MBA Assignment A
Question1. (a) Should the titles of controller and treasurer be adopted under Indian context? Would you like to modify their functions in view of the company practice in India? Justify your opinion?
(b) A firm purchases a machinery for Rs. 8,00,000 by making a down payment of Rs.1,50,000 and remainder in equal installments of Rs. 1,50,000 for six years. What is the rate of interest to the firm?
Question2. (a) Explain the mechanism of calculating the present value of cash flows.What is annuity due? How can you calculate the present and future values of an annuity due? Illustrate
(b) ”The increase in the risk-premium of all stocks, irrespective of their beta is the same when risk aversion increases” Comment with practical examples
Question3. (a) How leverage is linked with capital structure? Take example of a MNC and Analyze.
(b) The following figures relate to two companies
P LTD. Q LTD.
(In Rs. Lakhs)
Sales 500 1,000
Variable costs 200 300
—- ——-
Contribution 300 700
Fixed costs 150 400
—- ——-
150 300
Interest 50 100
—- ——-
Profit before Tax 100 200
—- ——-
You are required to:
(i) Calculate the operating, financial and combined leverages for the two companies ; and
Comment on the relative risk position of them
Question4. (a) Define various concepts of cost of capital. Explain the procedure of calculating weighted average cost of capital.
(b) The following items have been extracted from the liabilities side of the balance sheet of XYZ Company as on 31st December 2005.
Paid up capital:
4, 00,000 equity shares of Rs.10 each 40, 00,000
Loans:
16% non-convertible debentures 20, 00,000
12% institutional loans 60, 00,000
Other information about the company as relevant is given below as on 31st December 2005
Dividend Earning Average market price
per share per share per share
7.2 10.50 65
You are required to calculate the weighted average cost of capital, using book values as weights and earnings/price ratio as the basis of cost of equity. Assume19.2% tax rate
Question5. (a) A company has issued debentures of Rs. 50 Lakhs to be repaid after 7 years. How much should the company invest in a sinking fund earning 12% in order to be able to repay debentures? Show the procedure of loan amortization and capital recovery through an example.
(b) A bank has offered to you an annuity of Rs. 1,800 for 10 years if you invest Rs. 12,000 today. What is the rate of return you would earn?
Question6. The proforma of cost-sheet of HLL provides the following data.
| Cost (per unit): |
|
|
| Raw materials | 52.0 | |
| Direct labour | 19.5 | |
| Overheads | 39.0 | |
| Total cost (per unit): | 110.5 | |
| Profit | 19.5 | |
| Selling price | 130.0 |
The following is the additional information available:
- Average raw material in stock: one month;
- Average materials in process: half month;
- Credit allowed by suppliers: one month;
- Credit allowed to debtors: two months;
- Time lag in payment of wages: one and half weeks;
- Overheads: one month.
- One-fourth of sales are on cash basis.
- Cash balance expected to be Rs. 12,000.
You are required to prepare a statement showing the working capital needed o finance a level of activity of 70,000 units of output. You may assume that production is carried on evenly throughout the year and wages and overheads accrue similarly.
Question7. (a) Through quantitative analysis prove that PI (Profitability Index) is a better technique than NPV (Net Present Value) in Capital Budgeting.
- (b) A company is considering the following investment projects:
| Projects | Cash Flows (Rs.) | |||
| Co | C1 | C2 | C3 | |
| A | – 10,000 | + 10,000 | —– | —– |
| B | – 10,000 | + 7,500 | + 7,500 | —– |
| C | – 10,000 | + 2,000 | + 4,000 | + 12,000 |
| D | – 10,000 | + 10,000 | + 3,000 | + 3,000 |
- Rank the project according to each of the following methods: (1.) Payback, (2.) ARR, (3.) IRR, (4.) NPV assuming discount rates of 10 and 30 per cent.
- Assuming the project is independent, which one should be accepted? If the projects are mutually exclusive, which project is the best?
Question8. (a) ” Firm should follow a policy of very high dividend pay-out.” Taking example of two organization comment on this statement.
(b) An investor gains nothing from bonus share “Critically analyze the statement through some real life situation of recent past.
MBA Assignment B
Case Detail :
Question1. Give your recommendations about the proposed investment
Question2. You are required to make these calculations and in the light thereof, advise the finance manager about the suitability, or otherwise, of machine A or machine B.
MBA Assignment C
- The main function of a finance manager is
- Earnings per share–
- If the cut off rate of a project is greater than IRR, we may–
- Cost of equity share capital is —
- Degree of the total leverage (DTL) can be calculated by the following formula–
- Risk- Return trade off implies–
- The goal of a firm should be–
- Current Assets minus current liabilities is equal to–
- The indifference level of EBIT is one at which–
- Money has time value since–
- Net working capital is —
- The internal rate of return of a project is the discount rate at which NPV is–
- Compounding technique is —
- For determining the value of a share on the basis of P/E ratio, information is required regarding–
- Tandon committee suggested inventory and receivable norms for–
- Capital structure of ABC Ltd. consists of equity share capital of Rs. 1,00,000 (10,000 share of Rs. 10 each) and 8% debentures of Rs. 50,000 & earning before interest and tax is Rs. 20,000. The degree of financial leverage is–
- The following data is given for a company. Unit SP = Rs. 2, Variable cost/unit = Re. 0.70, Total fixed cost- Rs. 1,00,000 Interest Charges Rs. 3,668, Output- 1,00,000 units. The degree of operating leverage is–
- Market price of equity share of a company is Rs. 25 and the dividend expected a year hence is Rs. 10. The expected rate of dividend growth is 5%. The cost of equal capital to company will be–
- The dilemma of “liquidity Vs profitability” arise in case of–
- The present value of Rs. 15000 receivable in 7 years at a discount rate of 15% is–
- A bond of Rs. 1000 bearing coupon rate of 12% is redeemable at par in 10 yrs. If the required rate of return is 10% the value of bond is–
- The EPS of ABC Ltd. is Rs. 10 & cost of capital is 10%.The market price of share at return rate of 15% and dividend pay out ratio of 40% is–
- The credit term offered by a supplier is 3/10 net 60.The annualized interest cost of not availing the cash discount is–
- The costliest of long term sources of finance is —
- Which of the following approaches advocates that the cost of equity capital & debit capital remains unaltered when the degree of leverages varies?
- Which of the following is not a feature of an optimal capital structure?
- While calculating weighted average cost of capital–
- Which of the following factors influence the capital structure of a business entity?
- According to the Walters model, a firm should have 100% dividend pay-out ratio when–
- Operating cycle can be delayed by–
- If net working capital is negative, it signifies that-
- Which of the following models on dividend policy stresses on investors preference for the current dividend?
- Which of the following is a technique for monitoring the status of receivables?
- Average collection period is equal to–
- In IRR, the cash flows are assumed to be reinvested in the project at–
- In a capital budgeting decision, incremental cash flow mean–
- The simple EOQ model will not hold good under which of the following conditions–
- The opportunity cost of capital refers to the —
- Which of the following factors does not influence the composition of Working Capital requirements ?
- The capital structure ratio measure the–
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