MBA18-20-Remedial program for improving performance

1. What is the importance of Time Value of money in an investment decision?

2. A limited has an Asset of 1, 70,000 which have been financed through Rs.52, 000 debt and 1, 00,000 of

Equity and General Reserve of 18,000. Earnings available to equity shares holders for the year are

14,000.It pays 9% interest on borrowed funds and is in the 50% tax bracket. The Market price of the

share is Rs130.What is the WACC?

3. Company has an EBIT of Rs. 2, 00,000 and overall cost of capital of 13%.
It has a debt of Rs. 5, 00,000 borrowed @ 11%

(a) Find the value of firm using NOI approach

(b) If debt is increased to Rs. 6, 00,000 what is the vales of the firm?

(c) If decreased to 4, 00,000

Calculate the value of the firm and the cost of equity in each of cases.

4. What is financing risk and business risk? How it is measured?

5. Explain (a) Bonus Issue

(b) Stock split

(c) Gross worming capital and net working capital

(d) Operating cycle concept of working capital

(e) How effectively a firm can use “float” for cash management

6. Explain Net income approach and Net Operating income approach of Capital Structure theories

7. Explain different sources of working capital

8. How firm can effectively manage the cash flows in an organization?

9. The following information is available in respect of a firm

Ke= .10

EPS= Rs.10

Assumed rate of return on investments(r)

(i) 15% (ii) 8% and (iii) 10%

Calculate Value of the share according to Walters Model if Dividend Pay out ration is
0%, 25%, 50%, 75% and 100%

10. From the following information calculate leverages and interpret. Which firm is more risky?

Firm X Firm Y

Sales 50, 00,000 60, 00,000

Variable cost 40 % of sales 25% of Sales

Fixed operating cost 8, 00,000 10, 00,000

Fixed financing cost 14, 00,000 16, 00,000

11. Alpha Ltd has a share capital of Rs. 1, 00,000 divided into shares of Rs.10 each. The management is
Considering the following alternatives for financing a capital expenditure of Rs.50, 000.

(i) Issue of 10% debentures

(ii) Issue of 5,000, 12% preference shares of Rs 10 each.

(iii) Issue of 5,000 equity shares of Rs.10 each

The earnings before interest and taxes {EBIT) are Rs.30, 000

Calculate the effect of each of the alternatives in the earrings per share, assuming EBIT continue to be the
same in each alternative, Tax Liability is 40%.
Also calculate the effect of EPS if EBIT is increased by 15,000

12. What is dividend policy? What are the factors affecting dividend policy

13. A company is planning to purchase a machine which has the following cash flows

Year 1 Probability Year 2 Probability

9, 00.000 .5 9, 00,000 .5

15, 00,000 .5

13, 00,000 .5 18, 00,000 .6

15, 00,000 .4

The machine costs Rs, 12, 00,000 which an estimated life of 2 years.

The cost of capital of the firm is 12%.

Make your recommendation through the decision tree method