VEL TECH HIGH TECH DR.RANGARAJAN DR.

SANKUNTHALA ENGG COLLEGE DEPARTMENT OF MANAGEMENT STUDIES FINANCIAL MANAGEMENT - SUBJECT CODE: BA9222

Set A Part-A 1. 2. 3. 4. 5. Part-B

1. What do you mean by discounted cash flow techniques? List down its methods.

Define Capital budgeting. What are the needs of Capital Budgeting? What do you mean by Capital Rationing? State the meaning & formula for Profitability Index. What are the components of capital?

(or) What do you mean by cost of capital? Explain its significance. Part-C 1. Elaborate the capital budgeting process and its principles. (or) A Limited company is considering investing in a project requiring a capital outlay of Rs.200000. Forecast of annual income after depreciation but before tax is as follows: Year Rs. 1 1,00,000 2 1,00,000 3 80,000 4 80,000 40,000 5 Depreciation may be taken as 20% on original cost and taxation at 50% net income. Calculate: a) Pay-back method, (b) Discounted Cash flow method taking cost of capital at 10%, (c) Excess Present Value Index 2. Elaborate the classification of capital expenditure decisions and the factors influencing it. (or) Explain the different methods of calculating the cost of equity capital.

VEL TECH HIGH TECH DR.RANGARAJAN DR.SANKUNTHALA ENGG COLLEGE DEPARTMENT OF MANAGEMENT STUDIES FINANCIAL MANAGEMENT - SUBJECT CODE:BA9222

Set B Part A 1. State the principles of capital rationing. 2. What are the components of capital expenditure programme? 3. What is the impact of inflation in capital budgeting decision? 4. What do you mean by IRR? 5. What do you mean by Marginal Cost of Capital? Part-B 1. Explain the criteria for selecting the project under capital rationing. (or) Why Debt is considered as the cheapest source of finance for profit making firm? Part-C
1. Explain the various capital budgeting techniques.

(or) Explain the approach of weighted average cost of capital and state its limitations. 2. How is the cost of different types of capital measured? Illustrate and explain about cost of debt and cost of retained earnings. (or) The following details relate to two machines producing identical products: Particualrs Machine A Machine B Original Cost Rs.100000 Rs.150000 Working Life 5 yrs 5 yrs Profit before Rs Rs depreciation I yr 30,000 40,000 II yr 15,000 45,000 III yr 40,000 50,000 IV yr 40,000 24,000 V yr 35,000 71,000 Tax rate 50% 50%

(a) Calculate Return on Investments (b) Calculate average rate of return assuming that machines A & B have scrap values of Rs.10,000 and Rs.20,000 respectively at the end of 5th yr.