Paper /Subject Code: 86011/Finance: Strategic Financial Management

Duration: 2 % Hours
Marks: 75

Instructions:
1) Allthe questions arc compulsory
2) Figures to right indicate full marks.
Q.1 (A) Choose correct alternative and rewrite the statement: (Any 8) (8)
1. In case of Loss Asset, provision for NPA should be made
a) 15%
b) 25%
c) 40%
d) 100%

2. 048X
Relationship between dividend per 0A8N63!Y ASN3iyC41i
sharèand earning per share is
a) Price Earnings Ratio
b) Dividend yield ratio
c) Dividend payout ratio
d) intrinsic value per share

3. Net Profit for calculation of EVA is

a) NPAT
b) NPBT
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c) NOP
d) NOPAT

4. Ifthe firm has Ke<r, the Walter's Model suggests for

a) 0% Payout
b) 50% Payout
c) 25% Payout
d) 100% Payout

S. Merger between firms engaged in unrelated types of business activity is

a) Horizontal
b) Vertical
c)Conglomerate
d) Reserve
shareholders wealth.
6, Capital Rationing helps in
a) Maxinizing
b) Minimizing
c) Stabilizing
d) Measuring

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 Paper /Subject Code: 86011/Finance: Strategic Financial Management

7 Plof aproject is the ratio of present value of inflows to

a) Initialcost
b) PV of outflows
c) Total cash inflows
d) Total outflows

8 represents those funds which are required to manage day-to-day

business operations.
a) Long term capital YC
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b) Short term capital
c)
d)
Working-capital
None of above
9 Which amòng the following is short term sources of working capital financing?
a) Bill discounting
b) Letter of credit
c)
d)
Commercial paper
All of the above
10. is a schematic represeDtation of several decisions followed by different
chances of the occurrence.
a) Sensitiyity analysis
b) Probability techniques
c) Risk Adjusted Discounting Rate
d) Decision Tree

Q.1 (B) State whether given statements are True or False: (Any 7) (7)
1. Corporate governance essentially involves balancing of the intetests of only
shareholders.
2. Dividend policy is decided by the shareholders.
3. MM model deals with relevance of dividend decisions.
4. Prelerence dividend is deducted trom NPAT for caleulation of EPS.
5. Standard assets are those assets whichdo not haveany risk.
6 Capital budgeting decisions involves huge investment outlay.
7. In order to protect the earnings available to shareholders, the swap ratio should be
based on MPS.
8 MPBF refers to Maximum Permissible Bank Finance.
9 Discounting of bills is converting the bill into cash.
10. Dividend payout ratio refers to that portion of total earnings which is distributed
among shareholders.

Q.2A. RT Ltd. has a capital of Rs. I0,00,000 in equity shares of Rs. 100 each. The shares
Rs. 10
are currently quoted at par. The company proposes to declare a dividend ofthe risk
per share at the end of the current financial year. The capitalization rate for
class of which the company belongs is 12%. Compute market price of the share at
the endof the year, if (15)
i) dividend is not declared

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 P'aper /Subject Code: 86011 /Finance: Strategic Financial Management
ii) dividend is declared
Assuming that the company pays the dividend and has net profits of Rs: 5,00,000
and makes new investments of Rs. 10,00,000 during the period, calculate number
of new shares to be issued? Use. the MM model.

OR

Q.2B. With the belp of following figures, calculate the market price ofa share of
company
by using: (15)
i) Walter's fornula
ii) Gordon's fomula
Earnings per share (EPS) Rs. 10
Dividend per Share (DPS) Rs. 6
Cost of Capital (Ke) 20%
Internal rate of return on investment 25%
Retention Ratio 40%

Q.3A PVR LId. is considering a project with the following Cash flows: (15)
Year Cost of Plant (Rs.) Running Cost (R$.) Savings (Rs.)
12,00,000
4,00,000 12,00,000
2 5,00,000
3
14,00,000
6,00,000 11,00,000
The cost of capital is 12%. Measure the sensitiyity of the project to changes in the
levels of' plant cost, running cost and savings (considering each factor at a time) such
that the NPV becomes zero. The P.V. factors at 12% are as under:
Year 1
PV factor @ 12% 1 0.392 0.797 0.71|
Determine the factor which is most sensitive toaflect the acceptability of the project?
OR
O.3B. Mohan Ltd has Rs. 35,00,000 allocated for capital budgeting purposes. The
proposals
and associated profitability indexes have been determined. (15)
Projects Iuitial Investment (Rs.) Profitability IndeN
10,50,000 1.22
5,25,000 0.95
12,25,000 1.20
S 15,75,000 1.18
T 7,00,000 I.20
14,00,000 L.05
Calculate the Net Present Value for each of the projects
Which of the above investments should be undertaken? Assume that
projects
are indivisible and there is noalternative use of the money allocated for capital
budgeting.

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 Paper/ Subject Code: 86011 / Finance: Strategic Financial Management

0.4.A Calculate Variance and Standard deviation of the Project A and Project B on the basis
of the following information: (15)
Possible Event Projcct A Project B
Cash low Probability Cash flow Probability
(Rs) (Rs)
A 8,000 0.10 24,000 0.10
B 10,000 0.20 20,000 0.15
12,000 0.40 16,000 0.50
-14,000 0.20 12,000 0.15
16.000 0.10 8,000 0.10
OR
Q.4 Siddhesh Ltd. furishes the following information for the year: (15)
Cost slheet % of selling price
Raw material 40%
Wages 30%
Overheads 20%
Total Cost 90%
Profit 10%
Selling price 100%
Additional Information:
i)Output and sales for the year is 1,20,000 units.
ii) Raw materials remain in stock for one month's consumption
iii) Process period is one month.
ANVo.
it.
iv) Finished goods remain in stock for two months.
v) Credit period allowed by the suppliers of raw material is one month.
vi) Credit period allowed to debtors is two months.
vii)20% of purchasing willbe for cash.
viii) Time lag in payment ofwages and Overheads is one month.
ix)Cash and bankbalance is to be maintained at Rs. 50,000
x) Selling price isRs. 15 perunit
You are required to find out:
a) Working Capital Requirement of Siddesh Lid.
b) Maximum Permissible Bank inance as per Tandon committee assuming the
value of core current assets Rs. 2,50,000.

0.5(A) Explain the advantages and disadvantages of XBRL. (7)

(B) What are the short-term sources of working capital finance? (8)
OR
Q.5 WriteShort Notes on: (Any (hree) (15)
a. Market Value Added
b. NPA and their Provisioning
c. Types of Mergers
d. Coimmercial Paper
c. Factors determining working capital requirements

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