Financial Management for Beginners — DU B.Com. (Hons.) Previous Year Question Papers

a) Mr. Rivansh invested 720,000 at beginning of the year one at the rate of 12% compounded annually. What amount of money he will receive after end of 1st, 2nd and 3"d year of his investment. (6 Marks) b) What are short-term sources of finance? Explain. (9 Marks) c) What is liquidity decision? Explain. (3 Marks) OR d) "Wealth maximization is not merely an alternative, but a superior criterion to profit maximization. " Discuss the advantages of wealth maximization over profit maximization. (9 Marks) e) Mr. Madhav borrows 720,000,00 from Mr. Mukesh at simple interest rate of 10% o. a. It is agreed that the loan shall be payable in two equal instalments which shall be payable at end of six months and 1 year respectively. Calculate the amount of instalment. (6 Marks) f) Why systematic risk known as unavoidable risk? Explain. (3 Marks) Purchase price of each machine ·5,00,000 Working capital $2,00,000 Useful life of each machine 5 years Estimated salvage value at end of useful life 250,000 Cash salvage value of at end of useful life ·60,000 Method of depreciation Straight line Tax rate 30% Earnings before depreciation and tax: Which machine should be purchased on the basis of internal rate of return. b) What do you mean by capital budgeting? Why are the capital budgeting decisions important? Explain. (9 Marks) OR c) The following information is given for XYZ Ltd. Particulars Amount (8) Equity share capital ($100 each) 40,00,000 10% preference share capital 5,00,000 Revenue and surplus 5,00,000 Preliminary expenses 30,000 Profit before interest and tax 5,00,000 Tax rate 30% Market price of equity share 8125 You are required to calculate: Return on equity shareholder funds II. Return on capital employed III. Earnings per share IV. Price earnings ratio (18 Marks) a) XYZ Ltd. has the following capital structure as per its Balance Sheet as at 31st Particulars Amount (8) Equity share capital (fully paid-up share of 710 cach) 6,00,000 15% Preference share capital (fully paid-up share of 5,00,000 Retained earnings 1.00,000 15% Term loan 2,00,000 Additional information: I. Current quoted prices in stock exchange: II. For the last year, the company had paid equity dividends of R7 per share which is expected to grow @ 10% p.a. forever. I. The corporate tax rate is 30%. Calculate the weighted average cost of capital using book value and Market value. (18 Marks) c) Calculate the operating leverage, financial leverage and combined leverage from following data: (9 Marks) Particulars Amount (8) Sales (@ 7100 per unit) 60,00,000 Variable cost (@ 2100 per unit) 10,00,000 Fixed charges 12,00,000 Interest charges 2,00,000 By what % will EBIT increase if there is a 20% increase in sales. a) VN Ltd. Is commencing a new project for manufacture of electric bulbs. The following cost information has been ascertained for annual production of 50,000 units at full capacity: Particulars Amount per unit (8) Raw material 15 Direct labour Manufacturing overheads: