Download JNTUA (JNTU Anantapur) MBA (Master of Business Administration) 2019 June Supplementary 2nd Sem 18E00201 Financial Management Previous Question Paper
MBA (Fintech) II Semester Regular Examinations June 2019
FINANCIAL MANAGEMENT
(For students admitted in 2018 only)
Time: 3 hours Max. Marks: 60
All questions carry equal marks
*****
SECTION ? A
(Answer the following: 05 X 10 = 50 Marks)
1 (a) Describe the two widely discussed objectives of financial management.
(b) Discuss agency problem arising from the relationship between managers and shareholders.
OR
2 (a) Outline the differences between long term and short term finance functions/decisions.
(b) Identify the three key activities of the financial manager.
3 (a) Elucidate the merits and demerits of time adjusted methods of evaluation the investment
projects.
(b) State the reasons for the popularity of payback period method despite its weakness.
OR
4 Following data relate to two independent investment projects:
Projects Initial Quality Annual Cash Inflow (Rs) Life in Years
A 500,000 125,000 8
B 120,000 12,000 15
Assume a 10 percent required rate of return. Rank these two investment projects according to
each of the following criteria: (i) Payback period. (ii) Accounting rate of return. (iii) Net present
value index. (iv) Internal rate of return.
5 (a) Enumerate the features of equity shares and debentures as a long term sources of finance.
(b) What are the effect of bonus share on the earnings per share and the market price of the share?
OR
6 (a) Form the information supplied to you, determine the appropriate weighted average cost of
capital, relevant for evaluating long term investment projects of the company.
Cost of Equity : 12%
After tax cost of long term debt : 7%
After tax cost of short term debt : 4%
Sources of capital Book value Market value
Equity Rs. 5,00,000 Rs, 9,00,000
Long term debt Rs. 4,00,000 Rs. 3,75,000
Short term debt Rs. 1,00,000 Rs. 1,00,000
(b) The ABC Refrigerator company is deciding to issue 2,000,000 of Rs 1,000, 14 per cent 7-year
debentures. The debentures will have to be sold at a discount rate of 3 per cent. Further, the firm
will pay an underwriting fee of 3 per cent of the face value. Assume a 35% tax rate.
Calculate the after-tax cost of the issue. What would be the after-tax cost if the debenture were
sold at a premium of Rs 30?
Contd. in page 2
Page 1 of 2
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Code: 18E00201
MBA (Fintech) II Semester Regular Examinations June 2019
FINANCIAL MANAGEMENT
(For students admitted in 2018 only)
Time: 3 hours Max. Marks: 60
All questions carry equal marks
*****
SECTION ? A
(Answer the following: 05 X 10 = 50 Marks)
1 (a) Describe the two widely discussed objectives of financial management.
(b) Discuss agency problem arising from the relationship between managers and shareholders.
OR
2 (a) Outline the differences between long term and short term finance functions/decisions.
(b) Identify the three key activities of the financial manager.
3 (a) Elucidate the merits and demerits of time adjusted methods of evaluation the investment
projects.
(b) State the reasons for the popularity of payback period method despite its weakness.
OR
4 Following data relate to two independent investment projects:
Projects Initial Quality Annual Cash Inflow (Rs) Life in Years
A 500,000 125,000 8
B 120,000 12,000 15
Assume a 10 percent required rate of return. Rank these two investment projects according to
each of the following criteria: (i) Payback period. (ii) Accounting rate of return. (iii) Net present
value index. (iv) Internal rate of return.
5 (a) Enumerate the features of equity shares and debentures as a long term sources of finance.
(b) What are the effect of bonus share on the earnings per share and the market price of the share?
OR
6 (a) Form the information supplied to you, determine the appropriate weighted average cost of
capital, relevant for evaluating long term investment projects of the company.
Cost of Equity : 12%
After tax cost of long term debt : 7%
After tax cost of short term debt : 4%
Sources of capital Book value Market value
Equity Rs. 5,00,000 Rs, 9,00,000
Long term debt Rs. 4,00,000 Rs. 3,75,000
Short term debt Rs. 1,00,000 Rs. 1,00,000
(b) The ABC Refrigerator company is deciding to issue 2,000,000 of Rs 1,000, 14 per cent 7-year
debentures. The debentures will have to be sold at a discount rate of 3 per cent. Further, the firm
will pay an underwriting fee of 3 per cent of the face value. Assume a 35% tax rate.
Calculate the after-tax cost of the issue. What would be the after-tax cost if the debenture were
sold at a premium of Rs 30?
Contd. in page 2
Page 1 of 2
Code: 18E00201
7 A proforma cost sheet of a company provides the following particulars:
Amount per unit
Rs
Raw material 80
Direct labour 30
Overheads 60
Total cost 170
Profit 30
Selling price 200
Further the following particulars are available:
(i) Raw material in stock, on an average one month; materials in process, on average half a
month; finished goods in stock, on an average one month.
(ii) Credit allowed by suppliers is one month; credit allowed to debtors is two months; lag in
payment of wages is one and a half weeks; lag in payment of overhead expenses is one month;
one-fourth of the output is sold against cash; cash in hand and at bank is expected to be Rs
25,000. You are required to prepare a statement showing working capital needed to finance a
level of activity of 104,000 units of production. You may assume that production is carried on
evenly throughout the year and wages and overheads accrue similarly.
OR
8 (a) Discuss the factors that determine the need for working capital.
(b) Explain the basic motive of holding cash by the organization.
9 Enumerate the different types of mergers and the potential economic advantages from mergers.
OR
10 (a) Outline the motives of corporate mergers in India.
(b) Critically examine the SEBI takeover code.
SECTION ? B
(Compulsory question, 01 X 10 = 10 Marks)
11 Case Study:
Howard company is considering three financing plans: all equity; 60 per cent equity and 40 per
cent debt; and 40 per cent equity and 60 per cent debt. Total funds needed are Rs 300,000.
EBIT is expected to be Rs 45,000. Shares can be sold at the rate of Rs 20 per cent share. Funds
can be borrowed as follows: Up to and including Rs 60,000 at 14 per cent; Rs 60,000 to Rs
150,000 at 16 per cent and over Rs 150,000 at 18 per cent. Compute the EPS of each plan and
suggest which plan would you choose and why? Assume a tax rate of 35 per cent.
*****
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This post was last modified on 27 July 2020