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A(th Sin.)-Financiu Management-11lbSE-6.2AMICBCS

2024
FINANCIAL MANAGEMENT – HONOURS
Paper : DSE-6.2AH
Full Marks : 80

The figures in the margin indicate full marks.

Candidates are required to give their answers in their own words
as far as practicable.
-
Group A

1. Discuss the inter-relationship between three major decision areas of financíal management. 5

Or,
Briefly explain the components of financial enyironment.

2. Baburam Ltd. is considering a project with initial cash outflow of 1| lakh. Economic life of the project
is 5 years. The estimated scrap value of the project is 2.75 lakh. The profits before depreciation and
taxes are expected to be as follows :
Year 2 3 4 .5.
R
(lakh)| 2.53.1| 3.21| 3.45 3.2
Find out the cash inflows from the project for the five years considering 30% corporate tax rate.
Tax rule states 12% rate of depreciation under reducing balance method. 5

3. Explain with example the concept of operating cycle. 5

4. Two projects, X and Y are under consideration by two companies, Shyama Co. and Das Co. The details
of X and Y are as follows :

X Y

Investment () 1,00,000 2,00,000

Economic Life (years) 7

Profit per annum () 19,200 34,800

Cash flow per annum (?)| 22,000 46,000

Two companies, Shyama Co. and Das Co. have the following criteria for selecting projects :

Required payback period Required rate of return

Shyana Co. 3 years 18%
Das Co. 4 years 22%

Suggest suitable projects among X and Y to these companies. 5

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|A(6th Sm.)-Financial Managenent-HIDSIE-6.24IHICBCS (2)

Or,
Distinguish betwecn temporary and pormanent working capital.

B
Group
5. The following informmation are available from Ray Ld.
Post-tax carnings 7 10 laklh
Number of equity shares outstanding 2 lakh
Dividend pay-out ratio 40%
Price-Earnings ratio
Rate of return on investment 16%
(a) Calculate the dividend per share and cost of equity for Ray Ltd.
(b) Apply Walter's Model to find out the value of equity share.
(©) The newly appointed finance manager, Mr. Sukumar suggested the higher authority to increase the
pay-out ratio to 55% so as to satisfy the equity shareholders, Do you agree with his opiníon?
Justify. [Calculation of share price is not required] 4+4+2
Or,
(a) Mention the assumptions of Gordon's Model.
(b) Discuss any two types of dividend. 6t4

6. (a) Discuss the procedure of debtors and cash management of working capital.
(b) Explain why wealth maximization' is more preferable than 'profit maximisation' as the goai of
financial management, 6+4

7. The data for Hati Ltd. and Timi Ltd. for the year ended 31st March, 2024 were as follows :

Hati Ltd. Timi Ltd.

Variable Cost as a Percentage of Sales 75 50
Interest Expenses (?) 3000 1000
Degree of Operating Leverage 6 4
Degree of Financial Leverage 4 2
Income Tax Rate: 30%
Prepare Income statement for each of the companies and comment on the risk. 8+2

Or,
(a) Discuss Net Income theory of capital structure.
(b) What are the features of a sound capital structure? 5+5
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(3) |A(Gth Sw)-Finunclul Munagentent-MDSE-6,2AIICBC'S

8. Gangaram Lid. is having a fund of r S0 laklh for invcstment. The company is considering the following
projecls with details given hereunder :

Projcct Investment () Net Prescnt Value () Nature of the Project

A 10,00,000 5,21,780 Indivisible
B
18,00,000 8,77,000 Divisible
C 28,00,000 12,01,000 Dívisiblc
D 12,00,000 (-) 74,150 Indívisible
E 17,00,000 9,50,000 Indivisíble
F 30,00,000 15,15,000 Divisíble

Apply the concept of capital rationing and select the combination of projects which will maximise the
net present value, Also find NPV of the combination. 8+2
Or,
(a) Discuss, with example, whether discounted payback period concept can be applied to find out
profitability of a project.
(b) Explain the concept of Profitability Index in the context of capital expenditure decisions.
6+4
9. The management of Adyanath Ltd. is deciding whether they need to change their present capítal structure
1
of :1.ebt-equity ratio. The target stncreill bganáthtais3. markel pfice is' bu per
through 10% debenture. The carningspef sharc
share. The past trend of this company shows 6% growth in earmings. Applicable tax rate is 35%.
(a) Calculate specific costs of capital.
(b) Determine the present and target cost of capital of Adyanath Ltd.
(c) How the shareholders are getting affected under the proposed capital structure considering the
risk perspective of the company? 5+5

to cost and sales data

10. Chandraketu Pvt Ltd. provides the following particulars related
per unit.
i) Raw materials 80 per unit, Overhead? 60 per unit, Sales price 200
on sales price.
(i1)The company wants to make 15% profit
(ii) Raw materials are kept in stock for one month.
(iv) Processing time can be taken as, on average, two weeks. At this stage the material is fully introduced,
but other expenses are 50% incurred.
(v) Finished goods are in stock for one month.
(vi) Credít enjoyed by Chandraketu Pvt. Ltd. is one month; whereas, they allow credit for two months.
(vií) The time-lags in wage and overhead payment are 1½ weeks and 4 weeks respectively.

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A(6th Sm)-Financial Managenent-HIDSE-6.2AiICBCS (4)

(vi) Onc-fourth of the output is sold against cash; cash in hand and at bank is desircd to be maintaincd
at 20% of total current assets.
(Lx) Chandraketu Pvt Ltd, considers debtors at sales value.
You are required to prepare a Slatement showing the workíng capital necded to finance a level of
activity of 52,000 units of production. [Make ncccssary assumplions] 10

Puice 20
At 9 Ve+ FC= Sales. VC
20x 8o 6

patio
8OY.
watla be bst
Ne slbig (oile
20-l0.
Poott is R. 2000
when
Sale (GSUO Klo
20
(go) =
Cotition Tsoo 204) Vatts
UD
8
18
erott(given) 2vo