W(Gth Sm }-Financlal Management-HIDSE-62A/CBCS) | 2022, FINANCIAL MANAGEMENT — HONOURS Paper : DSE-6.2A 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. Explain the inter-relationship between financing decision, investment decision and dividend decision. 5 Or, ‘ Discuss the significance of wealth maximisation, “: 2. Ms. B is considering two in p an of % 5,000 with following details : nt @.)——— 6th Sm)-Financial Management 2 pe Si) A atnctat Manegrorn ORE $3} (2) 5. Cost of plant € 12.25 crore. Economic life of the plant is 6 years. Salvage value is estimated gas as @ 25 lakh. Pre-tax Profit before depreciation is expected to be & 3.4 crore for the first year. Find out the cash inflow from the plant considering 30% corporate tax rate, Straight line method of depreciation is accepted. s Or, Define independent projects and mutually exclusive projects. Briefly discuss their selection criteria based on NPV. 23 ‘The initial outlay for a project of economic life 6 years is ¥ 72,000. The cash flow after tax from this project for the first year is ¥ 19,500 and it increased steadily by € 6,000 per annum. Calculate payback period.) $ 2 23st Group - B Explain the concept of cost of capital. What do you mean by marginal cost of capital? Why should we consider marginal cost of capital rather than weighted average cost of capital while evaluating a new project? 34245 Or, ‘The existing capital structure of X Ltd. is as follows : Equity Share Capital and retained earning (Ke = 17%) = oo) 14% Preference Share Capital ‘ @ 2,00,000, 10% Debt © 3,00,000 pital outlay of € 5,00,000. Besides und will be raised as follows : (a) Calculate weighted aver (b) Calculate the marginal c(3) (Wik Sm)-Financial Management-H/DSE-6.24/CBCS) Overhead expenses include depreciation of € 8,000 per week. Planned stock will include raw-materials for 1,92,000 and 32,000 units of finished goods. Material will stay in process 2 weeks Credit allowed to debtors is 4 weeks Credit allowed by creditors 5 weeks. 20% of sales may be assumed to be made against cash. Cash and Bank is to be maintained at 10% of the working capital. a Assume that production is carried on evenly throughout the year and wages and overhead accrue similarly. ey ' 10 Or, What do you understand by working capital cycie? State the factors on which the duration of working capital cycle depends. Explain the significance of working capital cycle in working pial 34: management. 9. The selected financial data for companies A and B for the current year ended March 31, 2022 are as follows = , pi \QT Particulars Company B b | Variable cost as a percentage of Sales 15 Z Interest (2) 3 800, Degree of Operating Leverage 5 Degree of Financial Leverage Income tax rate (a) Prepare income statement of (>) Comment on the risks of the two fi 842 (a) (b)Wbth Sm)-Financial Management-H/DSE-6.2410BCS| (4) (a) Comment on the selection of the project on the basis of net present value considering 8% discounting rate. Year 1 2 3 4 5 6 PV for Re. 1 at 8% | 0.926 | 0857 | 0.794 | 0.735 | 0.681 | 0.630 (b)_ Review St decision under profitability index approach | 9 3 3 OE ge aaa Re a WA sno i cf ee 1 -563- * (b) Discuss the effect of income tax, salvage value of assets and ab ‘on cash inflows of a project under consideration, 46 11. P. Mitter Ltd. is having cost of capital 10 per cent and return on investment 12 per cent. The company earned & 20 as profit per share and declared 30% dividend. (a) Calculate the market price of equity share under Walter's model. 22-8 (b) To increase the market price per share, the management is willing to increase the dividend ratio in the next financial year, but the CFO Mr. Tapesh has opposed such a decision. Give he opinion in this matter. an are Core (a) Discuss the pros and cons of scrip dividend. (b) Differentiate between constant dividend rate policy and sonst dividend pay-out poticy with diagram. ‘i 446 pe ae