No.

of Printed Pages : 6 MC0-07

MASTER OF COMMERCE
Term-End Examination
June, 2017 00500
MC0-07 : FINANCIAL MANAGEMENT

Time : 3 hours Maximum Marks : 100

Weightage 70%
Note : Attempt any five questions. All questions carry equal
marks.

1. (a) What are basic financial decisions ? How

do they involve risk-return trade off ? 10, 10
(b) What role should the financial manager play
in a modern organisation ?

2. (a) Explain the method of calculating present

value of cash flows. 10, 10
(b) Explain the concept of valuation of
securities. Why is the valuation concept
relevant for financial - decision making
purposes ?

3. (a) What is payback period method ? Despite

its weakness, it is a very popular method.
What are advantages and disadvantages of
the same ? 10, 10

MCO-07 1 P.T.O.
 (b) Find payback period of the following
machines :
(i) Machine 'A' costs Z 50,000 and
generates a cash flow of Z 18,000 per
year for four years.
Machine 'B' costs Z 75,000 and
generates Z 20,000 per year for six
years.
Suggest which machine is better and
why ?

4. (a) A company issued a 10% perpetual debt for

Z 15,00,000. The company is in the 40%
tax bracket. Find the cost of debt after tax
(i) at par (ii) at a discount of 15% and (iii) at
10% premium. 15, 5
(b) Distinguish between explicit cost and
implicit cost.

5. Discuss the concept of financial leverage, 20

operating leverage and combined leverage. How
are they calculated ? Explain their significance
in the planning of a firm.

What is Optimum capital structure ? 5

Discuss.
Critically examine the Net Income and Net 15
operating Income approach to capital
structure decisions.

7. (a) What are the main determinants of a

dividend payout ? 10, 10
(b) Why do firms follow a policy of stable
dividend ?

MCO-07 2
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MCO-07 6
8. (a) What is an operating cycle ? How is it
important for the management of working
capital ? 10, 10
(b) Explain the risk-return trade off in working
capital management.

9. Write short notes on any two of the following : 10, 10

(a) Techniques of inventory management.
(b) Venture Capital
(c) Corporate finance Vs. Project finance
(d) Lease financing

MCO-07 3
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MCO-07 4 P.T.O.
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MCO-07 5 P.T.O.