Roll No........................... Total No.

of Questions : 13]

[Total No. of Pages : 03

Paper ID [B0210]
(Please fill this Paper ID in OMR Sheet)

MBA (205) (S05/Old) (Sem. - 2nd) FINANCIAL MANAGEMENT

Time : 03 Hours Maximum Marks : 75

Instruction to Candidates: 1) Section - A is Compulsory. 2) Attempt any Nine questions from Section - B. Section - A Q1) a) What is the financial goal of a firm? b) What are the main components of cash-outlay of an industrial project? c) What is the reason for averaging investment under Average Rate of Return method? d) What is Time-Value of money? e) Compare Debenture and equity share as a source of finance? f) Distinguish between financial lease and operating lease? g) Why cost of equity capital is usually higher than that of debt-capital? h) What shall be the effect of sale of inventory on working-capital position of a firm? i) j) l) What is commercial paper? What is operating leverage? What is stock dividend? (15 2 = 30)

k) What is dividend pay-out ratio? m) How would you explain the difference between mergers and acquisitions? n) Explain the concept of Risk-Free Rate of Return? o) Distinguish between growing and declining firms in dividend theories. J-8609[S-9700613]
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Section - B (9 5 = 45) Q2) Explain the scope of Financial Management. Q3) Explain with suitable example the concept of discounted pay-back period? Explain the merits and demerits of this concept. Q4) Compare the various sources of medium and long-term Finance available to a company? Q5) Punjab Global Ltd. is considering a new project which shall require investment into land of Rs. 4 lac, building Rs. 2 lac, machinery Rs. 6 lac and permanent working capital of Rs. 2 lac. Building and machinery shall have useful life of Five years and salvage value of Rs. 50,000 and Rs. 1,00,000 respectively. Project will generate Rs.20,00,000 per year in revenues and have variable costs of Rs.12,00,000 P.A. The cost of capital is 10 percent and tax rate is 50 percent. PV factor at 10% is 0.909, 0.826, 0.752, 0.683, 0.621 consecutively for different years. Suggest whether the company should accept the project or not? Q6) What is meant by capital structure? Explain Net Income Approach to capital structure? Explain its limitations also. Q7) Punjab Bloosom LTD. has a project in hand which requires an investment outlay of Rs. 50 lacs. The company has prepared financial plan as follows: (a) Common shares (in lacs) Rs. 20.0 (b) 10% Preference shares Rs. 10.0 (c) 14% Debentures (Redeemable) Rs. 20.0 50.0 (i) The share of the company shall be issued at a price of Rs. 25/- per share. The floatation costs are expected to be 4% of issue price. Company is expected to pay dividend of Rs. 3 per share next year which is expected to grow at 6% per year. (ii) Each Debenture shall have a face value of Rs. 100 and life of 7 years. Floatation costs shall be @ 4% and shall be redeemed at 10% premium over the Face Value. (iii) Preference shares too shall carry Face Value of Rs. 100/- per share and Floatation costs @ 4% of Face Value. Compute the weighted average cost of capital. J-8609[S-9700613]
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Q8) Explain the various concepts of working capital such as permanent and variable working capital? Also explain the various Factors which influence the working capital requirements of an industrial concern? Q9) List down the various long-term and short-term sources of working capital ? Explain how maximum permissible Bank Finance shall be determined as per each of the three methods recommended by Tondon committee? Support your answer with suitable example. Q10) Distinguish between dividend pay-out and Dividend Rate? Briefly explain the various factors which usually influence the dividend decision and dividend policy of a Firm. Q11) Give reasons behind corporate restructuring? Explain the various financial considerations involved in mergers and takeovers. Q12) What is meant by bonus shares? Give rules regarding bonus shares? Q13) Explain CAPM approach to determination of cost of equity? Support your answer with suitable example.

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