Beruflich Dokumente
Kultur Dokumente
April – 2002
60 Marks
Note:
(1) Section I, Question No. 1 and 2 are compulsory.
(2) Attempt any three questions from Section II.
Section — I
(1) Concept Testing: (15)
2) The company proposes to borrow the term loan under TUFs (Technology
Upgradation Fund Scheme).
4) The additional investment will increase the installed capacity by 3600 TPA.
5) The present and proposed set up is at Silvassa backward area and enjoys
Income tax holiday for 5 years. Tax Rate is 40%.
6) GIIC, GSFC and SBI financed the present unit. All the accounts are regular.
7) The project will lead to economies of scale, reduced cost of productions higher
production due to yarn speed being faster due to latest generation machine,
best quality due to the modernized machine.
10) The cost of proposed project and the means of finance are as follows:
Rs. In Lacs
Means of Finance
Promoter’s Fund
Additional Equity Share Capital 300
Internal Cash Accrual 500
Term Loan 1200
TOTAL 2000
11) The Term lending institution has Interest rate of 13% for similar risk project and
the loan is repayable in 5 years with installment and interest repayable at the
end of each year.
(a) Prepare Flash Report from the point of view of the Term lending institution.
(b) Evaluate the project for Profitability in the next 5 years.
(c) Calculate the Debt Service Coverage ratio for the Term Loan.
Section — II
(3) Company A wishes to takeover Company B. The financial details of the two
companies are given as under: (10)
In order to determine the terms of exchange ratio, the company has approached you for
valuation of shares based on:
(i) Net Asset Value
(ii) Earning per share
(iii) Market price per share
(10)
(4) M/s Onward Technology has short listed two projects A and B for final
consideration. It wants to take up only one project of the two and not both. The
investment required for project A is Rs.190 Lakhs while that for project B is Rs.400
Lakhs. The other details related to Project A and B are given below:
PROJECT A
Year Depreciation Profit Before Tax Profit After Tax
I 24 78 56
II 20 82 60
III 16 100 74
PROJECT B
Year Depreciation Profit Before Tax Profit After Tax
I 78 104 82
II 64 118 92
III 54 260 186
The cost of capital of company is 14% and the present value of Re.1 at the end of first,
second and third year @ 14% rate is 0.8772, 0.7695 and 0.6750 respectively. Using Net
Present Value Method, which project would you recommend.
(5) Discuss “Companies prefer to issue bonus shares to payment of dividend but (10)
investor prefer dividend to bonus shares”.
(6) Describe the impact of corporate taxation on corporate financing. Elucidate your (10)
answer with suitable examples.
(10)
(7) Discuss briefly the contents of a prospectus for issue of shares.
Section — I
(1) Concept Testing: (15)
Questions:
1) Give the Cashflow generated by the above project for the first 3 years only.
2) Calculate the Debt Service Coverage ratio for the above 3 years.
Section — II
(3) The following is the abridged financial statement of Auto Company. (10)
Calculate:
(a) Value of Shares before the above proposals.
(b) Value of Shares after Cash Dividend but before Bonus.
(c) Value of Shares after Cash Dividend and after Bonus.
(d) Retained Earnings after the above proposals.
(e) Value of Assets and Liabilities after the above proposals.
(4) The total available budget for the company is Rs. 20 Lacs. The Projects have been
ranked in the order of Profitability.
(b) Which projects should be undertaken by the company in order to maximize the (5)
Net Present Value under Capital Rationing assuming that the each Project is
indivisible?
(5)
(a) Explain the provisions of MAT and its implications of Corporate Financing (5)
(b) Explain whether Dividend declared to shareholders reduces the tax liability
(5)
under MAT.
(6)
(a) Discuss the role of Merchant banker in the following: (6)
(7) Discuss the various theories of explaining Dividend Policy of the company. (10)
Section — I
(1) Attempt the following: (15)
(2) The Directors of the following two Indian Companies have approached you
(15)
with their concern for the current scenario and future prospects
(1) Madhur Products Limited is an established company in the field of dairy
products, chocolates and ice creams. It has a decent track record of Dividend,
which averages @ 40 % p.a. The Company has also a good record of Bonus
issue. The last Bonus Issue ‘was made in September, 2000.
