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CASE STUDY – 1
Political Corruption in India
Governmenthasbeenjoltedbycontroversyoverlicences and radio airwaves that the CAG of India)
says were given out too cheaply, depriving the government of up to $39 billion in revenues. The
telecomminister,A Rajawasforcedto resign and the Prime Minister Dr Manmohan Singh has been
askedto explainhimself to the Supreme Court. Opposition parties want a full parliamentary probe
and have blocked proceedings until the government relents.
So,what isthe controversyall aboutandwhatdoes it mean for the telecom sector and companies?
In 2008, the country issued 122 new telecom licences and the second-generation radio spectrum
bundledwithittoseveral domesticcompaniesthathadlittle orno experience inthe telecomsector,
and at a price set in 2001.
The national Auditor General said that the allocation process did not reflect the correct value of
radio spectrum as there was no auction and the entire process was flawed, benefiting selected
companies.
The AuditorGeneral saidthatthe telecom ministry did not do the requisite due diligence, granting
85 out of the 122 licences to ineligible applicants.
The auditor also said the ministry did not follow its own guidelines, changed the cut-off date for
applications,which gave "unfair advantage" to some companies over others. It said that the entire
process "lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner".
The auditor said that several companies deliberately suppressed facts, disclosed incomplete
information,submittedfictitiousdocumentsandusedfraudulentmeanstoget licences and thereby
access to spectrum.
The auditorsaid thatunitsof UnitechLtd,whichreceivedlicencesin2008 and now operatesservices
in a joint venture with Norway's Telenor, had not fulfilled eligibility conditions including required
share capital.
Other firms which were ineligible according to the auditor include Loop Telecom, Videocon
TelecommunicationsandSTel Ltd. The auditorsaidthat SwanTelecom, which has since been partly
acquiredbythe UAE's Etisalat, wasgivenlicenceseventhoughaunitof No.2 telecomsfirmReliance
Communications held over 10% of equity, a violation of rules.
It is still too early to know whether any licences would be cancelled, but the pressure would be
strong not to do so because operators have invested in networks and have subscribers.
Any big crackdown could send a wrong signal to investors.
But the governmentcouldaskoperatorstocompensate forthe potential revenuelossashighlighted
by the auditor and may impose fines for not meeting separate rollout obligations.

The Auditor General also named nine other operators, including market leaders Bharti Airtel ,
Reliance Comm and Vodafone, who were allotted spectrum beyond the contracted limit without
paying any upfront charges, costing the government a potential $8 billion.
Questions:
Question 1: How many Telecom licenses were issued and how many were found ineligible?
Question 2: What was the potential loss of revenue to the nation? How did the CAG of India
calculate the loss?
Question3:Explainwithexamples the various kinds of ‘white collar crime’. How does this case fall
under the category of white collar crime?
Question4:How didthese companiesviolate the principles of Business Ethics and Corporate Social
Responsibility?
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IMT- 86
INTERNATIONAL FINANCIAL MANAGEMENT
SECTION – A
1. What kind of finances are available from foreign sources? Explain in detail the role of various
institutions providing foreign finance?
2. Exchange rate Type Period Conversion rate
a. CAN $ to USD SPOT Today 1.0401
b. CAN $ to USD FORWARD 3 months 1.0329
c. Six months interest rate
d. USD 9% P.A,
e. CAN$ 6% P.A.
3. Discuss about the following in detail with example.
a. Forward contract
b. Future contract
4. Explain how an Indian company can make investments abroad on fast track.
5. What are the ‘Rule’ requirements for a company to get listed on NASDAQ?
SECTION – B
1. Give the status of forex market in the present era.
2. A US MNC has its subsidiary in India. 10% preference shares of the face value of Rs. 50 have been
issuedbythe subsidiary,tobe redeemedatyearend8. Flotationcostsare expectedtobe 4%. These
costs can be amortizedfortax purpose duringthe 8 yearsat a uniformrate.The corporate tax rate is
35%. Determine the cost of preference shares from the perspective of the subsidiary.
3. Why was the fixed rate system was replaced by the floating exchange rate system?
4. Assessingandmanagingriskisa complex and critical task for international projects. Risks in terms
of international projects can be categorized into the following. Discuss.
5. What is the difficulty in extending the domestic CAPMto world environment?
SECTION – C
1. Briefly outline the measure to avoid double taxation.

