9F

A3
BE

30
DE
Paper / Subject Code: 85603 / Financial Management - III

E9

9B
F9

3A
9F
BE
8B

E2

BA

A3
E9
F9

FD
DC

29

A3
BE
8B

9
72

E
E9

B
F9

FD
C
0A

9
D

E
Duration : 2.30 hours Marks :75

8B

2
99
B
72

DE
75

F9
DC

EE
A
B3

F
N.B.: 1. All Questions are compulsory.

8B
50

9
B
2

E
D1

E9
A7
37

9
2. Working Notes should from part of answer.

FD
C

BF
30

2D

BE
B

50
3. Figures to the right indicates full marks.

99
D1

C8
3A

A7
7

F9

EE
3
4. Use of simple calculator is allowed.

30

2D
BA

1B

8B
0

9B
75
3A

A7
D

DC
29

BF
30
A

B
Q1. A. State whether following statement True or False (Any 8) (08)

50
DE

B
2
B

8
3A

7
37

F9
D

C
9
9F

0A
2

30

2D
A
a. Salvage Value is the sale value of an old asset after its usage.

1B

8B
DE
E9

75
A

A7
D

C
9
b. Fair Value of the shares is equal to average of intrinsic value and yield value.

9F

3
BE

B3
E2

D
A

0
A3
E9
c. Preference dividend is deducted from NPAT for calculation of EPS.

72
9B

5
D1
F9

FD

7
3
BE

0A
B3
8B

E2
d. Pooling of resources by two or more companies under a common entity is called as

30
A
99

2
B

5
1
F9

FD

3A
DC

EE
merger.

A7
37
0D
9
8B

E2

BA
99

1B
9B
72

50
e. Fictitious assets are written off to capital reduction account.

A3
D
C

E
0A

37
0D
BF

29
f. Appreciation in land and building is debited to capital reduction account.
D

A3
BE

1B
2

DE
75

A3
C8

E9
7

9B
g. Cost of asset is cash outflow to lessee.
F9
0A
B3

0D
D

9F

A3
BE
B

E2
h. Annual lease rental is considered as cash outflow for lessor.
2
75
D1

A3
8

9
A7

B
F9

FD
DC

EE
i. MPBF refers to Minimum Permissible bank finance.
B3

29
30

A3
8B
50

99
9B
72

DE
D1

j. Depreciation is an external source of finance.

3A

9B
7

EE
A
3

BF
30

9F
BA

E2
0

9B
2
5

Q1.B. Match the Column (Any 7) (07)

1

C8
3A

E9
7
37
D

FD
9

0A

BF
E2

30

2D
BA

BE
1B

99
Column A Column B
75
FD

8
3A

A7

F9
D

DC
9

EE
3
E2

1.Super Profit a. Initial Payment

0
BA
99

8B
0
A3

9B
72
5
D1
FD
EE

2.Normal rate of return b. Excess of FMP over Normal Profit

7

DC
9

A
3

BF
E2

30
A
9

1B
9B

3.Horizontal Merger c. Rate of Interest Plus Rate of Risk

0
E9

72
B

5
FD

C8
3A

37
0D
BF

4.Conglomerate d. Merger of unrelated line

BE

0A
E2

2D
BA
9

1B
3
C8

E9

5.Creditors accepting part payment e. Two Companies in the Same line

75
F9

FD

A7
0D
9
2D

3
BE

B3

6.Loss on Revaluation of asset f. Compromise

8B

A
99

50
DE

3
A7

9B

D1
F9

A
DC

7.Hire Purchase Price g. Debit Capital Reduction

EE

37
9F

3
8B

E2
0

30
BA

8.Down Payment h. Cash Price Plus Interest

1B
9B
72
75

FD

3A
DC

E
0A

0D
F

9.Bill Payable i. Normal Profit over FMP

29
E
8B

BA
9
9B
72

E
75

A3

10.Working Capital Finance j. Cash Price less Interest

9

D
DC

EE
0A
3

29
9F

A3

k. Spontaneous Source of Finance

1B

8B

9B
72

DE
75

E9

9B
0D

l. Provided against inventories

DC
0A
3

BF

F
BE
1B

E2
A3

9
72
75

C8

E9
9
0D

Q2.A. The Balance Sheet of Abhishek Ltd. as on 31/03/2023 is as follows: (15)

FD
0A
3

BF
2D

BE
1B
A3

Balance Sheet As On 31/03/2023

99
75

8
A7

9
0D

DC

EE
3

BF

Liabilities Amount Assets Amount Rs.