The Company feels that due to the conspiracy hatched by its competitors with
the help of widespread network of distributors, the Company’s products were
shown to have been contaminated and it was also widely shown on the media
that under the wrappers of many of their chocolates and ice creams, there was
a layer of fungus and decayed dry fruits. The snaps and live interview of the
consumers complaining about the inferior quality and “totally unsafe for human
consumption” shouts, drastically brought down the sale in the last quarter of the
Financial Year 2003—04.
The Directors are of the opinion that the sale would again pick up from the
second quarter of the next year and there will be a complete normally
thereafter.
Section — II
(3) Monica Engineering Ltd. gives you the following information of their income for the
year ended 31.3.2003:
(10)
(Amt. in Rs.)
Sales 238,23,200
Cost of sales 188,20,100
Gross Profit 50,03,100
Add: Transfer from Contingency Reserve 4,50,000
Less: Office Overheads 20,12,460
Selling and distribution 14,80,670
Depreciation 8,29,910
Provision for Income tax 3,80,000
Transfer to General Reserve 5,00,000
Proposed Dividend 1,80,000
Net profit carried to Balance sheet 70,060
Additional information
(1) The Carried Forward business loss from last year is Rs. 4,05,600.
(2) Depreciation allowable as per Income Tax Act is Rs. 9,20,300.
(3) Corporate Tax rate is 35% + Surcharge @ 5% and MAT u/s 115 JB is @ 7.50%
+ Surcharge @ 5%.
You are required to calculate the amount of tax payable by the Company for the year
ended 31.3.2003 after taking into account the provisions of MAT u/s 115JB of LT. Act,
1961.
(6) The existing manufacturing units has yearly fixed overheads of Rs.1,00,000. It
wished to expand the production by purchasing one of the two types of machinery (10)
Model A and Model B, each costing Rs.5,00,000 and having the estimated life of 5
years. The estimated annual Sales and Cost under both of these models are given
as under:
Model A (Rs.) Model B (Rs.)
Sales 20,00,000 24,50,000
Materials 9,20,000 11,12,200
Labour 4,12,450 5,67,800
Variable Overheads 3,80,900 4,95,670
Page 3 of 3
Special Study in
Finance
60 Marks
Special Study in Finance
April – 2005
Note:
(1) Answer all the questions in Section I.
(2) Answer any three questions from Section II. Each question in this Section carries 10 marks.
Section — I
(1) Attempt the following: (15)
(a) What is the principle underlying Discounted Cash Flow Techniques in Capital
Investment Decisions?
(b) What is a Shelf Prospectus?
(c) What are the matters covered in a Marketing Appraisal of a Term Loan
Appraisal?
(d) What do you understand by the term stock-split and consolidation of shares?
What is their impact on the Balance sheet of a company?
(e) State the main functions of Securities and Exchange Board of India.
(2) Royal Industries has for many years enjoyed a moderate stable growth in
sales and earnings. In recent years it is facing stiff competition in a plastic product
line and consequently its sales have been declining. Apprehending further decline in
its sales, its management is planning to move eventually out of plastic business
altogether and develop a new diversified product line in growth oriented industries.
To execute the proposed investment plan of this year a capital outlay of Rs. 12
crores is necessary to purchase new facilities to start manufacturing a new product.
The estimated rate of return on fresh investment is 20 percent per annum.
The company has been paying a dividend of Rs. 1.50 per share on 4 crore
outstanding shares. The dividend policy has been to maintain a stable dividend of
Re. 1 raising it only when it appears that earnings have reached a new permanently
higher level. The directors may change such a policy if there are compelling reasons to
do so. Total earning of the current year are Rs. 10 crores. The current market
price of the equity share is Rs. 15 and the firm’s Debt/Assets ratio is 40%. Current
costs of various forms of financing are:
Debentures 13%, New equity shares sold at Rs. 15, Required rate of
return is 10 percent.
