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[A-11] [MURBM 603A] BBM DEGREE EXAMINATION VI TRIMESTER FINANCIAL MANAGEMENT (Effective from the admitted batch 200910)

Time: 3 Hours Max.Marks: 60 --------------------------------------------------------------------------------------------Instructions: All parts of the unit must be answered in one place only. Figures in the right hand margin indicate marks allotted. --------------------------------------------------------------------------------------------SECTION-A 1. Answer any FIVE of the following: Each answer should not exceed one page. a) b) c) d) e) f) g) h) Financial Planning Time Value of Money Agency Cost Cost of Debt Risk Adjusted Discount Rate Operating Cycle Stable Dividend Policy A Ltd. has issued Rs.15,000 at 9% debt at par. The tax rate is 40%. Compute Kd SECTION-B Answer the following: UNIT-I 2. a) What is Finance Function? Explain the nature and scope of Financial Management OR b) What is wealth maximization? How is it superior to profit maximization? UNIT-II 3. a) The current market price of the shares of GVK Ltd. is Rs.105. The floatation costs are Rs.3 per share. Dividend per share amount to Rs.5.50 and is expected to grow at a rate of 9%. You are required to compute the cost of equity share capital 8 (5x4=20)

OR b) What do you understand by operating leverage? Explain how it magnifies the earnings of business firm UNIT-III 4. a) Explain the discounted cash flow techniques of capital budgeting proposals OR b) GPK Ltd. is considering two mutually exclusive projects A and B each involving a cost of Rs.1,20,000, the expected life of the project is 5 years for which the cash flows after tax (CFAT) are given below Year Project - X Project Y 1 40,000 20,000 2 40,000 20,000 3 40,000 40,000 4 40,000 80,000 5 40,000 40,000 Decide which project should be selected by using: a) Average Rate of Return Method b) Internal rate of return c) Net Present Value, and The required rate of return of the company is 12% UNIT-IV 5. a) Define Working Capital. Explain the factors influencing the size of working capital of manufacturing concerns OR b) A firm uses 5000 units of a product per year. Its carrying cost per unit is Rs.12/- and ordering cost is Rs.50/-. It takes 10 days to receive a shipment after an order is initiated and the firm intends to hold inventories for 15 days usage as a safety stock. Calculate the EOQ and reorder point 8 8 8

UNIT-V 6. a) Discuss the various factors influencing the dividend policy of a business organization OR b) The book value per share of a company is Rs.150 and its rate of return on equity is 12%. The company follows a dividend policy of 50% payout. What is the price of its share of the capitalization rate is 14% 8

[41/III T/111]

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