BA

1B

50
A3

9B
72

C8

Rs.
37
0D
29

BF
2D
BA

4,000 Equity share of Rs. 100 4,00,000 Land & Building 2,20,000
1B

0
DE

A3

C8
7

each
7
0D
29

0A
3

2D
BA

1B
DE

General Reserve 40,000 Plant & Machinery 2,60,000

A3

75

A7
0D
29
9F

Profit & Loss A/c 64,000 Patent & Trademark 44,000

A3

B3

50
DE

A3
E9

9B

Creditors 2,56,000 Stock 60,000

D1

37
9F

A3
BE

E2

Income Tax (provision) 1,20,000 Bank 1,04,000

30

1B
E9

9B
F9

Preliminary Expenses 24,000

0D
9F

A3
BE

E2

Debtors 1,68,000
A3
E9

9B
9

D
BF

8,80,000 8,80,000
9F

A3
BE

E2
C8

E9

9B
F9

25686 Page 1 of 4
2D

9F
BE
8B

E2
E9
A7

F9

FD
DC

BE
8B

99
72

F9
DC

3750A72DC8BF9BEE99FDE29BA3A30D1B
EE
0A
 9F

A3
BE

30
DE
Paper / Subject Code: 85603 / Financial Management - III

E9

9B
F9

3A
9F
BE
8B

E2

BA

A3
E9
F9

FD
DC

29

A3
BE
8B

9
72

E
E9

B
F9

FD
C
0A

9
D

E
8B

2
99
B
72

DE
75

F9
DC

EE
A
B3

F
8B
50

9
B
2

E
D1

E9
A7
37
1. The assets are valued as under:

FD
C

BF
30

2D

BE
B

50
Land & Building Rs. 3,80,000

99
D1

C8
3A

A7
7

F9

EE
Goodwill Rs. 2,80,000

3
30

2D
BA

1B

8B
0

9B
75
Plant & Machinery Rs. 2,82,500

3A

A7
D

DC
29

BF
30
2. Out of total Debtors it was found that debtors of Rs. 8,000 are bad.

50
DE

B
2
B

8
3A

7
37
3. The profits of the Company has been as follows:

F9
D

C
9
9F

0A
2

30

2D
A

1B

8B
DE
YEAR Rs. E9

75
A

A7
D

C
9
9F

3
BE
2020-2021 1,60,000

B3
E2

D
A

0
A3
E9

72
9B

5
D1
F9

2021-2022 1,80,000

FD

7
3
BE

0A
B3
8B

E2

30
2022-2023 2,12,000

A
99

2
B

5
1
F9

FD

3A
DC

EE

A7
4. The Co. follows the practise of transferring 25% of profits to General Reserves.

37
0D
9
8B

E2

BA
99

1B
9B
72

50
A3
5. Similar type of business earns 10%.

D
C

E
0A

37
0D
BF

29
D

A3
BE
Calculate the value of business under:

