ASSIGNMENT DRIVE SPRING 2016 PROGRAM MBA SEMESTER II SUBJECT CODE & NAME MB0045 FINANCIAL MANAGEMENT BK ID B1628 CREDITS 4 MARKS 60

ASSIGNMENT DRIVE PROGRAM SEMESTER SUBJECT CODE & NAME BK ID CREDITS MARKS

SPRING 2016 MBA II MB0045 FINANCIAL MANAGEMENT B1628 4 60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q. No

Questions

Marks

Total Marks

1

Explain the differences between wealth maximization and profit maximization. Explain relation between finance and accounting

2

Differences between wealth maximization and profit maximization

5

Explanation of relation between finance and accounting

5

10

Explain about the doubling period and future value. Solve the below given problem: Under the ABC Bank’s Cash Multiplier Scheme, deposits can be made for periods ranging from 3 months to 5 years and for every quarter, interest is added to the principal. The applicable rate of interest is 9% for deposits less than 23 months and 10% for periods more than 24 months. What will be the amount of Rs. 1000 after 2 years?

3

Explanation of doubling period

3

Solving the problem

3

Explanation of future value

4

10

Write short notes on: a) Irredeemable bonds b) Zero coupon bonds c) Valuation of Shares Explanation of irredeemable bonds

3

Explanation of zero coupon bonds

3

Explanation on valuation of shares

4

10

4

Explain the factors affecting Capital Structure. Solve the below given problem: Given below are two firms, A and B, which are identical in all aspects except the degree of leverage employed by them. What is the average cost of capital of both firms? Details of Firms A and B Firm A Net operating income EBIT

Rs. 1, 00, 000

Rs. 1, 00, 000

Nil

Rs. 25, 000

Rs. 1, 00, 000

Rs. 75, 000

Cost of equity Ke

15%

15%

Cost of debentures Kd

10%

10%

Rs. 6, 66, 667

Rs. 5,00, 000

Nil

Rs. 2, 50, 000

Total value of firm V Rs. 6, 66, 667 Explanation of factors affecting capital structure

Rs. 7, 50, 000 6

Interest on debentures I Equity earnings E

Market value of equity S = E/Ke Market value of debt B

5

Firm B

Solution for the problem

3

Interpretation

1

10

Explain the capital Budgeting process and its appraisals Solve the below given problem: Given below are the details on the cash flows of two projects A and B. Compute payback period for A and B. Cash flows of A and B Year 0 1 2 3 4 5

6

Project A cash flows (Rs.) (4,00,000) 2,00,000 1,75,000 25,000 2,00,000 1,50,000

Project B cash flows (Rs.) (5,00,000) 1,00,000 2,00,000 3,00,000 4,00,000 2,00,000

Explanation of capital budgeting process and its appraisals.

7

Solution for the problem

3

10

Explain the concepts of working capital. Explain the determinants of working capital. Explanation of concepts of working capital

5

Explanation of determinants of working capital

5

10