Download JNTUH (Jawaharlal Nehru Technological University Hyderabad) MBA (Master of Business Administration) 4th Semester (Fourth Semester) R15 2019 May 724AF Strategic Investment And Financing Decisions Previous Question Paper
Code No: 724AF
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA IV Semester Examinations, April/May-2019
STRATEGIC INVESTMENT AND FINANCING DECISIONS
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.a) What do you understand by ?risk analysis?? Explain types of risks. [5]
b) Differentiate the investment from Disinvestment. [5]
c) What is Hertz simulation? Explain its importance. [5]
d) Define ?lease?. How does it differ from a hire purchase? [5]
e) Discuss the possible reasons for mergers. [5]
PART - B 5 ? 10 marks = 50
2. Explain the concept of risk and uncertainty and what are the types of investment
decisions that can be adopted under uncertainty? [10]
OR
3. Suppose a firm has an investment proposal, requiring an outlay of Rs 2,00,000 at percent
(t=0). The investment proposal is expected to have 2 years economic life with no salvage
value. In year 1, there is a 0.3 probability (30 percent chance) that CFAT will be
Rs 80,000; a 0.4 probability(40 percent chance) that CFAT will be Rs 1,10,000 and 0.3
probability (30 percent chance) that CFAT will be Rs 1,50,000. In year 2, the CFAT
possibilities depend on the CFAT that occurs in year 1. That is, the CFAT for the year 2
are conditional on CFAT for the year1. Accordingly, the probabilities assigned with the
CFAT of the year 2 are conditional probabilities. The estimated conditional CFAT and
their associated conditional probabilities are as follows.
If CFAT = Rs 80,000
CFAT
2
Probability
If CFAT = Rs 1,10,000
CFAT
2
Probability
If CFAT = Rs 1,50,000
CFAT
2
Probability
Rs40,000 0.2 Rs 1,30,000 0.3 Rs 1,60,000 0.1
1,00,000 0.6 1,50,000 0.4 2,00,000 0.8
1,50,000 0.2 1,60,000 0.3 2,40,000 0.1
Comment on investment proposals. [10]
4. What is the impact of inflation on capital budgeting decisions? Elaborate. [10]
OR
R15
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Code No: 724AF
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
MBA IV Semester Examinations, April/May-2019
STRATEGIC INVESTMENT AND FINANCING DECISIONS
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.a) What do you understand by ?risk analysis?? Explain types of risks. [5]
b) Differentiate the investment from Disinvestment. [5]
c) What is Hertz simulation? Explain its importance. [5]
d) Define ?lease?. How does it differ from a hire purchase? [5]
e) Discuss the possible reasons for mergers. [5]
PART - B 5 ? 10 marks = 50
2. Explain the concept of risk and uncertainty and what are the types of investment
decisions that can be adopted under uncertainty? [10]
OR
3. Suppose a firm has an investment proposal, requiring an outlay of Rs 2,00,000 at percent
(t=0). The investment proposal is expected to have 2 years economic life with no salvage
value. In year 1, there is a 0.3 probability (30 percent chance) that CFAT will be
Rs 80,000; a 0.4 probability(40 percent chance) that CFAT will be Rs 1,10,000 and 0.3
probability (30 percent chance) that CFAT will be Rs 1,50,000. In year 2, the CFAT
possibilities depend on the CFAT that occurs in year 1. That is, the CFAT for the year 2
are conditional on CFAT for the year1. Accordingly, the probabilities assigned with the
CFAT of the year 2 are conditional probabilities. The estimated conditional CFAT and
their associated conditional probabilities are as follows.
If CFAT = Rs 80,000
CFAT
2
Probability
If CFAT = Rs 1,10,000
CFAT
2
Probability
If CFAT = Rs 1,50,000
CFAT
2
Probability
Rs40,000 0.2 Rs 1,30,000 0.3 Rs 1,60,000 0.1
1,00,000 0.6 1,50,000 0.4 2,00,000 0.8
1,50,000 0.2 1,60,000 0.3 2,40,000 0.1
Comment on investment proposals. [10]
4. What is the impact of inflation on capital budgeting decisions? Elaborate. [10]
OR
R15
5. A firm whose cost of capital is 10% is considering two mutually exclusive projects X and
Y, the details of which are:
Year Project X Project Y
Cost 0 Rs.70,000 Rs.70,000
Cash inflows 1 10,000 50,000
2 20,000 40,000
3 30,000 20,000
4 45,000 10,000
5 60,000 10,000
Compute the Net Present Value at 10%, Profitability Index, and Internal Rate of Return
of the two projects. [10]
6. Explain scope and importance of information and data bank in project selections. [10]
OR
7. Write a short note on:
a) Discount payback
b) Post payback
c) Surplus payback
d) Bail-out pay back [10]
8. How do you evaluate the lease from the lesser point of view? [10]
OR
9. A company is considering the lease of an equipment which has a purchase price of
Rs.3,50,000. The equipment has an estimated economic life of 5 years. As per the income
tax rule a written down depreciation at 25 percent is allowed. The lease rentals per year
are Rs. 1,20,000. Assume that the company?s marginal corporate tax rate is 50 percent. If
the before-tax borrowing rate for the company is 16 percent, should the company lease
the equipment? Ignore tax shield on depreciation after 5 years. [10]
10. Explain different types of mergers. Compare and contrast between mergers and
acquisition. [10]
OR
11. Videsh Limited is keen on reporting earnings per share of Rs. 6.00 after acquiring
Swadesh Limited. The following financial data are given.
Videsh Limited Swadesh Limited
Earnings per share Rs. 5.00 Rs. 5.00
Market price per share Rs. 60.000 Rs. 50.00
Number of shares 1,000,000 800,000
There is an expected synergy gain of 5 percent. What exchange ratio will result in a post-
merger earnings per share of Rs. 6.00 for videsh Limited. [10]
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This post was last modified on 23 October 2020