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Register Number : I Rs. 2 0,000 6 0,000 2 ,00,000 2 ,40,000 18 .0% 15.0% 16 .0% 12 .0%
5 8 5 9
X Y Z W Also, determine the weighted average cost of capital for each firm. SECTION - D ( Compulsory ) 10. ABC company has the following selected assets and liabilites: Assets and liabilities : Cash Retained earnings Eq uity share capital Debtors Inventory Rs.... 45,000 - 1,6 0,000 - 1,50,000 6 0,000 - 1,11,000 (1 15 = 15)
( FIRST YEAR )
( PAPER - V )
MANAGEMENT
Management ) December ]
[ Time : 3 Hours
Maximum : 75 Marks
SECTION - A
(5 3 = 15)
working capital.
Turn over
2 (c) Why does a firm have idle cash ? (d) What is a leveraged lease ? (e) What is meant by the concept financial risk ? (f) Define arbitrage process. (g) What is EBIT-EPS analysis? (h) Define flexible capital structure. SECTION - B (3 10 = 30)
3 5. What is the sensitivity approach for dealing with project risk ? 6. X - company earns Rs. 5 per share, is capitalised at a rate of 10 % and has a rate of return on investment of 18 % .According to Walters formulae, what should be the price per share at 25 % dividend payout ratio? Is this the optimum payout ratio according to Walter ? SECTION - C (1 15 = 15)
Answer any THREE questions. All questions carry equal marks. 2. How can you solve the problem of cash management ? 3. The credit policy that maximizes expected operating profit is the optimal credit policy. - Discuss . 4. The function of the safety stock is to prevent stock outs.- Comment.
Answer any ONE question. 7. What are the controllable and uncontrollable factors affecting working capital ? 8. What is the major difference between an operating lease and a financial lease ? 9. Assuming no taxes and given the earnings before interest and taxes (EBIT), interest (I) at 10 % and equity capitalisation rate (k e ) below. Calculate the total market value of each firm. Turn over
5 Rs..... D e b e n tu re s P r o v isio n f o r ta x a tio n E x p e n se s o u tsta n d in g L a n d a n d b u ild in g G o o d w ill F u rn itu re C r e d ito r s Yo u a r e r e q u ir e d to d e te r m in e : (i) (ii) N e t w o r k in g c a p ita l. G r o ss w o r k in g c a p ita l. 3 9 ,0 0 0 . 2 5,0 0 0 50 ,0 0 0 3 ,0 0 ,0 0 0 2 1 ,0 0 0 57 ,0 0 0 1 ,0 0 ,0 0 0 D e b e n tu re s
Rs.....
1 ,0 0 ,0 0 0
P r o v isio n f o r ta x a tio n
57 ,0 0 0
E x p e n se s o u tsta n d in g
2 1 ,0 0 0
3 ,0 0 ,0 0 0
50 ,0 0 0
2 5,0 0 0
3 9 ,0 0 0 .
Yo u a r e r e q u ir e d to d e te r m in e : (i) (ii)
G r o ss w o r k in g c a p ita l.
N e t w o r k in g c a p ita l.