# Download GTU MBA 2019 Winter 3rd Sem 3539221 Strategic Financial Management Question Paper

Download GTU (Gujarat Technological University) MBA 2019 Winter 3rd Sem 3539221 Strategic Financial Management Previous Question Paper

Page 1 of 3

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019

Subject Code: 3539221 Date: 03/12/2019
Subject Name: Strategic Financial Management
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 Explain the terms in brief with examples:
(a) EBIT
(b) Stock split
(d) Break even Analysis
(e) Fair Value of share
(f) Transaction cost
(g) Earnings per share

14
Q.2 (a) Define the terms: ?Risk? and ?Uncertainty?. What is Risk
Management? Discuss the steps for application of Risk
Management in Project Management.
07
(b) Disha Ltd which makes only one product sells 10,000 units of its
product making a loss of Rs 10,000. The variable cost per unit of
the product is Rs 8 and the fixed cost is Rs 30,000. The company
has estimated its sales demand as under:
Sales
(Units)
10000 12000 14000 16000 18000
Probability 0.10 0.15 0.20 0.30 0.25
What is the probability that company will incur loss? What is the
probability that company will make profit of Rs. 6000?

07

OR
(b) From the following project details calculate the sensitivity of the
project cost, annual cash flow and cost of capital. Which variable
is most sensitive?
Project cost ? Rs 12000
Life of the project ? 4 Years
Annual Cash Flow ? Rs 4500
Cost of Capital ? 14%

The annuity factor at 14% for 4 years is 2.9137 and at 18% is
2.6667

07

Q.3 (a) Define industrial sickness. What are the factor causing industrial
sicknesses?

07
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Page 1 of 3

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019

Subject Code: 3539221 Date: 03/12/2019
Subject Name: Strategic Financial Management
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 Explain the terms in brief with examples:
(a) EBIT
(b) Stock split
(d) Break even Analysis
(e) Fair Value of share
(f) Transaction cost
(g) Earnings per share

14
Q.2 (a) Define the terms: ?Risk? and ?Uncertainty?. What is Risk
Management? Discuss the steps for application of Risk
Management in Project Management.
07
(b) Disha Ltd which makes only one product sells 10,000 units of its
product making a loss of Rs 10,000. The variable cost per unit of
the product is Rs 8 and the fixed cost is Rs 30,000. The company
has estimated its sales demand as under:
Sales
(Units)
10000 12000 14000 16000 18000
Probability 0.10 0.15 0.20 0.30 0.25
What is the probability that company will incur loss? What is the
probability that company will make profit of Rs. 6000?

07

OR
(b) From the following project details calculate the sensitivity of the
project cost, annual cash flow and cost of capital. Which variable
is most sensitive?
Project cost ? Rs 12000
Life of the project ? 4 Years
Annual Cash Flow ? Rs 4500
Cost of Capital ? 14%

The annuity factor at 14% for 4 years is 2.9137 and at 18% is
2.6667

07

Q.3 (a) Define industrial sickness. What are the factor causing industrial
sicknesses?

07
Page 2 of 3

(b) ABC limited is considering merger with XYZ limited. ABC ltd
shares are currently traded at Rs 25. It has 2000000 shares
outstanding and its earning after taxes amount to Rs 400000. XYZ
ltd has 100000 shares outstanding, its current market price is Rs
12.50 and its earnings after tax is Rs 100000. The merger will be
affected by means of stock swap. XYZ ltd has agreed to a plan
under which ABC ltd will offer the current market value of XYZ
ltd shares.
1. What is pre-merger EPS and P/E ratio of both the companies
and what is the exchange ratio?
2. What must the exchange ratio be for ABC ltd.?s pre-merger and
post-merger EPS to be the same?

07
OR
Q.3 (a) Explain:
(I) Sensitivity Analysis in Capital budgeting.
(ii) Simulation Analysis in Capital budgeting.
07
(b) Asoka Builders ltd. Has an issued and paid up capital of 5 lakh
shares of Rs. 10 each. The company declared a dividend of Rs. 12.5
lakhs during the last five years and expects to maintain the same
level of dividends in future. The control and ownership of the
company is lying in the few hands of directors and their family
members. The average dividend yield for listed companies in the
same line of business is 18%. Calculate the value of 3000 shares in
the company.
07

Q.4 (a) Describe the decision tree approach with the help of an example.
How is this technique useful in capital budgeting?
07
(b) A company has a total investment of Rs. 500000 in assets and
50000 outstanding ordinary shares at Rs 10 per share (par value).
It earns a rate of 15% on its investments and has a policy of
retaining 50% of the earnings.

