Download JNTUA MBA 2nd Sem Supple 2015 Dec 14E00204 Financial Management Question Paper

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Code: 14E00204

MBA II Semester Supplementary Examinations December/January 2015/2016

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FINANCIAL MANAGEMENT

(For students admitted in 2014 only)

Time: 3 hours Max. Marks: 60

All questions carry equal marks

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SECTION -A

Answer the following: (05 X 10 = 50 Marks)

1. Define financial management. Explain the nature and scope of financial management.
   OR
   Write short notes on: (a) Role of finance manager. (b) Profit maximization versus wealth maximization.

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2. A company is considering an investment proposal to install new machinery. The project will cost Rs.75,000. The machinery has a life of 5 years and has no scrap value. The company's tax rate is 30% and the cut-off rate is 10%. The firm uses straight line method of depreciation. The estimated cash flows before taxes (CFBT) from the proposed investment proposal are as follows:
   Years: 1 2 3 4 5
   CFBT: 16,000 17,000 23,000 25,000 26,000
   The present value factors (PVF) at 10% discount rate are given below:
   Years: 1 2 3 4 5
   

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   PVF@10%: 0.909 0.826 0.751 0.683 0.621
   You are required to compute:
   (a) Account rate of return. (b) Net present value of the project.
   OR
3. Under what circumstances do the net present value and internal rate of return methods differ? Which method would you prefer and why.

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4. The capital structure of ABC company is as follows:
   8% Debentures = Rs.15,00,000
   6% preference shares = Rs.5,00,000
   1,00,000 equity share capital of Rs.20 each = 20,00,000
   The expected dividend on equity share capital is Rs.2 per share which will grow at 7% forever.
   

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   Corporate tax rate is assumed to be 50%.
   You are required to compute the weighted average cost of capital of ABC company.
   OR
5. What is cost of capital? Discuss the different approaches to the computation of equity capital of a firm.
6. How are the objectives of inventory management and cash management similar? Explain.
   

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   OR
7. Briefly explain: (a) Pipe-line theory. (b) Economic order quantity.
8. What is merger? Enumerate the different types of mergers. What are the potential economic advantages from mergers?
   OR
9. Examine the provisions of the Indian companies act governing corporate take-overs.

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SECTION - B

(Compulsory Question) 01 X 10 = 10 Marks

1. Case study: XYZ company has the following selected assets and liabilities.
   (i) Cash = Rs.30,000
   (ii) Favorable bank balance = Rs.15,000
   

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   (iii) Retained earnings = Rs.1,60,000
   (iv) Equity share capital = Rs.1,50,000
   (v) Debtors = Rs.40,000
   (vi) Accounts payables = Rs.9,000
   (vii) Inventories = Rs.1,11,000
   

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   (viii) Debentures = Rs.1,00,000
   (ix) Provision for tax = Rs.57,000
   (x) Expenses outstanding = Rs.21,000
   (xi) Land and building = Rs.2,00,000
   (xii) Un-expired insurance = Rs.1,00,000
   

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   (xiii) Goodwill = Rs.50,000
   (xiv) Furniture = Rs.25,000
   (xv) Accounts receivables = Rs.20,000
   (xvi) Creditors = Rs.30,000
   You are required to calculate:
   

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   (a) Gross working capital.
   (b) Net working capital.