NOVEMBER 2023 62550/CZ25D

Time : Three hours Maximum : 75 marks

SECTION A — (10 × 2 = 20 marks)

Answer any TEN questions.

1. What are three important functions of finance?

{v°ß ‰ßÖ •UQ¯ £oPÒ ¯õx?

2. What is the source of finance?

{v Buõμ® GßÓõÀ GßÚ?

3. Write short note on ‘Wealth Maximization.

ö\ÀÁzøu Ea\¨£kzxÁx ]Ö SÔ¨¦ u¸P.

4. What do you mean by weighted average cost of capital?

|h¨¦ \μõ\› ‰»uÚ ö\»Ä Gߣuß ö£õ¸Ò ¯õøÁ?

5. State any two assumptions of NI approach.

NI AqS•øÓ°ß H÷uÝ® C¸ AÝ©õÚ[PøÍ u¸P.

6. What are the types of leverages?

ö|®¦÷Põ¼ß ÁøPPÒ ¯õøÁ?

7. What is meant by ‘Stock dividend’?

£[S £[Põuõ¯® GßÓõÀ GßÚ?

8. Give the formula Garden’s model.

Põºhß ©õv›°ß \©ß£õk u¸P.

9. What is net working capital?

{Pμ |øh•øÓ ‰»uÚ® ¯õx?

10. What is operating cycle?

ö\¯À•øÓ _ÇÀ•øÓ GßÓõÀ GßÚ?

11. Give the formula for pay-back period.

v¸®£ ö\¾zx® Põ»zvØPõÚ \©ß£õk u¸P.

12. Define Capital Budgeting.

‰»uÚ £möám C»UPn® u¸P.
 SECTION B — (5 × 5 = 25 marks)

Answer any FIVE questions.

13. What are the various functions of finance manager?

{v°¯À ÷©»õÍ›ß £À÷ÁÖ £oPÒ ¯õøÁ?

14. Ganesh Industries Ltd, issues 5,000 12% debentures for Rs. 100
each at par. The tax rate is 40%. Calculate before tax and after
tax cost of debt.
P÷nè Cshìi›ì ¼m. ¹. 100 Ãu® 5,000, 12% Phß
£zvμ[PøÍ •P©v¨¤À öÁΰkQÓx. Á› Ãu® 40% BS®.
Phß «uõÚ ö\»øÁ Á›US •ß ©ØÖ® ¤ß GÚU Psk¤i.

15. Arun Ltd. expects a net operating income of Rs. 2,00,000. It has
Rs. 2,00,000 in 10% debentures, the overall capitalization rate is
12%. Calculate the value of the firm and equity capital rate
according to NOI approach.
A¸s ¼ªöhmhõÀ Gvº£õºUP¨£k® {Pμ |øh•øÓ C»õ£®
¹. 2,00,000. {Ö©® 10% PhÜmk¨ £zvμ[PÒ ¹. 2,00,000 US
øÁzv¸UQÓx. ö©õzu ‰»uÚ BUP ÂQu® 12%. {Pμ |øh•øÓ
÷£õUQߣi {Ö©zvß ö©õzu ©v¨¤øÚ²® ©ØÖ® ‰»uÚ
ÂQuzøu²® PnUQkP.

16. From the following information calculate operating leverage.

Production and sales - 30,000 units
Selling price per unit - Rs. 20
Variable cost per unit - Rs.l0
Fixed cost per unit of
Current level of sales - Rs. 5
RÌPõq® ÂÁμ[PøÍU öPõsk |øh•øÓ BØÓ»õuõ¯zvøÚU
PõsP.
EØ£zv ö\´ux ©ØÖ® ÂØÓx - 30,000 A»SPÒ
ÂØ£øÚ Âø» J¸ A»QØS - ¹. 20
©õÖ£k® ö\»ÄPÒ J¸ A»QØS - ¹. 10
{ø»a ö\»Ä J¸ A»QØS
(uØ÷£õøu¯ ÂØ£øÚ AÍÂÀ) - ¹. 5

2 62550/CZ25D
17. From the following data, determine the market price per share
as per Walter’s model.
Earnings per share - Rs. 30
Cost of capital - 13%
Return on investment - 16%
Dividend payout ratio - 40%.
RÌPõq® ÂÁμ[Pμ¸¢x ÁõÀhº ©õv›°ß E£÷¯õQzx J¸
£[QøÚ \¢øu Âø»ø¯ PnUQkP.
J¸ £[Qß «uõÚ DmhÀ - ¹. 30
‰»uÚzvß «uõÚ AhUP® - 13%

•u½miß «x Á¸Áõ´ - 16%

£[Põuõ¯ ÂQu® - 40%.