If the appropriate discount rate of the firm is 10%. Determining the
price of its share using Gordon model

What shall happen to the price of the share, if the company has a
payout of 80% or 20%
07
OR
Q.4 (a) Explain various micro and macro environmental factors affects
the strategic financial planning
07
(b) The installed capacity of a factory is 6000 units. Actual capacity
used is 4000 units. Selling price per unit is Rs 10, variable cost is
Rs 6. Calculate leverage in each of above situations:
1. When fixed cost are 4000
2. When fixed cost are 10000
3. When fixed cost are 12000
07
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Page 1 of 3

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY
MBA ? SEMESTER III ? EXAMINATION ? WINTER 2019

Subject Code: 3539221 Date: 03/12/2019
Subject Name: Strategic Financial Management
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 Explain the terms in brief with examples:
(a) EBIT
(b) Stock split
(d) Break even Analysis
(e) Fair Value of share
(f) Transaction cost
(g) Earnings per share

14
Q.2 (a) Define the terms: ?Risk? and ?Uncertainty?. What is Risk
Management? Discuss the steps for application of Risk
Management in Project Management.
07
(b) Disha Ltd which makes only one product sells 10,000 units of its
product making a loss of Rs 10,000. The variable cost per unit of
the product is Rs 8 and the fixed cost is Rs 30,000. The company
has estimated its sales demand as under:
Sales
(Units)
10000 12000 14000 16000 18000
Probability 0.10 0.15 0.20 0.30 0.25
What is the probability that company will incur loss? What is the
probability that company will make profit of Rs. 6000?

07

OR
(b) From the following project details calculate the sensitivity of the
project cost, annual cash flow and cost of capital. Which variable
is most sensitive?
Project cost ? Rs 12000
Life of the project ? 4 Years
Annual Cash Flow ? Rs 4500
Cost of Capital ? 14%

The annuity factor at 14% for 4 years is 2.9137 and at 18% is
2.6667

07

Q.3 (a) Define industrial sickness. What are the factor causing industrial
sicknesses?

07
Page 2 of 3

(b) ABC limited is considering merger with XYZ limited. ABC ltd
shares are currently traded at Rs 25. It has 2000000 shares
outstanding and its earning after taxes amount to Rs 400000. XYZ
ltd has 100000 shares outstanding, its current market price is Rs
12.50 and its earnings after tax is Rs 100000. The merger will be
affected by means of stock swap. XYZ ltd has agreed to a plan
under which ABC ltd will offer the current market value of XYZ
ltd shares.
1. What is pre-merger EPS and P/E ratio of both the companies
and what is the exchange ratio?
2. What must the exchange ratio be for ABC ltd.?s pre-merger and
post-merger EPS to be the same?

07
OR
Q.3 (a) Explain:
(I) Sensitivity Analysis in Capital budgeting.
(ii) Simulation Analysis in Capital budgeting.
07
(b) Asoka Builders ltd. Has an issued and paid up capital of 5 lakh
shares of Rs. 10 each. The company declared a dividend of Rs. 12.5
lakhs during the last five years and expects to maintain the same
level of dividends in future. The control and ownership of the
company is lying in the few hands of directors and their family
members. The average dividend yield for listed companies in the
same line of business is 18%. Calculate the value of 3000 shares in
the company.
07

Q.4 (a) Describe the decision tree approach with the help of an example.
How is this technique useful in capital budgeting?
07
(b) A company has a total investment of Rs. 500000 in assets and
50000 outstanding ordinary shares at Rs 10 per share (par value).
It earns a rate of 15% on its investments and has a policy of
retaining 50% of the earnings.

If the appropriate discount rate of the firm is 10%. Determining the
price of its share using Gordon model

What shall happen to the price of the share, if the company has a
payout of 80% or 20%
07
OR
Q.4 (a) Explain various micro and macro environmental factors affects
the strategic financial planning
07
(b) The installed capacity of a factory is 6000 units. Actual capacity
used is 4000 units. Selling price per unit is Rs 10, variable cost is
Rs 6. Calculate leverage in each of above situations:
1. When fixed cost are 4000
2. When fixed cost are 10000
3. When fixed cost are 12000
07
Page 3 of 3

Q.5

CASE STUDY:
ABC Ltd. wants to raise Rs. 5, 00,000 as additional capital. It has
two mutually exclusive alternative financial plans. The current
EBIT is Rs. 17, 00,000 which is likely to remain unchanged.
The relevant Information is ? Present Capital Structure:
3,00,000 - Equity shares of Rs. 10 each
10% Bonds of Rs. 20, 00,000.
Tax Rate: 50%
Current EBIT: Rs. 17,00,000
Current EPS: Rs. 2.50
Current Market Price: Rs. 25 per share

(a) What is the indifference level of EBIT at:
Financial Plan I: 20,000 Equity Shares at Rs. 25 per share.
Financial Plan II: 12% Debentures of Rs. 5, 00,000.
07
(b) Calculate EBIT-EPS for both above financial plans 07
OR
Q.5 (a) What is the indifference level of EBIT at
Financial Plan I: 20,000 Equity Shares at Rs. 25 per share.
Financial Plan II: 12% Preference share of Rs. 5, 00,000.
07
(b)

Calculate EBIT-EPS for both above financial plans 07

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