4 Firms k

Register Number : I Rs. 2 0,000 6 0,000 2 ,00,000 2 ,40,000 18 .0% 15.0% 16 .0% 12 .0%

EBIT Rs. 2 ,00,000 3,00,000 5,00,000 6 ,00,000

Name of the Candidate :

5 8 5 9

X Y Z W Also, determine the weighted average cost of capital for each firm. SECTION - D ( Compulsory ) 10. ABC company has the following selected assets and liabilites: Assets and liabilities : Cash Retained earnings Eq uity share capital Debtors Inventory Rs.... 45,000 - 1,6 0,000 - 1,50,000 6 0,000 - 1,11,000 (1 15 = 15)

M.B.A. (Human Resource Management) DEGREE EXAMINATION, 2008

( FIRST YEAR )

( PAPER - V )

120 / 140 / 150. FINANCIAL

MANAGEMENT

( Common with M.B.A. Marketing

Management and M.B.A. Financial

Management ) December ]

[ Time : 3 Hours

Maximum : 75 Marks

SECTION - A

(5 3 = 15)

Answer any FIVE questions.

All questions carry equal marks.

1. (a) Define the term finance function.

(b) Explain the concept of hard core

working capital.

Turn over

2 (c) Why does a firm have idle cash ? (d) What is a leveraged lease ? (e) What is meant by the concept financial risk ? (f) Define arbitrage process. (g) What is EBIT-EPS analysis? (h) Define flexible capital structure. SECTION - B (3 10 = 30)

3 5. What is the sensitivity approach for dealing with project risk ? 6. X - company earns Rs. 5 per share, is capitalised at a rate of 10 % and has a rate of return on investment of 18 % .According to Walters formulae, what should be the price per share at 25 % dividend payout ratio? Is this the optimum payout ratio according to Walter ? SECTION - C (1 15 = 15)

Answer any THREE questions. All questions carry equal marks. 2. How can you solve the problem of cash management ? 3. The credit policy that maximizes expected operating profit is the optimal credit policy. - Discuss . 4. The function of the safety stock is to prevent stock outs.- Comment.

Answer any ONE question. 7. What are the controllable and uncontrollable factors affecting working capital ? 8. What is the major difference between an operating lease and a financial lease ? 9. Assuming no taxes and given the earnings before interest and taxes (EBIT), interest (I) at 10 % and equity capitalisation rate (k e ) below. Calculate the total market value of each firm. Turn over

5 Rs..... D e b e n tu re s P r o v isio n f o r ta x a tio n E x p e n se s o u tsta n d in g L a n d a n d b u ild in g G o o d w ill F u rn itu re C r e d ito r s Yo u a r e r e q u ir e d to d e te r m in e : (i) (ii) N e t w o r k in g c a p ita l. G r o ss w o r k in g c a p ita l. 3 9 ,0 0 0 . 2 5,0 0 0 50 ,0 0 0 3 ,0 0 ,0 0 0 2 1 ,0 0 0 57 ,0 0 0 1 ,0 0 ,0 0 0 D e b e n tu re s

Rs.....

1 ,0 0 ,0 0 0

P r o v isio n f o r ta x a tio n

57 ,0 0 0

E x p e n se s o u tsta n d in g

2 1 ,0 0 0

L a n d a n d b u ild in g G o o d w ill F u rn itu re C r e d ito r s

3 ,0 0 ,0 0 0

50 ,0 0 0

2 5,0 0 0

3 9 ,0 0 0 .

Yo u a r e r e q u ir e d to d e te r m in e : (i) (ii)

G r o ss w o r k in g c a p ita l.

N e t w o r k in g c a p ita l.