2. What is country risk? Discuss its elements.
3. Shouldinternational firmsrequire higherratesof returnonforeign projects than identical projects
at home? Comment.
4. What is a foreign exchange market? Explain the functions of a foreign exchange market.
5. One French franc could be purchased in the foreign exchange market for 21 US cents today. If the
Franc appreciated 10% tomorrow against the dollar, how many Francs would a dollar buy
tomorrow?
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CASE STUDY – 1
1. The current value of the S & P 500 index is $ 1000. The value of portfolio is $5 million. Beta of
portfolio is 1.5. One futures contract is for delivery of $ 250 times the index.
a) What position in futures contracts on the S & P 500 is necessary to hedge the portfolio?
b) Use the data for the value of the index andthe future price of inthe index,both3 monthsaheads,
to assess the performance of the stock index hedge by recording the gain on the futures position,
the return on the market, the expected return on the portfolio, the expected portfolio value in 3
months ( including dividends) and the total expected value of the position in 3 months .
Scenario Value for index futures Price of index
1 900 902
2 950 952
3 1000 1003
4 1050 1053
5 1100 1103
The current futures price is $ 1010. The dividends rate on the index is 1% per annum. The risk-free
rate is 4% per annum.
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CASE STUDY – 2
Suppose a subsidiary of America currently has an annual sale of $ 50,00,000 with 45 days credit
terms. The sales of the subsidiary can be increased by 6% or $ 3,00,000 if the company relaxes its
creditperiodto 120 days.With this extension in sales, the cost of goods sold is $ 1,00,000. Monthly
creditexpensesof the subsidiary are 1% in financing charges. The dollar is expected to decrease in
value on an average of 0.5% every 30 days. If the currency change is not considered then calculate
the total financing cost.

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IMT- 87
RISK MANAGEMENT
SECTION – A
Question 1: (a) Explain the principles of risk management. Also explain the limitations of risk
management.
(b) Explain the difference between credit risk and the market risk in a financial contract.
(c) Explain why a bank is subject to credit risk when it enters into two offsetting swap contracts.
(d) Describe briefly some strategies for controlling interest rate risk.
(e) What do you understand by Interest rate risk? What are its sources and also explain the broad
categories of interest rate risk.
SECTION – B
Question2:(a) Howthe optionsandfuturescanbe usedas hedgingvehicle?How basis risk replaces
the price risk by hedging? Explain.
(b) How is a call option different from Put option? What do you mean by exercising an option?
(c) Criticallyexamine,“buyinga call option is risky because the holder commits to purchase a share
at a later date.”
(d) What do youmean by options strategies? Explain how different strategies can be used as a risk
management tool. Give suitable examples.
(e) What doyou meanbyStrangle?Isit possible tomake profitsirrespective of increase or decrease
in prices of an underlying asset?
SECTION – C
Question 3: (a) What are different type of currency Derivatives? What are its uses under foreign
exchange risk management?
(b) What do youmeanby ForeignExchange riskandwhatare the tools to manage foreign exchange
risk?
(c) What do you mean by Hedge Ratio?
(d) Explain how a total return swap can be used as a financing tool?
(e) Explain: Liquidity risk
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CASE STUDY – 1
An investorcanuse differentOptionstrategies for Risk management. Given below are some of the
strategies being contemplated by a person. You are required to calculate
(i) Risk neutral position
(ii) Maximum pay off and
(iii) Maximum Loss under each strategy:

