Subject:Financial Management
Assignment Guidelines
Subject:Financial Management
Marks:25
Last Date of Submission:20/08/2024
Instructions:
All questions are mandatory
Solution of all the questions should be HANDWRITTEN
Upload the scan pdf of solution on LMS
Ensure the question number are clearly mentioned for each solution
Describe the three broad areas of financial decision making.
Explain 3 short term sources of Finance
Describe the concept of shareholders wealth maximization and also explain why it is superior to profit maximization.
TIME VALUE OF MONEY
Calculate the future value at the end of four years of the following series of payments at 10% interest rate:
At the end of the Year Cash Flow
(Rs.) (Rs.)
1 5,000
1423435990452 4,000
3 3,000
4 2,000
8549275205965
Mr. S. K. Shukla decided to deposit Rs. 30,000 at the per year in his Public provident fund account for 10 years. What will be the accumulated amount in the PPF A/c at the end of 10 years if the interest is 8 percent?
908603518625510522019371774Mr. Shah has invested Rs. 50,000 on Xerox machine on 1.1.2012. He estimates net cash income from Xerox machine in the next four years as under. The rate of interest is 10%
Year Estimated Inflows
2012 22000
2013 15000
77007557450063183832082014 28000
2015 25000
Calculate the PV of all future cash flow
Mr. Tarak plans to buy a house at Andheri (west) for Rs. 90,00,000. He plans to borrow Rs. 60,00,000 from HDFC Limited to finance the purchase for 15 years. The rate of interest on such a loan is 12% per annum. Compute the annual instalment.
COST OF CAPITAL
The shares of a chemical company are selling at Rs 20 per share. The firm had paid dividends @ Rs 2 per share last year. The estimated growth of the company is approximately 5 per cent per year.
Determine the cost of equity capital of the company.
ABC Ltd. has issued 14% preference shares of the face value of Rs. 100 each at par and redeemed after 6 years at par Flotation cost is expected to be Rs. 1 per share. Determine the cost of preference share by
A company issues a new 10 per cent debentures of Rs 1,000 face value to be redeemed after 10 years. The debenture is expected to be sold at a 5 per cent discount. It will also involve floatation costs of 5 per cent of face value. The companys tax rate is 35 per cent. What would the cost of debt be?
A company has on its books the following amounts and specific costs of each type of capital.
Type of capital Book value Market value Specific costs (%)
Debt Rs 5,00,000 Rs 6,00,000 5
Preference 2,00,000 4,00,000 8
Equity 8,00,000 15,00,00015
Retained earnings 5,00,000
TOTAL20,00,000 25,00,000
CAPITAL BUDGETING
A company has to choose one of the following two mutually exclusive projects. You have to use the Payback period as the criterion.
Year Project A (Rs.) Project B (Rs.)
0 (15,000) (15,000)
1 4,200 4,200
4,800 4,200
7,000 4,000
48,000 5,000
52,000 10,000
Using the information given below, compute Discounted pay-back method and Depreciation has been calculated under the straight-line method. The cost of capital may be taken at 14%
Particular Rs.
Initial Outlay 80,000
Cash Inflows
I Year 6,000
II Year 34,000
III Year 46,000
IV Year 26,000
V Year 12,000
Following project data relating two projects being considered by a company
ParticularsProject XProject Y
Initial Investment2,00,0001,80,000
Salvage Value40,00040,000
Expected Life4 Years4 Years
Earnings Before Depreciation and Tax
YearProject X (Rs.)Project Y (Rs.)
190,00085,000
270,00065,000
380,00050,000
490,00050,000
The cost of Capital is 10% and the tax rate is 50%. Based on Net Present Value which project should be accepted.
Following project data relating two projects being considered by a company
ParticularsProject XProject Y
Initial Investment2,00,0001,80,000
Salvage Value40,00040,000
Expected Life4 Years4 Years
Earnings After Depreciation and before Tax
YearProject X (Rs.)Project Y (Rs.)
190,00085,000
270,00065,000
380,00050,000
490,00050,000
The cost of Capital is 10% and the tax rate is 50%. Based on Profitability Index which project should be accepted.
