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Naranlala

School of Industrial Management & Computer Science, Navsari-396450


Module Test-1
Subject: Financial Management
Date: 12-03-2015

Que. 1 Write any one question. (Marks 10)


Que.1 (A) Explain Financial Management. Explain form of business organization and agency problem. Also
explain emerging role of the financial manager in India.
OR
Que.1 (B) Explain Function of the financial system with the help of its diagram. And also explain financial
intermediaries.
Que. 2 Calculate any 2 equation. (Marks 10)
Que. 2 (A) You want to take up a trip to the Canada which cost is Rs. 10,00,000. The cost is expected to remain
unchanged in nominal terms. You can save annually Rs. 50,000 to fulfill your desire. How Long will you have
to wait if your savings earn an interest of 12 percent? The future value of an annuity of Rs. 50,000 that earns 12
percent is equated to Rs. 10,00,000.
Que. 2 (B) You want to borrow Rs. 10,80,000 to buy a flat. You approach a housing finance company which
charges 12.5 percent interest. You can pay Rs. 1,80 ,000 per year toward Loan amortization. What should be the
maturity period of the loan?
Que. 2 (C) Suppose a bank offers 12 percent stated annual interest rate. What will be the effective interest rate
when compounding is done annually, semiannual, quarterly, monthly, weekly, and daily?
Que. 3 Calculate any 2 Equation. (Marks 10)
Que 3(A) The Computation of YTM requires a trial and error procedure. Consider a Rs. 1,000 par value bond,
carrying a coupon rate of 9 percent, maturing after 8 years. The bond is currently selling for Rs. 800. What is
YTM on this bond?
Que 3(B) Vardhman Limiteds earnings and dividends have been growing at a rate of 18 percent per annum.
This growth rate is expected to continue for 4 years. After that the growth rate will fall to 12 percent for the next
4 years. Thereafter, the growth rate is expected to be 6 percent forever. If the last dividend per share was Rs. 2
and the investors required rate of return on vardhmans equity is 15 percent, what is the intrinsic value per
share?
Que. 3(C) The current dividend on an equity share of pioneer technology is Rs. 3. Pioneer is expected to enjoy
an above normal growth rate of 40 percent for 5 years. Thereafter, the growth rate will fall and stabilize at 12
percent. Equity investors require a return of 15 percent form pioneers stock. What is the intrinsic value of the
equity share of pioneer?

Que. 4 Calculate following Equation. (Marks 10)


A proforma cost sheet of a Rutavik Ltd. provides the following data: Particulars Amount per unit
Raw materials
Direct labour
Overhead
Total cost
Profit
Selling price

Rs 52.00
19.50
39.00
110.50
19.50
130.00

Raw materials in stock = one month;


Materials in process = half a month;
Finished goods in stock = one month.
Credit allowed to debtors = two months;
Credit allowed by suppliers = one month;
Average time-lag in payment of wages = 10 Days;
Overhead expenses = one month;
One-fourth of the output is sold against cash;
Cash in hand and at bank is desired to be maintained at Rs 120000.
You are required to prepare a statement showing the working capital needed to finance a level of activity of
70000 units of production.
Que.5 calculates any 1 equation. (Marks 10)
Que 5 (A). Consider the following data for a certain item purchased by Magnum Limited.
Annual usage = 6000 units,
Fixed cost per order = Rs. 400,
Purchase price per unit = Rs. 100,
Carrying cost = 20% of inventory value.
What is the EOQ?
Now, assume that a discount of Rs. 5 per unit is offered if the order size is 1000 units. Should Magnum seek the
quantity discount?
OR
Que 5 (B) The relevant financial information for I Ltd. For the year ending 2013 are given below.
Rs. Millions
Year beginning
Year Ending 2012P&L Account
Rs.
Balance sheet data
2012-13
13
Sales
80
Inventory
9
12
Account
Cost of goods sold
56
12
16
Receivables
Account Payables
7
10
Assuming 365 days in a year calculate
A). Length of Operating Cycle.
B). Length of Cash Cycle.

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