MBA Financial Management

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R5-R7
MBA II-Semester Supplementary Examinations, January 2009
FINANCIAL MANAGEMENT
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Time: 3 Hours Max. Marks: 60
Answer any FIVE questions.
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All questions carry equal marks
1. “The ultimate goal of financial management is to increase the market value of
the firm”. Discuss.
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2. Following are the details of a proposed project:
Initial outlay Rs. 80,000
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Initial working capitalRs. 20,000
Cash flow before depreciation:
Year 1 2 3 4
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Rs 35,000 35,000 30,000 30,000
Salvage value Rs. 20,000
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Tax rate assumed to be 50%.
The project is depreciated on SLM. If the required rate of return is 10%.
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Is the project acceptable order the NPV method?
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3. What is weighted average cost of capital? Discuss the steps in computation of
weighted average cost of capital.
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4. What do you understand by indifference point of EBIT? Explain with the help
of EBIT-EPT analysis.
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5. What is an informational content of dividend payment? How does it affect the
value of the share?
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6. What do you understand by working capital? Discuss the various sources of
working capital funds.
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7. Kakinada Chemicals presently gives credit terms of net 30 days. It has Rs. 90
million in sales and its average collection period is 45 days. To stimulate
demand, the company may give terms of net 60 days. If it accepts these
terms, sales are expected to increase by 15%. After the change, the
average collection period is expected to be 75 days, with no difference in
payment habit between old and new customers. Variable costs Rs. 80 for every
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Rs. 100 of sales and the company required rate of return on investment in
receivables is 20% should the company extends its credit period?
8. Write short notes on:
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(a) Finance Function (b) Profitability index
(c) Acid test ratio (d) Operating leverage
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