[Type text] [Type text] Nov 2010

Master of Business Administration - MBA Semester 2

MB0045 ±Financial Management-4Credits

(Book ID: B1134)

Assignment Set- 1 (60 Marks)
Note: Each question carries 10 marks. Answer all the questions.

Q.1 What arethe4 finance decisions takenbyafinance manager.

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Q.2 What arethefactors thataffectthefinancialplanofacompany?
Q.3 Showtherelationship between requiredrateofreturnand couponrate on thevalue

ofabond.

Q.4 Discuss theimplication offinancialleverage fora firm.

Q.5 Thecash flows associatedwith a projectaregivenbelow:

Year Cash flow

0 (100,000)

1 25000

2 40000

3 50000

4 40000

5 30000

Calculate thea) payback period.

b) Benefitcostratio for 10% costofcapital

Q6. AFRPSaQ\¶V HaUQLQJV aQG GLYLGHQGV are growingat therate of18% pa.The growth

rate is expected to continue for 4 years. After 4 years, from year 5 onwards, thegrowth

rate will be 6% forever. If the dividend per share last year was Rs. 2 and the investors

requiredrate ofreturn is 10% pa, whatis theintrinsic priceper share or the worth of one

share.
[Type text] [Type text] Nov 2010

Master of Business Administration - MBA Semester 2

MB0045 ±Financial Management-4Credits

(Book ID: B1134)

Assignment Set- 2 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Q.1 Discuss theobjective ofprofitmaximization vs wealth maximization.

Q.2 Explain theNetoperating approachtocapitalstructure.

Q.3 What doyouunderstandbyoperatingcycle.

Q.4 What is theimplication ofoperatingleveragefor afirm.

Q.5 A companyis consideringa capitalprojectwith the followinginformation:

The cost of the project is Rs.200 million, which consists of Rs. 150 million in plant a

machineryand Rs.50million on net working capital. Theentireoutlaywill be incurred in the

beginning. The life of the project is expected to be 5 years. At the end of 5 years, the fixed

assets will fetch a net salvage value of Rs. 48 million ad the net working capital will be

liquidated at par. The project will increase revenues of the firm by Rs. 250 million per year.

Theincrease incosts willbeRs.100 millionper year.The depreciation rateapplicable willbe

25% as per written down value method. The tax rate is 30%. If the cost of capital is 10%

whatis thenetpresentvalueoftheproject.

Q.6 Giventhefollowinginformation,whatwillbethepricepershare using theWalter

model.

Earnings per share Rs. 40

Rate ofreturnoninvestments18%

Rate ofreturnrequiredbyshareholders 12%

Payoutratiobeing 40%,50%,or60%.