1B
2

DE
75

A3
C8

E9
7

9B
F9
a. Intrinsic Value
0A
B3

0D
D

9F

A3
BE
B

E2
b. Yield Value
2
75
D1

A3
8

9
A7

B
F9

FD
DC

EE
B3

c. Fair Value

29
30

A3
8B
50

99
9B
72

DE
D1
3A

9B
7

EE
A
3

BF
30

9F
BA

E2
0

9B
2
5
1

C8
OR
3A

E9
7
37
D

FD
9

0A

BF
E2

30

2D
BA

BE
1B

99
75

Q2.B. Calculate EVA from the following on March 2022 for ZT Ltd (08)
FD

8
3A

A7

F9
D

DC
9

EE
3
E2

0
BA
99

8B
0
A3

9B
72

Financial Leverage 1.4 times

5
D1
FD
EE

DC
9

A
3

BF
E2

Equity Capital Rs 340 lakhs

30
A
9

1B
9B

0
E9

72
B

5
FD

C8
3A

Reserves and Surplus Rs 260 lakhs

37
0D
BF

9
BE

0A
E2

2D
BA
9

1B

10 % Debentures Rs 800 lakhs

3
C8

E9

75
F9

FD

A7
0D
9

Cost of Equity 17.5%

2D

3
BE

B3
8B

A
99

50
DE

Income Tax rate 30 %

A7

9B

D1
F9

A
DC

EE

37
9F

3
8B

E2
0

30
BA

1B
9B
72
75

FD

3A
DC

E
0A

0D
F

29
E

Q2.C. Calculate MVA from the following information of Beta Ltd. (07)
8B

BA
9
9B
72

E
75

A3
9

D
DC

EE
0A
3

29
9F

A3

Liabilities Amt Assets Amt

1B

8B

9B
72

DE
75

E9

9B

(in Lakhs) (in Lakhs)

0D

DC
0A
3

BF

F
BE
1B

E2

Equity share capital of Rs 10 each 2,400 Buildings 3,600

A3

9
72
75

C8

E9
9
0D

FD

Retained earning 1,200 Machinery 1,600

0A
3

BF
2D

BE
1B
A3

99

8% Term loan 1,600 Stock 200

75

8
A7

9
0D

DC

EE
3

BF

Bills Payable 700 Debtors 160

BA

1B

50
A3

9B
72

C8

Provision 860 Bank 1200

37
0D
29

BF
2D
BA

1B

6760 6760
0
DE

A3

C8
7
7
0D
29

Profit after Tax (PAT) = Rs 4,542 P/E Ratio = 2

3

0A
3

2D
BA

1B
DE

A3

75

A7
0D
29
9F

A3

B3

50
DE

A3
E9

9B

D1

37
9F

A3
BE

E2

30

1B
E9

9B
F9

0D
9F

A3
BE

E2

A3
E9

9B
9

D
BF

9F

A3
BE

E2
C8

E9

9B
F9

25686 Page 2 of 4
2D

9F
BE
8B

E2
E9
A7

F9

FD
DC

BE
8B

99
72

F9
DC

3750A72DC8BF9BEE99FDE29BA3A30D1B
EE
0A
 9F

A3
BE

30
DE
Paper / Subject Code: 85603 / Financial Management - III

E9

9B
F9

3A
9F
BE
8B

E2

BA

A3
E9
F9

FD
DC

29

A3
BE
8B

9
72

E
E9

B
F9

FD
C
0A

9
D

E
Q3.A. The following information is provided related to the acquiring firm S Limited

8B

2
99
B
72

DE
75

F9
DC
and the target firm T limited. (15)

EE
A
B3

F
8B
50

9
B
2

E
D1

E9
A7
37

FD
C

BF
Particulars S Limited T Limited

30

2D

BE
B

50

99
D1

C8
3A
Earning After Tax Rs 8,000 lakhs Rs 600 lakhs

A7
7

F9

EE
3
30

2D
BA

1B
Number of Shares 800 lakhs 300 lakhs

8B
0

9B
75
3A

A7
D

DC
29
P/E ratio (Times) 10 5

BF
30
A

50
DE
Required:

B
2
B

8
3A

7
37

F9
D

C
9
9F

0A
2

30

2D
A

1B

8B
DE
1. What is the swap ratio based on current market price? E9

75
A

A7
D

C
9
9F

3
BE

B3
2. What is the EPS of S Limited after acquisition ?

E2

D
A

0
A3
E9

72
9B

5
D1
F9

FD
3. What is the expected market price per share of S Limited after acquisition assuming P/E

7
3
BE

0A
B3
8B

E2

30
A
9
ratio of T Limited remains unchanged ?

2
B

5
1
F9

FD

3A
DC

EE

A7
37
0D
9
4. Determine the market value of the merged firm
8B

E2

BA
99

1B
9B
72

50
A3
5. Calculate gain/loss for shareholders of the two independent companies after acquisition.

D
C

E
0A

37
0D
BF

29
D

A3
BE

1B
2

DE
75

A3
C8

E9
7

9B
F9
OR
0A
B3

0D
D

9F

A3
BE
B

E2
2
75

Q3.B. The balance sheet of VST limited as on 31/03/2022 as follows: (15)

D1

A3
8

9
A7

B
F9

FD
DC

EE
B3

29
30

Balance sheet as on 31/03/2022

A3
8B
50

99
9B
72

DE
D1
3A

9B
7

Liabilities Rs. Assets Rs.

