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1. Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
(Prefer mailing. Call in emergency
ASSIGNMENT
DRIVE SUMMER 2017
PROGRAM MBADS/ MBAFLEX/ MBAHCSN3/ MBAN2/ PGDBAN2
SUBJECT CODE & NAME MB0045 – FINANCIALMANAGEMEN
SEMESTER 2
BK ID B1628
CREDITS 4
MARKS 60
Note: Answerall questions.Kindlynote that answers for 10 marks questionsshould be approximately
of 400 words. Each questionis followedbyevaluationscheme.
Q1 Explain the differences between wealth maximization and profit
maximization.
Explainrelationbetweenfinance andaccounting
Differencesbetweenwealthmaximizationandprofitmaximization
Explanationof relationbetweenfinance andaccounting
Answer:Wealthmaximisationvs. profit maximisation

2.  Wealthmaximisationisbasedoncashflow.Itisnot basedonthe accountingprofitas inthe case
of profitmaximisation.
 Through the process of discounting,wealth maximisationtakes care of the quality of cash flow.
Converting uncertain distant cash flow into comparable values at base period facilitates better
comparison of projects. The risks that are associated with cash flow are adequately reflected
whenpresent valuesare takentoarrive at the
Q2 Explain about the doubling period and future value. Solve the below given
problem:
Under the ABC Bank’s Cash MultiplierScheme, deposits canbe made for periods
ranging from 3 months to 5 years and for every quarter, interest is addedto 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?
Answer:Doubling period
Doubling period is the period which makes the investmentas "Doubled", that is the amount invested
fetches100% return.
1. Rule of 72
The initial amountof investmentgetsDoubledwithinwhich72/I
Where,I= InterestRate of the investment.
Q3 Write short notes on:
a) Irredeemable bonds
Answer:Irredeemable bondsor perpetual bonds
Bonds which will never mature are known as irredeemable or perpetual bonds. Indian Companies Act
restrictsthe issue of such bondsand therefore,theseare veryrarelyissuedbycorporates these days.In
case of these bonds,the terminal value ormaturityvaluedoesnotexistbecause theyare notredeemable.
The face value is known, and the interest received on such bonds is constant and received at regular
intervalsandhence,the interestreceipt
b) Zerocoupon bonds
Zero coupon bonds

3. InIndia,zerocouponbondsare alternativelyknownasDeepDiscount Bonds(DDBs).Thesebondsbecame
verypopularinIndiafor overa decade
c) Valuationof Shares
Valuationof Shares
A company’ssharescanbe categorisedinto:
 Ordinaryor equityshares
 Preference shares
The returnsthe shareholdersreceive in
Q3. Explain the factors affecting Capital Structure. Solve the below given
problem:
Givenbelow are two firms, A and B, which are identical in all aspects except the
degreeofleverage,employedbythem.What is theaveragecostof capitalof both
firms?
Details of Firms A and B
Firm A Firm B
Netoperating income EBIT Rs. 1, 00, 000 Rs. 1, 00, 000
Intereston debenturesI Nil Rs.25,000
Equity earningsE Rs.1,00,000 Rs.75,000
Cost of equityKe 15% 15%
Cost of debenturesKd 10% 10%
Market value of equityS = E/Ke Rs. 6, 66, 667 Rs.5,00,000
Market value of debt B Nil Rs.2,50,000
Total value of firmV Rs. 6, 66, 667 Rs,7,50,000
Explanationof factorsaffectingcapital structure
Solutionforthe problem
Interpretation
Answer:Factors AffectingCapital Structure
Leverage:The use of sourcesof fundsthat have a fixedcostattachedtothem, suchaspreference shares,
loansfrom banksand financial institutions,and debenturesinthe capital structure,isknownas “trading
onequity”or“financial leverage”.If the assetsfinancedbydebtyieldareturngreaterthanthe costof the
debt, the EPS will increase without an increase in the owner’s investment. Similarly,the EPS will also
increase if preference share capital isused
Q4. Explain the capital Budgeting process andits appraisals
Solve the belowgivenproblem:

4. Givenbelow are the details on the cash flows of two projects A and B. Compute
payback periodfor A and B.
Cash flows of A and B
Year Project A cash flows(Rs.) Project B cash flows(Rs.)
0 (4,00,000) (5,00,000)
1 2,00,000 1,00,000
2 1,75,000 2,00,000
3 25,000 3,00,000
4 2,00,000 4,00,000
5 1,50,000 2,00,000
Explanation ofcapital budgetingprocess and its appraisals.
Solutionfor the problem
Answer:Capital budgetingprocess
After the screening of proposals for potential involvement is over, the company should take up the
followingaspectsof capital budgetingprocess:
 A proposal should be commercially viable. The following aspects are examined to ascertain the
commercial viabilityof anyinvestment proposal:
 Market for the product
 Availabilityof rawmaterials
 Sourcesof raw materials
Q5. Explainthe concepts of working capital. Explainthe determinants of working
capital.
Explanationof conceptsof workingcapital
Explanationof determinantsof workingcapital
Answer:Concepts ofWorking Capital
Gross working capital: Gross working capital refers to the amounts invested in various components of
currentassets.It basicallyreferstothe currentassets.Thisconcepthas the followingpractical relevance:
 Managementof currentassetsis the crucial aspectof workingcapital management
 Gross workingcapital helpsinthe fixationof

marketconditions.
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601

5. (Prefer mailing. Call in emergency