DU SOL B.Com Question Paper 3rd Year 2018 Financial Management

This question paper contains 8+4 printed pages]

l'our Roll No.

t275

B.Com./lIl GI

Paper Code : C-l18

Paper XVI-A-FINANCIAL MANAGEM ENT

Time '. 3 Hrnrs Maximum ltlarks '. 55

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Nole '.- Ansrvers may be rvritten either in English or in Hindi;

but the same medium should be used throughout the
paper.

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Nole :-* The maximum nrarks printed on the question paper are

applicable for the students of the regular colleges
(Cat. 'A'). These marks will. however, be scaled up
proportionately in respect of the studelrts of SOL at the

tirne of posting of arvards for compilation of
result.
P.T.O.

(2) t275

Attentpt all the ./ile questions.

l// questions carry equal marks.
Use of simple calculator is allowed.

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I' what are the major types of financial management decisions that

business firnrs make ? Describe each one of them. il
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(a) How the goal of wealth maximization is a better operative

. criterion than that of profit maximization ? 6

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(3)
are nor
points of time
at different
occurring
(h) "Cash tlorvs can they be
reasons and how
Explairr the
comparable"'
?
nrade cotrrpalable
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decisions
? What
nreant bY
capital budgeting
2. What is period method and
': e*ptuin the payback
rnain feature' ll
of capital budgeting'
index method
protitability

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payable imnrediately'
'A' costs Rs' 1'00'000
(cr) Machine half payable
immediately
'B' costs Rs' I '20'000
Machine
tirne' The cash receipts
payable in oue yeai
and half
as follows
:
expected are P.T.o'

(4) 1275

Year (at the end) A (in Rs.) B (in Rs.)

20,000

60.000 60,000

40,000 60,000

30,000 20.000

20.000

With 7o/o cost of capital' which machine should be
selected t 6

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+ 30,000 20,000

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(5) t275

to install a new machine
(b) ABC Ltd. is evaluating a proposal

costing Rs. 50'000 with a life
of 5 years and no salvage

before depreciation and
value. The follorving cash flows

taxes (CBDT) have been calculated
:

Years Cash Flow

Rs. 10,000

Rs. 12,000

Rs. 13,000

Rs. 15,000

Rs. 20,000

per straight line method
The firm provides depreciation as

and is strbjected to tax at 'l0ozo'
Find out the :

(t) PaYback Period

NPV @ l0%.
5
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P.T.O.

(6) t275

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r0.000 t'.

r2.000 {.

| 3.000 d.

15.000 F.

20.000 F.

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(ii) {e e-dutq T@ @ tovo I

J. \a) The cost of preference capital is generally lower than the

cost of equity. state the reasons. 5

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(7)
is available ti'or.rr the balance
(b) I'he lollowing intbrmation

sheet of a colllpan-v :

shares
Equity share caPital 8000

8'00'000
' of Rs. 100 each
8.00.000
1296 debentures

24,00.000
l8-9'o ten.lr loan

40.00.000
'fotal

cost of capital of the
f)etermine the rveighted average
Rs' 20
paying dividends at rate of
company. lt had been
6
per share' Income tax rate
is 40%'

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40.00.000

P.1'.O

(8) 1275

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Examine the impact
Explain the concept of financial leverage'

financial leverage
of financial leverage on the EPS' Does the
ll
ahvays increase the EPS ?

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the dividend
Explain briefly'the lactors which intluence

polic-v of a firnr. What is the advantage of
stable dividend

il
policy ?

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r/75
(e)
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(3{f{r)
about a company i
are available
informations
(.t ) flre tbllorving
lS/o

Cost of caPital
15%

Rate of return on investrxent
Rs' 5
share
Earning Per
oIr o^
Use
share n)' II Q eaCh'
has l0 lac eqtrity
The company
the firm in each
the value of
Walter's model to tletermine

case :

(l) l00o/'o retentlon

(ii) 509"o retention

(t,,) No retention'
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(b) The follorvins infbrrnafion is available
in respecr ol.
'x' Ltd. :

EPS
Rs. l0

Rate of return
2()%

And required rate of return ol-

equity irrvcsrrnent (ke.)
t6%

Find out the market price of the
share under Gor<Jon Model

if the firn follorvs a payout of :

(i) s0%

(ii) 250,6.

( ll ) 1275

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capital managcrnent ? Explain
What is the importance of rvorking

the need for
the factors to be considered while determining

ll
working caPital'

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P.T.O.

(t2) 1275

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(3Ter{r)

(u) What are the objectives
of irrventorl, tnanagement
? How
are they sirnilar to objectives
of cash management ? 6

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(h) What are the techniques
of control of receivable
i) E.xplain
the "Aging Schedule...
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