EE
A
3

BF
30

9F
BA

E2
0

9B
Equity share of Rs. 100 each 1,00,00,000 Fixed asset 1,50,00,000
2
5
1

C8
3A

E9
7
37
D

FD
9

0A

BF
E2

30

2D

6% cumulative preferences Investments (market

BA

BE
1B

99
75
FD

8
3A

A7

of Rs.100 each 50,00,000 value rupees 19,00,000) 20,00,000

F9
D

DC
9

EE
3
E2

0
BA
99

8B
0

5% debentures of Rs. 100

A3

9B
72
5
D1
FD
EE

DC
9

each 40,00,000 Current assets 60,00,000

3

A
3

BF
E2

30
A
9

1B
9B

0
E9

72
B

Sundry creditors 50,00,000 Profit and loss A/C

5

12,00,000
FD

C8
3A

37
0D
BF

9
BE

0A
E2

2D
Provision for taxation 2,00,000
BA
9

1B
3
C8

E9

75
F9

FD

A7
0D

2,42,00,000 2,42,00,000
9
2D

3
BE

B3
8B

A
99

50
DE

3
A7

9B

D1
F9

A
DC

EE

37
9F

The following scheme of internal reconstruction is sanctioned .

8B

E2
0

30
BA

1B
9B
72
75

FD

3A
DC

1. All the existing Equity Shares are reduced to Rs 40 each

E
0A

0D
F

29
E
8B

BA
9
9B
72

2. All Preference Shares are reduced to Rs 60 each

E
75

A3
9

D
DC

EE
0A
3

29
9F

3. The rate of interest on debentures increased to 6%. The debenture holders surrender
A3
1B

8B

9B
72

DE
75

E9

9B
0D

their existing the debenture of rupees 100 each and exchange the same for Fresh
DC
0A
3

BF

F
BE
1B

E2
A3

debentures of Rs 70 is for every debenture held by them.

72
75

C8

E9
9
0D

FD
0A
3

BF

4. Fixed Asset are to be written down by 20%

2D

BE
1B
A3

99
75

8
A7

5. Current Assets are to be valued at Rs 46,00,000

0D

DC

EE
3

BF
BA

1B

50
A3

6. Investments are to be brought to their market value

9B
72

C8
37
0D
29

BF

7. One of the creditors of the company to whom the company owes rupee 40,00,000
2D
BA

1B

0
DE

A3

C8
7

decides to forgo 40% of his claim and was allotted with 60,000 equity shares of
7
0D
29

0A
3

2D
BA

1B
DE

A3

rupees 40. each in full and final settlement of his claim.

75

A7
0D
29
9F

A3

8. The taxation liability is to be settled at rupees 3,00,000

B

50
DE

A3
E9

9B

D1

9. It is decided to write of debit balance of profit and loss account

37
9F

A3
BE

E2

30

1B

You are required to:

E9

9B
F9

0D
9F

A3
BE

1. Pass necessary journal entries

E2

A3
E9

9B
9

2. Balance sheet after reduction.

BF

9F

A3
BE

E2
C8

E9

9B
F9

25686 Page 3 of 4
2D

9F
BE
8B

E2
E9
A7

F9

FD
DC

BE
8B

99
72

F9
DC

3750A72DC8BF9BEE99FDE29BA3A30D1B
EE
0A
 9F

A3
BE

30
DE
Paper / Subject Code: 85603 / Financial Management - III

E9

9B
F9

3A
9F
BE
8B

E2

BA

A3
E9
F9

FD
DC

29

A3
BE
8B

9
72

E
E9

B
F9

FD
C
0A

9
D

E
8B

2
99
B
72

DE
75

F9
DC

EE
A
B3

F
Q4.A. AB Ltd requires an equipment costing 2,00,000 the same will be utilized over (15)

8B
50

9
B
2

E
D1

E9
A7
the period of 5 years it has 2 financing option in this regard. The Salvage value of Equipment

37

FD
C

BF
30

2D

BE
at the end of 5th year is zero. The company uses straight line depreciation. Assume tax rate is

