Download JNTUH (Jawaharlal Nehru Technological University Hyderabad) MBA (Master of Business Administration) 2nd Semester (Second Semester) R15 2019 May 721CM Financial Management Previous Question Paper
Code No: 721CM
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA II Semester Examinations, April/May-2019
FINANCIAL MANAGEMENT
Time: 3hours Max.Marks:75
Note: This question paper contains two parts A and B.
Part A is compulsory which carries 25 marks. Answer all questions in Part A. Part B
consists of 5 Units. Answer any one full question from each unit. Each question carries
10 marks and may have a, b, c as sub questions.
PART - A 5 ? 5 Marks = 25
1. Explain briefly the following:
a) Agency relationship. [5]
b) Marginal Cost of Capital. [5]
c) The MM Approach on Capital Structure. [5]
d) Major forms of Dividends. [5]
e) Cash Management Techniques. [5]
PART - B 5 ?10 Marks = 50
2. Explain the concept of Risk ?Return trade off, with suitable examples and brief on
concept of Time Value of money. [10]
OR
3.a) You invest Rs. 15,000 at the end of first year, Rs 20,000 at the end of 2
nd
year, and
Rs 50,000 at the end of each year from 3rd year to 5
th
. Calculate the Future Value of
these cash flows, if the interest rate is 10%.P.A.
b) An investment of Rs.5,000 in a deep discount bond will return Rs. 1,00,000 in 20 years.
Find the interest rate implicit in the offer? [5+5]
4. A company has the following Book value capital structure.
(Amount in Crores of Rupees)
Components of Capital Amount
Equity Capital (In shares of Rs 10 each, fully paid) 15
12% Preference Capital( In shares of Rs 100 each, Fully
paid)
1
Retained earnings 20
11.5% Debentures( Of Rs.100 each) 10
11% Term Loan 14
TOTAL 60
Additional Information:
a) The Market price per equity share is Rs 40. The next expected dividend per share
(DPS) is Rs 3.60 and the DPS is expected to grow at a constant rate of 7%.
b) The preference shares are redeemable after 10 years at par and are currently selling at
Rs 75 per share.
c) The debentures are redeemable after 6 years at par and their current market rate is Rs
80 per debenture.
d) The tax rate applicable to the firm is 40%
Calculate the Weighted Average Cost of Capital, using the Market Value proportions.
[10]
R15
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Code No: 721CM
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA II Semester Examinations, April/May-2019
FINANCIAL MANAGEMENT
Time: 3hours Max.Marks:75
Note: This question paper contains two parts A and B.
Part A is compulsory which carries 25 marks. Answer all questions in Part A. Part B
consists of 5 Units. Answer any one full question from each unit. Each question carries
10 marks and may have a, b, c as sub questions.
PART - A 5 ? 5 Marks = 25
1. Explain briefly the following:
a) Agency relationship. [5]
b) Marginal Cost of Capital. [5]
c) The MM Approach on Capital Structure. [5]
d) Major forms of Dividends. [5]
e) Cash Management Techniques. [5]
PART - B 5 ?10 Marks = 50
2. Explain the concept of Risk ?Return trade off, with suitable examples and brief on
concept of Time Value of money. [10]
OR
3.a) You invest Rs. 15,000 at the end of first year, Rs 20,000 at the end of 2
nd
year, and
Rs 50,000 at the end of each year from 3rd year to 5
th
. Calculate the Future Value of
these cash flows, if the interest rate is 10%.P.A.
b) An investment of Rs.5,000 in a deep discount bond will return Rs. 1,00,000 in 20 years.
Find the interest rate implicit in the offer? [5+5]
4. A company has the following Book value capital structure.
(Amount in Crores of Rupees)
Components of Capital Amount
Equity Capital (In shares of Rs 10 each, fully paid) 15
12% Preference Capital( In shares of Rs 100 each, Fully
paid)
1
Retained earnings 20
11.5% Debentures( Of Rs.100 each) 10
11% Term Loan 14
TOTAL 60
Additional Information:
a) The Market price per equity share is Rs 40. The next expected dividend per share
(DPS) is Rs 3.60 and the DPS is expected to grow at a constant rate of 7%.
b) The preference shares are redeemable after 10 years at par and are currently selling at
Rs 75 per share.
c) The debentures are redeemable after 6 years at par and their current market rate is Rs
80 per debenture.
d) The tax rate applicable to the firm is 40%
Calculate the Weighted Average Cost of Capital, using the Market Value proportions.
[10]
R15
OR
5. Calculate the NPV and IRR of a project, the cash flows of which are as follows.
(Amount in lakhs of Rupees)
Years 0 1 2 3 4 5
Investment 70
Cash Inflows 10 20 30 40 50
Additional Information:
a) The cost of capital is 10%.
b) Salvage value at the end of 5
th
year is Zero. [10]
6. The Income statement of XYZ Company is as follows. Calculate Finance Leverage,
Operating Leverage and Composite leverage of the company based on the following
data. [10]
ITEM Amount in Rupees
Total Sales / Revenue*( 5000 units) 25,00,000
Less Variable Expenses 10,00,000
Less Fixed Expenses 9,00,000
Earnings Before Interest and Tax 6,00,000
Less Interest on Debt 75,000
Profit Before Tax 5,25,000
Less Tax @50% 2,62,500
Profit After Tax 2,62,500
Less Preference Dividend 50,000
Equity Earnings 2,12,500
OR
7. The Equity Capitalization rate and Tax rate are 20% and 35% respectively, for firm A
and Firm B. The EBIT of both the firms is Rs 2,25,000 each. Interest on debt in respect
of firm A is Rs 75,000 (@15% PA). State, which of the two firms has optimal capital
structure under Net Income approach? [10]
8. Explain the factors determining the dividend policy of a company and basic model of
valuation of the firm. [10]
OR
9. The cost of capital and the rate of return on investments of a company are 10% and 15%
respectively. The company has 10 lakhs equity shares of Rs 10 each. Its earnings per
share are Rs 5.
Calculate the value of the firm in the following situations using Walter Model, and
comment on the results.
a) 100% Retention b) 50% Retention and c) No Retention [10]
10. What are the different methods of financing the Working capital of a firm? Explain them
with suitable examples. [10]
OR
11. Explain the various types of short term and Long term sources of financing the inventory
and receivables. [10]
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This post was last modified on 23 October 2020