Nirma University
University Elective
Semester End Examination, December, 2020
UEIM007: Financial Management (17/12/2020)
Time: 90 Minutes Max Marks: 40
Instructions: 1. Figures to right indicate full marks.
2. Assumption/s if any should be stated clearly before starting question.
3. Show all the necessary calculations for the support of the answer.
4. Marks are reserved for neatness, presentation and format.
5. Upload a single PDF file on LMS. The scanned document must be clearly visible
and readable. MAKE SURE to keep the orientation as “Portrait” and NOT
“Landscape”.
Que. Max.
No. Marks
Q-1 AB Ltd. sells good at gross profit margin of 20%. It includes depreciation as part of 10
cost of production. The following are the forecasts for the next 12 months period.
Determine the requirement of working capital for the company on cash cost basis.
Particulars Amount
Cash Sales 4,00,000
Sales ( 2 months credit ) 84,00,000
Material consumed ( Suppliers credit is 2 months ) 6,85,000
Manufacturing expenses o/s at the end of the year ( cash 50,000
expenses are paid one month in arrear)
Total Administrative expenses ( they are paid as incurred 1,80,000
)
Sales Promotion expenses (paid quarterly in advance) 90,000
Wages ( paid in the beginning of next month) 5,80,000
Raw material and finished goods are kept at one month’s requirement. Normally, the
company maintains Rs. 50000 Of cash balance. A safety margin of 10% will be
maintained. Assume no WIP. Ignore the tax. Base your calculations on 360 days in a
year.
OR
Q-1 You have been asked to prepare a cash budget for the next quarter, January through 10
March, for Sharmilee Exports. They have provided you with the following
information:
a. Sales are expected to be: Rs.300,000 in January, Rs.260,000 in February, and
Rs.350,000 in March. All sales will be in cash.
b. The estimated purchases are: Rs.240,000 in January, Rs.220,000 in February,
and Rs.250,000 in March. Payments for purchases will be made after a lag of
one month. Outstanding on account of purchases in December last are
Rs.210,000.
c. The rent per month is Rs.8,000 and the partners’ personal withdrawal per
month is Rs.12,000.
d. Salaries and other expenses, payable in cash, are expected to be: Rs.15,000 in
January, Rs.15,000 in February, and Rs.16,000 in March.
e. They plan to buy two computers worth Rs.50,000 on cash payment in March.
f. The cash balance at present is Rs.12,000. Their target cash balance, however,
is Rs.20,000 every month. What will be surplus/ deficit of cash every month
in relation to their target cash balance?
Q-2 One of your juniors has only one elective course remaining and must choose between 10
another advanced elective class in CAD and one in Financial Management. As her
friend, you want to persuade her to take Financial Management. Give some examples
of how she might benefit from the study of Financial Management
Q-3 As a finance manager of Axar Ltd. and have to choose between purchase of two 10
machines A and B. They serve the same function but are designed differently and thus
the cost of machine A is Rs.1,75,000 and lasts for 7 years, whereas machine B costs
Rs.1,50,000 and lasts for 5 years . The annual operating costs of machine A and B are
Rs. 22000 and 25000, respectively. If the cost of capital is 12%, show with
calculations as to which machine you would choose.
Q-4 XYZ Ltd. has the following capital structure: 10
Sources of Fund Amt. (Rs.)
Equity Capital 4000000
(400000 shares at INR 10)
8% preference shares 2000000
10 % Debentures 4000000
Total 10000000
Market price of equity is Rs. 20 and dividend to be paid by the company is Rs. 5 per
share. Expected growth rate is 8%. Tax rate is 50%.
Calculate the weighted average cost of capital (WACC).