18. Prepare the estimated working capital requirements from the

following information of a trading concern.
(a) Projected annual sales 1,00,000 units
(b) Selling price Rs. 8 per unit
(c) Percentage gross profit on sales — 25%
(d) Average credit period allowed to customers - 8 weeks
(e) Average credit period allowed by suppliers - 4 weeks
(f) Average stock holding in terms of sales required - 12 weeks
Allow 10% contingencies.
ÁoP {ÖÁÚzvß uPÁÀPμ¸¢x ÷uøÁ¯õÚ |øh•øÓ •uÀ
PnUQkP.
(A) Bsk ÂØ£øÚ 1,00,000 A»SPÒ
(B) ÂØ£øÚ Âø» A»S JßÔØS ¹. 8
(C) ÂØ£øÚ «uõÚ ö©õzu C»õ£ Ãu® & 25%
(D) ÁõiUøP¯õ͸US AÎzu \μõ\› Phß Põ»® & 8 Áõμ[PÒ
(E) AΨ£õÍμõÀ ÁÇ[P¨£mh \μõ\› Phß Põ»® & 4 Áõμ[PÒ
(F) ÷uøÁ¯õÚ ÂØ£øÚUPõÚ \μõ\› \μUS øÁzv¸¨£x &
12 Áõμ[PÒ
{PÌ \õμõ JxUS 10% AÝ©vUPÄ®.

3 62550/CZ25D
19. Initial outlay – Rs. 50,000
Life of the asset – 5 years
Estimated cash flow – Rs. 12,500
Calculate internal rates of return.
B쮣 ‰»uÚ® & ¹. 50,000
ö\õzxUPÎß ÁõÌ|õÒ & 5 Á¸h®
÷uõμõ¯©õÚ öμõUP |h©õmh® & ¹. 12,500
CøhUPõ» Á¸Áõ´ ÂQuzøu PnUQkP.

SECTION C — (3 × 10 = 30 marks)

Answer any THREE questions.

20. Explain the basic objectives of financial management.

{v ÷©»õsø©°ß Ai¨£øh ÷|õUP[PøÍ ÂÍUSP.

21. Siva Ltd. has an all equity capital structure consisting of 20,000
equity shares of Rs. 100 each. The management plans to raise
Rs. 30 lakhs to finance a programme of expansion. Three
alternative methods of financing are under consideration.
(a) Issue of 30,000 new shares of Rs. 100 each.
(b) Issue of 30,000 8% debentures of Rs. 100 each.
(c) Issue of 30,000 8 % preference shares of Rs. 100 each.
The company’s expected earnings before interest and taxes
(EBIT) is Rs. 10 lakhs. Determine the earnings per share
in each alternative assuming a corporate tax rate of 50 per
cent. Which alternative is best and why?
]Áõ ¼m ¹. 100 Ãu® 20,000 £[SPøÍ •u½k ö\´QÓx.
{ÖÁÚ® ÷©¾® ¹. 30 C»m\® E¯ºzv •u½k ö\´¯
¸®¦QÓx. RÌPõq® ‰ßÖ ©õv›PøÍ CuØPõP ÷uºÄ
ö\´QÓx.
(A) ¹. 100 Ãu® 30,000 £[SPøÍ öÁΰkuÀ
(B) ¹. 100 Ãu® 30,000, 8% Phß £zvμ[PÒ öÁΰkuÀ
(C) ¹. 100 Ãu® 30,000, 8% •ßÝ›ø© £[SPøÍ
öÁΰkuÀ
Á› ©ØÖ® ÁmiUS •¢øu¯ Á¸Áõ´ ¹. 10 C»m\® GÛÀ
JÆöÁõ¸ vmhzvß RÌ £[S JßÔß Á¸Áõ´ Psk¤i. Á›
Ãu® 50% GÚU öPõÒP. ‰ßÖ ÁÈPÎÀ Gx ]Ó¢ux? Hß GßÖ
TÖP.

