DCBC603
Reg. No.
VI Semester [Link]. (Regular) T&T/I&AS Degree Examination,
July/August - 2024
COMMERCE
Advanced Financial Management
(NEP Scheme)
Paper :6.3
Time : 2% Hours Maximum Marks :60
Instructions to Candidates:
Answer should be completely written in English only.
SECTION -A
Answer any Five sub questions. Each sub question carries2 marks. (5x2=10)
1. a) Give the meaning of cost of capital.
b) IfEBIT (Operating Profit) is Rs. 1,50,000, cost of debt (K) is 8?% cost of equity (K)
is 12% and overall cost of capital (K) is 10%, calculate the value of the fim under
NOl approach.
c) Mention any two objectives of capital Budgeting.
d) What is operating cycle?
e) What is meant by speculative motive?
f) State any four assumptions of Gordon's approach.
Ifa company's ROR(r) =12%, cost of Equity (K) =8% and EPS =Rs. 10, caleulate
the value of Equity under Walter's equation assuming 30% dividend payout.
SECTION-B
Answer any Four questions. Each question carries 5 marks. (4x5=20)
2. Explain the factors influencing cost of capital.
3. Explain the irrelevant concept of capital structure as per MM approach.
|P.T.O.
(2) DCBC603
4. Given the following information:
Particulars ABC Co. Ltd. XYZ Co. Ltd.
EBIT Rs. 2,40,000 Rs. 2,40,000
14% Debentures Rs. 6,00,000
Tax Rate 40% 40%
Cost of equity capital(K) 18% 18%
Compute the value ofABC Ltd. and XYZ Co. Ltd. using Net Income (NI) Approach.
5. Aproject cost Rs. 1,00,000. It is expected to generate cashflows as under:
Year Cash Inflow (Rs.) Certainty Equivalent
64,000 0.9
2 54,000 0.6
3 40,000 0.5
4 20.000 0.3
Risk free discount rate is 10% calculate NPV. Discount factor at 10% for 1" year - 0.909,
2nd year -0.826, 3rd year -0.751 and 4th year -0.683
6 Sigma Ltd. provides the following information:
Particulars Rs.
Total Sales 10,00,000
Cash sales (included intotal sales) 4,80,000
Return inwards/sales returns 20,000
Opening Debtors 1,30,000
Closing Debtors 70,000
i) Debtors Turnover Ratio (DTR)
ii) Average Collection Period (ACP).
(3) DCBC603
SECTION-C
Answer any Two questions. Each question carries 12 marks. (2x12=24)
The capital structure of Arun [Link]. comprises the following securities:
Sources of Fund Book Value (Rs.) Market Value (Rs.) Specific Costs
Pref:share capital 2,50,000 2,75,000 8%
Equity share capital 15,00,000 22,50,000 15%
Retained Earnings 5,00,000 6,25,000 13%
Debentures. 10,00,000 8,50,000 5%
Calculate the WACC by using:
i) Book value weights
ii) Market value weights.
8. Following are the details regarding three companies:
Indu Ltd. Bindu Ltd. Sindhu Ltd.
r=15% r= 10% r=8%
K= 10% K=10% K= 10%
EPS = Rs. 10 EPS = Rs. 10 EPS = Rs. 10
Calculate the value of equity share of each of the company when Dividend payout Ratio is:
i) NIL 0%,
ii) 50%,
iii) 80% and
iv) 100%
You are required to offer your comments on the results by using Walter's model.
9. What are Accounts Receivables? Explain the factors influencing the size of Receivables.
SECTION-D
Answer any ONE question. It carries 6 marks. (1x6=6)
10. Compare The NI Approach and Net Operating Income (NO) Approach.
11. Listout any Six Inventory Techniques.
