PAPER CODE:
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PAPER ID:
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Section-A
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Short Answer Questions
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Marks (2*10=20)
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(Answer are expected to be in 50-70 words)
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Attempt all questions
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1. Distinguish between: a. Realized and Expected Returns b. Diversifiable V/s Non-diversifiable
risk
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2. Briefly explain the three key activities of a modern financial manager with reference
to any organization.
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3. State the importance of working capital for an organization.
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4. Mr. Amit makes a deposit of Rs. 10,000 in a bank which pays 8% interest compounded
annually for 8 years. You are required to find out the amount to be received by
him after 8 years.
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5. State the advantages of preference shares as a source of long term finance.
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6. Define the concept of Economic Value Added (EVA).
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7. Debenture holders get the interest at a fixed rate. State whether true or false.
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8. Define EOQ and derive its formulae.
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9. Distinguish between Gross working capital and Net working capital.
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10. Financial distress is exclusively related to the risk of bankruptcy. State whether
true or false.
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s
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Section-B
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Medium Answer Questions
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Marks (10*3=30)
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(Answer are expected to be in 100-200 words)
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Attempt any three questions
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1. “Retained earning is not a cost free source of finance/ capital”. Comment and
explain the statement.
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2. What is an EBIT – EPS analysis? Illustrate your answer.
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3. (a) Find out the present value of a 5 years annuity of Rs. 50,000 discounted
at 8%.
(b)A & G Co. issues Rs. 2,00,000 10% redeemable debentures of Rs. 100 each at par.
The cost of floatation is Rs. 5,000. the debentures are redeemable after 10 years.
Find out before tax and after tax cost of debt capital assuming a tax rate of 50%.
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4. Discuss the significance of dividend policy in business decisions. How can dividend
policy decision influence value of the firm?
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5. What do you mean by Working Capital Management? What are the factors that may
affect the quantum of working capital?
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Section-C
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Long Answer Questions
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Marks (10*5=50)
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(Answer are expected to be in 300-500 words)
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Attempt all Questions Each Question has internal Choice.
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1. Comment on the emerging role of finance manager in India.
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OR
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Briefly describe the three basic reasons why Profit/ EPS maximisation fails to be
consistent with wealth maximization?
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2. Discuss the need and importance of Capital Budgeting.
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OR
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Below is the data given from the books of Gupta & Co. Ltd.,
Initial Investment 20,000
Net cash Inflow:
1st Year
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2,000
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2nd Year
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2,000
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3rs Year
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2,500
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Year
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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P.V.F
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0.909
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0.826
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0.751
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0.683
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0.621
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0.564
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0.513
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0.467
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0.424
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0.386
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3. Explain the concept of Cost of Capital as a device for establishing a cut off point of capital investment proposals. Explain its relevance in corporate investment and financing decisions.
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OR
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Mukta & Co. ltd. Has an EBIT of Rs. 10,00,000. the company has Rs. 40,00,000 in 10% debentures. The overall capitalization rate is 12.5%. the company decides to raise a sum of Rs. 10,00,000 through debt at 10% and uses the proceeds to pay off equity shareholders.
Calculate the total value of the firm and the equity capitalization rate and prove that overall cost of capital remains unaffected by change in debt-equity mix.
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4. The earning per share of a company are Rs. 20. the capitalization rate is 15% and retained earnings can be employed to yield a return of 18%. A company is considering a payout of 25%, 50% and 75%. Which of these would maximize the wealth of the share holders?
Calculate as per the Walter’s model.
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OR
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Explain the different sources of working capital finance?
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5. A firm has sales of Rs. 10, 00,000, Variable Cost of Rs. 7, 00,000, Fixed Cost of Rs. 2,00,000 and debt of Rs. 5,00,000 at 10% interest rate.
Calculate the Operating and Financial Leverage. If the firm wants to double its EBIT (Earnings Before Interest and Tax), how much rise in sales would be needed on a percentage basis?
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OR
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What are the various sources of long term finance to a firm? Describe and explain Equity Shares with its advantages and limitations.
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