4 62550/CZ25D
22. Determine the market price per share under Gordons model.
Rate of return 20%
Capitalisation rate 15%
Earning per share Rs.14
If retention is
a - 40%
b - 60%
c - 20%
RÌPõq® AÝ©õÚ[PøÍU öPõsk Põºhß ©õv›°ß £i
£[QøÚ \¢øu ©v¨¤øÚU PõsP.
•u½miß «uõÚ Á¸Áõ´ ÂQu® 20%
‰»uÚ BUP ÂQu® 15%
J¸ £[Qß «uõÚ DmhÀ ¹. 14
£[Põuõ¯ ÁÇ[PÀ ÂQu®
a - 40%
b - 60%
c - 20%

23. From the following estimates, calculate the average amount of

working capital required.
Per annum
(a) Average amount locked up in stock: Rs.
Stock of finished goods and work-in-progress 10,000
Stock of stores, material etc. 8,000
(b) Average credit given:
Local sales 2 weeks’ credit 1,04,000
Outside the state 6 weeks’ credit 3,12,000
(c) Time available for payments:
For purchases 4 weeks 78,000
For wages 2 weeks 2,60,000
Add 10% to allow for contingencies.

5 62550/CZ25D
 ¤ßÁ¸® uPÁÀPμ¸¢x \μõ\› |øh•øÓ ‰»uÚz
÷uøÁ°øÚU PõsP.
J¸ BsiØS
(A) \μõ\› \μUQ¸¨¦z öuõøP : ¹.
•iÄØÓ ö£õ¸ÒPÎß C¸¨¦ 10,000

‰»¨ö£õ¸Ò C¸¨¦ 8,000

(B) \μõ\› Phß ÁÇ[RmkU Põ»® :

EÒ ©õ{» ÂØ£øÚ & (2 Áõμ[PÒ Phß) 1,04,000

öÁÎ ©õ{» ÂØ£øÚ & (6 Áõμ[PÒ Phß) 3,12,000

(C) ö\¾zxu¼ß uÁønU Põ»® :

öPõÒ•uÀ & (4 Áõμ[PÒ) 78,000

T¼ & (2 Áõμ[PÒ) 2,60,000

{PÌ \õμõ JxUS 10% ÷\ºUPÄ®.

24. Choice is to be made between two competing proposals which

require an equal investment of Rs. 50,000 and are expected to
generate net cash flows as under:

Year Project A Project B

Rs. Rs.

1 25,000 10,000
2 15,000 12,000
3 10,000 18,000
4 Nil 25,000
5 12,000 8,000
6 6,000 4,000

The cost of capital of the company is 10%. The following are the
present value factors at 10% pa.
Year 1 2 3 4 5 6
P.V. Factors 10% : 0.909 0.826 0.751 0.683 0.621 0.564

Which project proposal should be chosen? Evaluate the project

proposals under discounted cash flow method.

6 62550/CZ25D
 R÷Ç EÒÍÁõÖ {Pμ öμõUP Kmhzøu²® \© AÍÄ •u½hõP
¹. 50,000•® ÷uøÁ¨£k® Cμsk ÷£õmiz vmh[Pμ¸¢x
JßÖ ÷uºÄ ö\´¯¨£h ÷Ási²ÒÍx.
Á¸h® vmh® A vmh® B
¹. ¹.
1 25,000 10,000
2 15,000 12,000
3 10,000 18,000
4 Nil 25,000
5 12,000 8,000
6 6,000 4,000
A¢u {Ö©zvß ‰»uÚ AhUPÂø» 10% ¤ßÁ¸ÁÚ BskUS
10% ÃuzvÀ uØ÷£õøu¯ ©v¨¦U PõμoPÒ
Á¸h® 1 2 3 4 5 6
uØ÷£õøu¯ ©v¨¦ 0.909 0.826 0.751 0.683 0.621 0.564
Põμo 10% :
vmhU P¸zxUPøÍz v¸®£a ö\¾zx® Põ» •øÓ°À TkuÀ
uØ÷£õøu¯ ©v¨¦ •øÓ°À ©v¨¥k ö\´P.

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7 62550/CZ25D