(a) Mr. XYZ is bullish about ABC Ltd stock. He buys ABC Ltd. at current market price of Rs. 4800 on
4th July.To protectagainstfall inthe price of ABC Ltd. , he buys an ABC Ltd. put option with a strike
price Rs. 4500 (OTM) at a premium of Rs. 100 expiring on 31st July.
(b) Mr. XYZ isbearishonNifty;When the Nifty is at 4894. He buys a put option with a strike price of
Rs. 4700 at a premium of Rs. 50, expiring on 31st August.
(c) Mr. XYZ is bullish on Nifty when it is at 4180. He sells a put option with a strike price of Rs. 4400
at a premium of Rs. 120 expiring on 31st July.
(d) Nifty is at 4850 on 27th April. An investor, Mr. A enters a long straddle by buying a May Rs. 4900
Nifty put for Rs. 85 and a May Rs. 4900 Nifty call for Rs. 122.
(e) Suppose Niftyisat4500 in May. An investor,Mr.A,executesashortstrangle byselling a Rs. 4300
Nifty put for a premium of Rs. 23 and a Rs. 4700 Nifty call for Rs. 43.
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CASE STUDY – 2
X Ltd Canada andY Ltd of U.S.have approached a swap dealer to arrange a currency swap for them.
Interest rate in U.S. and Canada for fixed rate borrowing and floating rate borrowing are:
US$ CANADA $
X Ltd. LIBOR +1% 6%
Y Ltd. LIBOR +1.5% 7.5%
X Ltd wants to borrow US $ at floating Rate while Y Ltd wants to borrow Canada $ at fixed rate. A
Swapdealerhasagreedto arrange a swapfor themfora considerationof .5% spread.Designa swap
inwhichboth the companies i.e. X Ltd and Y Ltd. are equally benefited. Also show the related cash
flow position of the transaction.
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IMT-136
FINANCIAL MARKETS INSTITUTIONS AND SERVICES
SECTION – A
1. Explain the process of capital formation.
2. Give detailed chart depicting Organization of the Financial System in India.
3. Give differencesandsimilaritiesbetweenNew Issue MarketandStockExchangesintabular format.
4. Give detailed chart depicting Money Market Organization in India.
5. Distinguish between CP and CD as understood under Indian Money market.
SECTION – B

1. List the ways by new Issues are brought into the market. Explain any one of them in detail.
2. Give detailed chart depicting Regulatory Framework of Securities Market in India.
3. Who or what is SEBI? List 5 of its powers and functions.
4. Write a note on Buyback of securities.
5. Write a note on primary market intermediaries in India.
SECTION – C
1. Write a detailed on Depository System in India. Remember to give relevant figures/diagrams
2. Write a note on Forward Contracts .
3. Who are venture capitalists? What do they do?
4. What are NBFCs? Why are they important for an economy.
5. Write a note on FDI.
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CASE STUDY – 1
1. Sequia Investments Pvt Ltd is an American investment company. It wants to invest $1 Trillion in
Indian Economy. Suggest it how should it invest. Give your answer by providing various financial
markets, institutions and services it should avail for maximum profit.
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CASE STUDY – 2
2. Ajayhas got a newjobin whichhismonthly take home is Rs.75,000/- He wants to invest in Mutual
Funds.You are an expertat mutual fundindustry.Explainhim what are Mutual Funds and how they
work and how will it be beneficial to him.
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IMT-142
STRATEGIC FINANCIAL MANAGEMENT
SECTION – A