(3) ABC Ltd. has made a rights offer (to its existing shareholders) of one share for
every 3 shares held @ Rs. 25 per share. The current market price per share of the
company is Rs. 40. A presently holds 1000 equity shares of the company. Before
deciding on the acceptance of the rights offer, he would like to know answers to the
following questions:
(i) What is expected to be the market price of the share after the rights issue? (2)
(2)
(ii) What is the value of the right to the shareholder per shares held by him?
(2)
(iii) If he renounces his shares in favor of his friend for a price which is the value (2)
of the right, what would be the change in his wealth? (2)
(iv) What would be the change in his wealth if he remains dormant and let go the
(2)
right offer? Advise him.
Section — II
(10)
(4) Discuss the financial ratios used for appraisal of Term Loan Proposals.
(6) What is Capitalization of Reserves? What are the guidelines issued by SEBI with in (10)
this regard? How does it affect the Balance sheet of a company?
(7) Following are the data on a capital project evaluated by the management of EFG
(10)
Ltd.
Annual Cost Saving Rs. 40,000
Useful Life 4 years
IRR 15%
Profitability Index 1.064
NPV ?
Cost of Capital ?
Cost of Project ?
Payback ?
Salvage Value 0
Find the missing value considering the following table of thediscount factors only:
(8) The Balance sheet of Ganesh Ltd. as on 31-3-2005 was as under: (10)
Additional Information:
(i) Land & Building and Machinery are valued at Rs. 1,37,500
and Rs. 55,000
respectively.
(ii) Of the total debts Rs. 2,500 are bad.
(iii) Goodwill is to be valued at Rs. 25,500
(iv) The normal dividend declared and paid by such
type of companies is 15% on the paid-up capital
(v) The average rate of dividend, declared and paid
by the company is 18% on its paid-up capital.
Note:
(1) Section I is compulsory
(2) Answer any three questions from Section II
(3)Use of simple calculators is permitted
(4)Figures to the right indicate marks
(5)Make suitable assumptions wherever required.
(6) Working notes, if any, shall form part of your answers.
Section — I
(1) Answer the following: (15)
(2)
(a) Mr. Anil Sane, a fresh MBA, wishes to start a Manufacturing Unit from his (10)
ancestral factory premises. He has Rs.1,05,200 in his bank account. His
parents have promised to gift him Rs.3,50,000.
(b) Also find out any five plus points of the above loan proposal from Banker’s (5)
Point of view.
Section — II
(3) Evaluate the merits of Internal Funding and External Funding. (10)
(4) Discuss recent controversies related to IPOs and multiple Demat Accounts. (10)
(5) Explain the impact of inflation on corporate financing, covering al the aspects in (10)
detail.
(6) M/s Maha Sweet would like to setup a food-processing unit. The technology for the (10)
processing is always on improvement and hence the propose unit would become
obsolete within four years of operation and would be scrapped. The company
estimates to achieve sales of Rs.50 lakh in the first year of operation. This will be
double every year. Net profit margin is 50%. Initial Outlay is Rs.5 crores. Company
will also pump-in initial working capital of Rs.1 crore. Scrap value of the unit is Rs.1
crore. Depreciation on SLM basis.
Present Value table of Re.1 is as follows:
Years 1 2 3 4
17% 0.855 0.731 0.624 0.534
18% 0.847 0.718 0.609 0.516
Calculate:
(a) Payback Period
(b) Payback Profitability
(c) NPV at 17% discounting rate
(d) NPV at 18% discounting rate
(e) IRR
(7) Gems Ltd. Gives you the following information as on 31.3.2006 (10)
The patents are worthless while 50% of the fixed assets are appreciated by 20%
From the above you are required to calculate value of an equity share of the company
under:
**********
All the Important Questions already get covered in the past board papers.
For more questions, refer to
http://www.managementparadise.com/forums/t1690-question-bank-sem-6-
2006-.html