50

99
D1

C8
3A

A7
7

F9
40 %

EE
3
30

2D
BA

1B

8B
0
Option 1:

9B
75
3A

A7
D

DC
29

BF
To buy with borrowed fund at the cost of 18% p.a repayable in 5 equal instalments of Rs

30
A

50
DE

B
2
B

8
3A
64,000 p.a

7
37

F9
D

C
9
9F

0A
2

30

2D
A

1B

8B
DE
Option 2:
E9

75
A

A7
D

C
9
To take equipment on lease and on an annual rent of Rs 32,000

9F

3
BE

B3
E2

D
A

0
A3
E9

72
9B
Discount Factor at 18%

5
D1
F9

FD

7
3
BE

0A
B3
8B

E2

30
Year Value

A
99

2
B

5
1
F9

FD

3A
DC

EE

A7
1 0.847

37
0D
9
8B

E2

BA
99

1B
9B
72

50
2 0.718

A3
D
C

E
0A

37
0D
BF

29
D

3 0.609

A3
BE

1B
2

DE
75

A3
C8

E9
7

4 0.516

9B
F9
0A
B3

0D
D

9F

A3
BE
B

E2
5 0.437
2
75
D1

A3
8

9
A7

B
F9

FD
DC

EE
Total 3.127
B3

29
30

A3
8B
50

99
9B
72

Advise the company which option should go for if internal rate of return 18%

DE
D1
3A

9B
7

EE
A
3

BF
30

9F
BA

E2
0

OR

9B
2
5
1

C8
3A

E9
7
37
D

FD
9

0A

BF
E2

30

2D
BA

BE
1B

Q4.B. MCO ltd issued commercial paper worth RS 20 crores as per following (08)

99
75
FD

8
3A

A7

F9
D

DC
9

EE
3

details
E2

0
BA
99

8B
0
A3

9B
72
5
D1
FD

Date of Issue 16/01/2022

EE

DC
9

A
3

BF
E2

30
A
9

1B

Date of Maturity 17/04/2022

9B

0
E9

72
B

5
FD

C8
3A

37
0D
BF

No of Days 91
9
BE

0A
E2

2D
BA
9

1B
3
C8

Interest Rate 12 % p.a

E9

75
F9

FD

A7
0D
9
2D

3
BE

B3

What was the amount received by the company on issue of commercial paper (Changes of
8B

A
99

50
DE

3
A7

9B

D1
F9

A
DC

intermediary may be ignored) (Assume number of days in a year is assumed to be 365 days)
EE

37
9F

3
8B

E2
0

30
BA

1B
9B
72
75

Q4.C.A firm has total credit sales of Rs 2,00,00,000 and its average collection period is (07)
FD

3A
DC

E
0A

0D
F

29
E
8B

BA

80 days. Bad debts are around 1% of credit sale. The firm spends Rs 2,20,000 per year on
9
9B
72

E
75

A3
9

D
DC

EE
0A
3

administer credit sale. A factor is prepared to buy firm receivable. He will advance receivable
29
9F

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1B

8B

9B
72

DE
75

to the firm at 18 % interest after keeping 10 % as reserve. Suggest whether the company should
E9

9B
0D

DC
0A
3

BF

F
BE
1B

opt for inhouse management of debt and or factoring service (Assume number of days in a year
E2
A3

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72
75

C8

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9
0D

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is assumed to be 360 days)

0A
3

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99
75

8
A7

9
0D

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3

BF

Q5.A. Distinguish between Merger and Takeover (08)

BA

1B

50
A3

9B
72

C8

Q5.B. Explain different types of leases? (07)

37
0D
29

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2D
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1B

0
DE

OR
A3

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7
7
0D
29

0A
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Q5. Write note on the following (Any 3) (15)

DE

A3

75

A7
0D
29

a. Variations of Shareholders rights

9F

A3

B3

50
DE

A3
E9

b. Retained Earning
9B

D1

37
9F

A3
BE

E2

c. Types of Factoring
30

1B
E9

9B
F9

d. Certificate of Deposit
0D
9F

A3
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E2

e. Synergy
A3
E9

9B
9

D
BF

9F

A3
BE

E2
C8

E9

9B
F9

25686 Page 4 of 4
2D

9F
BE
8B

E2
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A7

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FD
DC

BE
8B

99
72

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