3) ? EXAMINATION ? SUMMER 2016
Subject Code: 2830201 Date: 04/05/2016
Subject Name: Strategic Financial Management (SFM)
Time: 10.30 AM TO 01.30 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 (a) Attempt all MCQ 06
1 The end goal of planners should ideally be to achieve:
(a) Maximisation of shareholder value
(b) Maximisation of growth rate
(c) Maximisation of organizational efficiency
(d) Maximisation of customer satisfaction
2 In a situation where sustainable growth rate is to be calculated, which one of the
following ratio is assumed to remain unchanged?
(a) Inventory turnover ratio
(b) Current ratio
(c) Debt ? equity ratio
(d) Acid-test ratio
3 In which of the following, values of a set of variables are varied concurrently
by specified values?
(a) Scenario analysis
(b) Sensitivity analysis
(c) Simulation analysis
(d) Decision tree analysis
4 Walter model assumes that for future financing, a firm will rely only on
(a) debentures
(b) term loans
(c) retained earnings
(d) external equity
5 Financial break even occurs at the point of time when the
(a) Firm starts making operating profits
(b) Accumulated losses are wiped off
(c) Present value of investment becomes zero
(d) Cash flows become steady
Page 2 of 4
6 Randomly selected values are used in
(a) Sensitivity analysis
(b) Break even analysis
(c) Decision tree analysis
(d) Simulation analysis
(b) Explain the terms: 1. Exchange ratio 2. Amalgamation
3. Liquidation value 4. Financial Leverage
04
(c) Write a short note on ?Sensitivity analysis? 04
Q.2 (a) What are the contents in Project Feasibility Report? 07
(b) Intuitively, the free cash flow to equity measures the cash left over for equity
investors after all reinvestment needs are met (net capital expenditures and
working capital needs) and after all debt commitments have been fulfilled
(interest expenses and principal payments). Explain the FCF approach of
business valuation.
07
OR
(b) Your chairman told in his speech at AGM ?Economic value added (EVA) is a
value enhancement concept that has caught the attention of both firms interested
in increasing their value and portfolio managers, looking for good investments.
EVA is a measure of dollar surplus value created by a firm or project.? You are
required to discuss EVA as better way of thinking about value creation. Also
show how EVA can be calculated?
07
Q.3 (a) Discuss the various factors affecting Dividend Decision. 07
(b) Discuss Risk Adjusted Discount rate and Certainty Equivalent method with
illustration as risk evaluation technique in capital budgeting.
07
OR
Q.3 The Balance sheet of Jaipan Ltd. on March 31 2015 is shown below
Liabilities Amount
(Rs. in
000)
Assets Amount
(Rs. in
000)
Share Capital
Retained Earnings
Term Loans
Short term Bank Borrowings
Trade Creditors
Provisions
150
180
080
200
140
050
Net Fixed
Assets
Inventories
Debtors
Cash
400
200
150
050
800 800
The sales for the year ending March 31, 2015 were 1000. Its profit margin on
sales was 6% and its dividend payout ratio was 50%. The tax rate was 60%
Jaipan expects its sales to increase by 30% in next year. The ratio of assets to
sales and spontaneous current liabilities to sales would remain unchanged.
You are required to
1. Estimate the external fund requirement for the year 2016
14
Page 3 of 4
2. Prepare the following statements, assuming that the external fund
requirement would be raised equally term loans and short term bank
borrowings (i) Projected Balance sheet and (ii) Projected Profit and Loss
A/c
Q. 4 (a) Explain the term ?Bonus Share? and ?Stock Split? along with its rational. 07
(b) Define the ?Industrial Sickness? and Causes of sickness. 07
OR
Q. 4 Jet Airways is planning to acquire a light commercial aircraft for flying class
clients at an investment of Rs 50,00,000. The expected cash flow after tax for
the next three years is as follows:
Amount in Rs. Lakh
YEAR 1 YEAR 2 YEAR 3
CFAT Prob. CFAT Prob. CFAT Prob.
14 0.1 15 0.1 18 0.2
18 0.2 20 0.3 25 0.5
25 0.4 32 0.4 35 0.2
40 0.3 45 0.2 48 0.1
The Company wishes to take into consideration all possible risk factors relating
to airline operations. The Company wants to know: (i) The expected NPV of
this venture assuming independent probability distribution with 6 per cent risk
free rate of interest. (ii) The possible deviation in expected value (iii) How
would standard deviation of the present value distribution help in capital
budgeting decisions.
14
Q.5 Skyline Software Ltd has appointed you as its finance manager. The company
wants to implement a project for which Rs 30 lakh is required to be raised from
the market as a means of financing the project. The following financing plans
and options are at hand: (Number in thousands)
Particulars Plan A Plan B Plan C
Option: 1
Equity Shares 30 30 30
Option: 2
Equity Shares 15 20 10
12% Preference Shares Nil 10 10
10% Non convertible Debentures 15 Nil 10
Assuming corporate tax to be 35 per cent and the face value of all the shares
and debentures to be Rs 100 each, calculate the indifference points and earnings
per share (EPS) for each of the financing plans. Which plan should be accepted
by the company?
14
OR
Q.5 The Modern Chemicals Ltd requires Rs 25,00,000 for a new plant. This plant is
expected to yield earnings before interest and taxes of Rs 5,00,000. While
deciding about the financial plan, the company considers the objective of
maximising earnings per share. It has three alternatives to finance the project?
14
Page 4 of 4
by raising debt of Rs 2,50,000 or Rs 10,00,000 or Rs 15,00,000 and the balance,
in each case, by issuing equity shares. The company?s share is currently selling
at Rs 150, but is expected to decline to Rs 125 in case the funds are borrowed
in excess of Rs 10,00,000. The funds can be borrowed at the rate of 10 per cent
upto Rs 2,50,000, at 15 per cent over Rs 2,50,000 and upto Rs 10,00,000 and at
20 per cent over Rs 10,00,000. The tax rate applicable to the company is 50 per
cent. Which form of financing should the company choose?
*******************
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This post was last modified on 19 February 2020