Question 1: What are the critical factors to be observed while making capital budgeting decisions
under capital rationing?
Question2:The Moon Ltd. isexaminingtwomutually exclusive proposals. The management of the
companyusescertaintyequivalent (CE) approach to evaluate new investment proposals. From the
followinginformationpertainingtothese projects,advise the companyastowhichprojectshouldbe
taken up.
Proposal A Proposal B
Year Cash flow after
taxes
CE Cash flow after
taxes
CE
0 (25000) 1.0 (25000) 1.0
1 15000 .8 9000 .9
2 15000 .7 18000 .8
3 15000 .6 12000 .7
4 15000 .5 16000 .4
Question 3: What is the indifference point and why is it so called? What is its usefulness?
Question 4: The following particulars are available in respect of corporate:
1. Capital employed Rs 500 million
2. Operating profits after taxes for the last three years are :Rs 80 million, Rs 100 million and Rs 90
million.
3. Riskless rate of return 10%
4. Risk premium relevant to business 5 %.
You are required to calculate the value of goodwill, based on the present value of super profit
method. Super profits are to be computed on the basis of the average profits of 4 years. It is
expected that the firm is likely to earn super profits for the next 5 years only.
Question 5: What synergies exist in:
a) Horizontal mergers
b) Vertical Mergers
c) Conglomerate mergers
SECTION – B
Question 1: A machine purchased four years ago has been depreciated to its current book value of
Rs 50,000. The machine originally had a projected life of 10 years and zero salvage value. A new
machine will cost Rs 80,000. Its installation cost estimated by the technician is Rs 20,000. The
technicianalsoestimatesthatthe installationof the new machine will result in a reduced operating
cost of Rs 30,000 per year for the next 6 years. The old machine would be sold for Rs 20,000. The
new machine will have a 6 year life with no salvage value. The company’s income is taxed at 35%.
Determine whether existing machine should be replaced, if cost of capital 10%. Depreciation is at
straight line basis.
Question 2: What is the sensitivity approach for dealing with the project risk? What is one of the
most common methods used to evaluate projects using sensitivity analysis?
Question 3: Distinguish between
· Gross working capital and net working capital.
· Permanent and temporary working capital.
Question 4: Following information is available in respect of a trading firm:
· Onan average,debtorsare collectedafter45 days; inventories have an average holding period of
75 days and creditor’s payment period on an average is 30 days.
· The firm spends a total of Rs 120 lakh annually at a constant rate.
· It can earn 10% on investments.
From the above information compute:

a) Cash cycle and cash turnover.
b) Minimum amount of cash required to meet the payment obligations.
c) Savings by reducing the average inventory holding period by 30 days.
Question 5: What is credit standards? What key variables should be considered in evaluating
possible changes in credit standards?
SECTION - C
Question 1: From the following data determine the EOQ
· Annual requirement, 12,00,000 units .
· Purchase Price Rs 3 per unit.
· Ordering cost Rs 50 per order.
· Carrying cost of inventory, 10% of the cost.
Question2:What are the featuresof trade credit as a short term source of working capital finance?
How can the cost of trade credit be calculated?
Question 3: A call option at a strike price of Rs 170 is selling at a premium of Rs 15. At what share
price on maturity will it break even for the buyer of the option? Will the writer of the option also
break even at the same price?
Question 4: Explain and illustrate the option pay off.
Question 5: A proforma cost sheet of a company provides the following particulars:
Amount (Rs.)
Raw material 80
Direct labour 30
Overheads 60
Total cost 170
Profit 30
Selling price 200
The following particulars are available:
Raw material instock,onaverage one month;material inprocess,onaverage half a month; finished
goodsin stock,on average one month. Credit allowed by suppliers is one month, credit allowed to
debtorsistwomonths,lag inpaymentof wagesisone and a half weeks,laginpayment of overhead
expensesisone month;one fourthof the output is sold against cash; cash at bank is expected to be
Rs 25000. You are requiredtoprepare astatementshowingthe workingcapital needed to finance a
level of activity of 1,04,000 units of production. Assume that production is carried out during the
year evenly.
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CASE STUDY – 1
Bose Engineeringhashada verypoorbad debtrecord and,for thisreasonithas devisedthe method
of credit control based on analyses of its debt experience and of the personal characteristics of its
customers. It is ascertained its good and bad debt experiences from a sample of actual orders
executed. It ranked its customers using a points system from 0 to 100, where 0 denoted a class of
customers with the highest percentage of bad debts and 100 denoted a class with the highest
percentage of good debts. These analysis led to the preparation of following tables:

