Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2019 Summer 2nd Sem 3529203 Financial Management Previous Question Paper

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA ? SEMESTER 2 ? EXAMINATION ? SUMMER 2019

Subject Code:3529203 Date:13/05/2019

Subject Name: 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. No. Question Text and Description Marks

Q.1 Explain the following terms:

(a) Time Value of Money

(b) Yield To Maturity

(c) Permanent Working Capital

(d) Cost of Capital

(e) Discounted Pay Back Period

(f) Leverages

(g) Price Earning Ratio

14

Q.2 (a) What do you mean by Financial Management? Explain its Profit

Maximization and Wealth Maximization objectives in details.

07

(b) A finance company advertises that it will pay a lump sum of Rs.10,000

at the end of 6 years to investors who deposit annually Rs. 1,000. What

interest rate is implicit in this offer?

07

OR

(b) A company is currently paying a dividend of Rs. 2 per share. Dividend

is expected to grow at 15% annual rate for 3 years, thereafter at 10%

for next 3 years and after which it is expected to grow at 5% forever. If

capitalization rate is 9% what is the intrinsic value of share?

07

Q.3 (a) Give the meaning of Leverage and discuss the types of Leverages in

details.

07

(b) A company belongs to risk class for which capitalization rate is 10%. It

currently has outstanding 25000 shares at Rs. 100 each. The expected

dividend is Rs. 5 per share, net income is Rs. 2,50,000 and investment

is Rs. 5,00,000. Show under M-M assumption the payout of dividend

does not affect the value of firm.

07

OR

Q.3 (a) What do you mean by Dividend and explain the factors affecting

dividend decision in details.

07

(b) Equity (Rs. 10 each)???????????????.15 cr

12% Preference Shares (Rs. 100 each)????????..1 cr

Retained Earnings????????????????..20 cr

11.5% Debentures (Rs. 100 each)??????????..10 cr

07

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Page 1 of 2

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA ? SEMESTER 2 ? EXAMINATION ? SUMMER 2019

Subject Code:3529203 Date:13/05/2019

Subject Name: 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. No. Question Text and Description Marks

Q.1 Explain the following terms:

(a) Time Value of Money

(b) Yield To Maturity

(c) Permanent Working Capital

(d) Cost of Capital

(e) Discounted Pay Back Period

(f) Leverages

(g) Price Earning Ratio

14

Q.2 (a) What do you mean by Financial Management? Explain its Profit

Maximization and Wealth Maximization objectives in details.

07

(b) A finance company advertises that it will pay a lump sum of Rs.10,000

at the end of 6 years to investors who deposit annually Rs. 1,000. What

interest rate is implicit in this offer?

07

OR

(b) A company is currently paying a dividend of Rs. 2 per share. Dividend

is expected to grow at 15% annual rate for 3 years, thereafter at 10%

for next 3 years and after which it is expected to grow at 5% forever. If

capitalization rate is 9% what is the intrinsic value of share?

07

Q.3 (a) Give the meaning of Leverage and discuss the types of Leverages in

details.

07

(b) A company belongs to risk class for which capitalization rate is 10%. It

currently has outstanding 25000 shares at Rs. 100 each. The expected

dividend is Rs. 5 per share, net income is Rs. 2,50,000 and investment

is Rs. 5,00,000. Show under M-M assumption the payout of dividend

does not affect the value of firm.

07

OR

Q.3 (a) What do you mean by Dividend and explain the factors affecting

dividend decision in details.

07

(b) Equity (Rs. 10 each)???????????????.15 cr

12% Preference Shares (Rs. 100 each)????????..1 cr

Retained Earnings????????????????..20 cr

11.5% Debentures (Rs. 100 each)??????????..10 cr

07

Page 2 of 2

11% Term Loan??????????????????..12.5 cr

Next year?s dividend on equity is Rs. 3.60 which is expected to grow at

7% and its market price is Rs. 40. Preference shares redeemable after

10 years currently selling at Rs. 75. Debentures redeemable after 6

years are selling at Rs. 80. Tax rate is 40%. Find WACC under book

value.

Q.4 (a) Give the meaning of Working Capital and discuss the factors affecting

Working Capital Requirements.

07

(b) Calculate (a) the operating leverage, (b) financial leverage and (c)

combined leverage from the following data under situations I and II

and financial plans, A and B.

Installed capacity, 1,000 units

Actual production and sales, 800 units

Selling price, Rs 20 per unit and Variable cost, Rs 15 per unit

Fixed cost: Under situation I, Rs 800 and Under situation II, Rs.1500

Capital Structure Financial Plans

A B

Equity Rs. 5000 Rs. 7000

Debt (0.10 interest) Rs. 5000 Rs. 2000

07

OR

Q.4 (a) Discuss the Traditional Approach with the help of diagram. 07

(b) A Ltd & B. Ltd are identical in all respect except A Ltd issued 12%

debentures of Rs. 30,00,000 while B Ltd issued only equity capital.

Both companies earn 24% before interest and tax on their total assets

of Rs. 50,00,000. Tax rate is 40% and cost of equity is 18%. Find the

value and WACC for both firms using NI and NOI approach.

07

Q.5

Q.5

(a)

(b)

(a)

(b)

A company is considering two mutually exclusive projects. Both

require cash outlay of Rs. 10,000 each. Required rate of return is 10%

and tax rate is 50%. Cash outflows before interest and tax are as below:

A (Rs.) 4000 4000 4000 4000 4000

B (Rs.) 6000 3000 2000 5000 5000

Calculate Pay Back Period for each project.

Calculate Average Rate of Return for each project.

OR

Calculate Net Present Value for each project.

Calculate Internal Rate of Return for each project.

07

07

07

07

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This post was last modified on 19 February 2020