Financial Management

 

AEREN FOUNDATION’S                                                                              Maharashtra Govt. Reg. No.: F-11724

 

 

 

 

 

 

 

 

SUBJECT : Financial Management

 

COURSE : MBA 2nd semester                                         Total Marks : 80

Dear students get fully solved assignments

Send your semester & Specialization name to our mail id :

“ help.mbaassignments@gmail.com ”

or

Call us at : 08263069601

(Prefer mailing. Call in emergency )

 

 

 

 

Question – A (1)   Mr. Nimish holds the following portfolio.      

Share                                                            Beta                                                       Investment

Alpha                                                            0.9                                                          Rs.12, 00,000

Beta                                                               1.5                                                          Rs. 3, 50,000

Carrot                                                           1.0                                                          Rs. 1, 00,000

What is the expected rate of return on his portfolio, if the risk rate is 7 per cent and the expected return on the market portfolio is 16 per cent?

 

 

Answer – A (1):  For given bata (β), the required rate of return is obtained as

E(rp) = rf + β (rm – rf)

 

Question – A (2)  A share is selling for Rs.60 on which a dividend of Rs.4 per share is expected at the end of the year. The expected market price after dividend declaration is to be Rs.70. Compute the following: –

  • The return on investment ® in shares.
  • Dividend yield
  • Capital Gain Yield

 

 

Answer – A (2):

  • Return on Investment per share =   Net profit after taxes   –   Dividend     X  100

Average ordinary share or net worth

 

 

Dividend Yield   =    Dividend per ordinary share (DPS)    X  100

Market Value per Share

 

 

 

  • Capital Gain Yield =   Earnings per share (EPS)   X  100

Market value per share

 

 

Question – B: DIC Ltd. provides the following data:

Comparative trial balance

                                                                         March 31 year 2              March 31 year 1              Increase(Decrease)  

Debit Balance                                                                     

Cash                                                                                      20                                            10                                  10

Working capital (other than cash)                   Rs.190                                    Rs. 90                           Rs.100

Investment (Long term)                                               100                                         200                               (100)

Building and equipment                                              500                                         400                                100

Land                                                                                      40                                          50                                 (10)

 

Total                      850                                         750                                100  

 

Credit  

Accumulated Depreciation                                         200                                         160                         40

Bonds                                                                                   150                                         100                         50

Reserves                                                                             350                                         350                         —

Equity Shares                                                                    150                                         140                         10

 

                                                                Total                      850                                         750                         100

 

Income Statement

For the period ending March 31, year 2

                                                                                                                                                                (Amount in Rs lakh)

Sales                                                                                                                                                     Rs.1000

Cost of Goods Sold                                                                                                                                 500

Selling Expense                                                                                Rs.50                                    

Administrative Expenses                                                                   50                                            100

Operating Income                                                                                                                                  400                 

Other charges

                Gain on sale of building and equipment                 Rs 5

                Loss on sale of investments                                           (10)

                Interest                                                                                     (6)

                Taxes                                                                                      (189)                                          (200)

 

Net Income after taxes                                                                                                                         200

Notes:  (a)          The depreciation charged for the year was Rs.60 Lakh

  • The Book value of the building and equipment disposed was Rs 10 Lakh

 

Prepare a Cash Flow Statement (Based on AS-3)

 

Answer – B:

Cash Flow Statement of DIC Limited (Indirect Method)

Particulars Amount in Rs. Lakh
Cash flow from operating activities:
    Net profit before taxation and extraordinary items 389
    Adjustment for
        Depreciation 60
        Gain on sale of building and equipment (5)
        Interest expense 6

 

 

Question – C (1) – A. Ltd. produces a product which has a monthly demand of 4,000 units. The product requires a component X which is purchased at Rs.20. For every finished product one unit of component is required.  The ordering cost is Rs.120 per order and the holding cost is 10 per cent per annum.            You are required to calculate:

  • Economic order quantity
  • If the minimum lot size to be supplied is 4, 000 units, what is the extra cost, the company has to incur?
  • What is the minimum carrying cost, the company has to incur?

 

Answer – C (1):

  • Determination of EOQ

EOQ   =          2 AB                                             A = Annual usage of inventory (units)

C                                                      B = Buying cost per order

C = Carrying cost per unit

 

 

 

 

 

Question – D – A stock is currently trading for Rs.29. The risk less interest is 7 % p.a continuously compounded. Estimate the value of European call option with a strike price of Rs.30 and a time of expiration of 4 months. The standard deviation of the stock’s annual return is 0.45. Apply BS model.

 

 

Answer – D:

Spot price of the share S Rs. 29.00

 

 

Dear students get fully solved assignments

Send your semester & Specialization name to our mail id :

“ help.mbaassignments@gmail.com ”

or

Call us at : 08263069601

(Prefer mailing. Call in emergency )

 

Leave a Reply