Fm12
JUNE 2011 EXAMINATION
FM 12
FINANCIAL MANAGEMENT
Time: Three Hours Maximum Marks: 100
Note:
1. The paper is divided into three sections: Section A, Section B and Section C.
2. There are seven questions in Section A of 10 marks each. Attempt any four.
3. Section B has 5 questions of 15 marks each. Attempt any three.
4. All the questions of Section C (Case Study) are compulsory. This section is of 15 marks.
Marks will be awarded for the right procedure also in numerical questions.
Section – A
1. Time value of money means that the value of money changes over a period of time. That is a sum of money received today is worth more than if the same is received after sometime. Elaborate. (10)
2. Capital budgeting decisions are very important, but they pose difficulties, which shoot from three principal sources: measurement problem, uncertainty and temporal spread. Explain. (10)
3. Write a note on EBIT-EPS analysis giving suitable examples. (10)
4. Compare the advantages and disadvantages of different types of sources of long-term financing of working capital. (10)
5. “Ratios are indicators – sometimes pointers but not in themselves powerful tool of management decision making”. Explain. (10)
6. “Working capital deals with the decision regarding the appropriate mix and level of current assets and current liabilities”. Elucidate the statement. (10)
7. What is hedging approach of current asset financing? Discuss the basic premise of the hedging approach to finance funds requirements. What are the effects of this approach on the profitability and risk? (10)
Section B
1. A project costs Rs. 5,00,000 and has a scrap value of Rs. 1,00,000. Its stream of income before depreciation and taxes during first year through five years is Rs. 1,00,000, Rs. 1,20,000, Rs. 1,40,000, Rs. 1,60,000 and Rs. 2,00,000. Assume a 50 percent tax rate and depreciation on straight line basis. Calculate the
FM 12
FINANCIAL MANAGEMENT
Time: Three Hours Maximum Marks: 100
Note:
1. The paper is divided into three sections: Section A, Section B and Section C.
2. There are seven questions in Section A of 10 marks each. Attempt any four.
3. Section B has 5 questions of 15 marks each. Attempt any three.
4. All the questions of Section C (Case Study) are compulsory. This section is of 15 marks.
Marks will be awarded for the right procedure also in numerical questions.
Section – A
1. Time value of money means that the value of money changes over a period of time. That is a sum of money received today is worth more than if the same is received after sometime. Elaborate. (10)
2. Capital budgeting decisions are very important, but they pose difficulties, which shoot from three principal sources: measurement problem, uncertainty and temporal spread. Explain. (10)
3. Write a note on EBIT-EPS analysis giving suitable examples. (10)
4. Compare the advantages and disadvantages of different types of sources of long-term financing of working capital. (10)
5. “Ratios are indicators – sometimes pointers but not in themselves powerful tool of management decision making”. Explain. (10)
6. “Working capital deals with the decision regarding the appropriate mix and level of current assets and current liabilities”. Elucidate the statement. (10)
7. What is hedging approach of current asset financing? Discuss the basic premise of the hedging approach to finance funds requirements. What are the effects of this approach on the profitability and risk? (10)
Section B
1. A project costs Rs. 5,00,000 and has a scrap value of Rs. 1,00,000. Its stream of income before depreciation and taxes during first year through five years is Rs. 1,00,000, Rs. 1,20,000, Rs. 1,40,000, Rs. 1,60,000 and Rs. 2,00,000. Assume a 50 percent tax rate and depreciation on straight line basis. Calculate the