Point ratings Cumulative total no.Of
orders received
Cumulative no. Of
orders received which
turn out to be good
debts
Cumulative no. Of
orders received which
turn out to be bad
debts
0 – 10 1150 200 950
0 – 20 2100 450 1650
0 – 30 2850 750 2100
0 – 40 3950 1500 2450
0 – 50 6600 4000 2600
0 – 60 8150 5400 2750
0 – 70 9100 6250 2850
0 – 80 9500 6600 2900
0 – 90 9750 6800 2950
0 – 100 10000 7000 3000
The table shows, cumulatively, an analysis of the customers by class and an analysis of good & bad
debts within each class per 10,000 orders received.
During 2005, the company rejected all orders from customers with a credit rating of 50 and below
withthe result that a sample profit and loss account, based on the table of 10,000 orders received,
appeared as follows:
Sales (3400 orders @ Rs 14/- per order) 47600
Variable Costs:
Purchases 3400 @ Rs 3/- 10200
Distribution 3400 @ Rs 2/- 6800 17000
30600
Overheads:
Administration & Selling Expenses 18200
Bad Debts @ Rs14/- 5600 23800
6800
Assume that administration and selling expenses remaining constant
a) Apply the 2005 prices and costs to the statistical table to show cumulatively for the first five
classes of customers the effect on profits of declining to accept orders in each class. Present your
answerincolumnarformin termsof contributionstooverheadsand profit lost, costs saved and the
total gain or loss.
b) Prepare a sample profit and loss account, similar to that shown and based on 10000 orders
received,assumingthatall ordersfromcustomerswith a credit rating of 20 and below are rejected.
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CASE STUDY – 2
A ltd is considering takeover of B Ltd and C Ltd. The financial data for the three companies are as
follows:
Particulars A Ltd. B Ltd. C Ltd.
Equity share capital of
Rs. 10 each
450 180 90

(Rs./million)
Earnings
(Rs./million)
90 18 18
Market price of each
shares (Rs.)
60 37 46
Calculate the:
a. Price-Earnings exchange ratios.
b. Earnings per Share of A Ltd after the acquisition of B Ltd and C Ltd separately.
c. Will you recommend the merger of either/both of the companies? Justify your answer.
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IMT-58 – MANAGEMENT ACCOUNTING
SECTION – A
Q1. Distinguish between Management accounting and Financial Accounting.
Q2. What are the methods by which semi variable cost can be split in its fixed and variable
elements?
Q3. Medical aid co. manufactures a special product “AID”. The following particulars were collected
for the year
1998:
Monthly demand of AID 1,000 units
Cost of placing an order Rs. 100
Annual carrying cost per unit Rs 15
Normal usage 50 units per week
Minimum usage 25 units per weed
maximum usage 75 units per week
re-order usage 4 to 6 week
Compute from the above :
a. re-order quantity
b. re-order level
c. minimum level
d. maximum level
Q4. What do you understand by JIT?
Q5. Explain the term administrative overheads and briefly discuss three methods of treatment
thereof in cost accounts.
SECTION – B
Q1. How does ABC differ from the traditional costing approach?
Q2. What is service costing? Describe the type of industries in which such a system would be
suitable.

Q3. Calculate the cost of each process and total cost production from the data given below:
Process x Process Y Process Z
Materials 2,250 750 300
Labour 1,200 3,000 900
Direct Expenses:
Fuel 300 200 400
Carriage 200 300 100
Work overhead 1,890 2,580 1,875
The indirect expenses Rs. 1,275 should be apportioned on the basis of wages.
Q4. What are the advantages of variable costing?
Q5. What do you mean by break-even analysis and explain its uses and applications?
SECTION - C
Q1. Explain advantages and limitations of budgeting.
Q2. What is transfer prices? What are different types of transfer prices?
Q3. Define expense centre. What is the suitability of the measure of performance in an expense
centre?
Q4. Differentiate between ‘sunk’ and ‘avoidable’ costs. What is the relevance of such a distinction
for short-run decisions?
Q5. The details regarding composition and the weekly wage rate of labour force engaged on a job
scheduled to be completed in 30 weeks are as follows:
Standard Actual
Category of No. of Weekly wage No. of Weekly wage
Workers Laborers Rate Laborers Rate
Skilled 75 60 70 70
Semi-skilled 45 40 30 50
Unskilled 60 30 80 20
The work is actually completed in 32 weeks. Calculate the various labour cost variances.
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CASE STUDY – 1
A Ltd. furnishes the following data relating to the year 2008.
1st half of the year 2nd half of the year
Sales (Rs.) 45,000 50,000
Total cost (Rs.) 40,000 43,000
Assumingthatthere isnochange inpricesand variable costandthat the fixedexpensesare incurred
equally in the two half year period, calculate-
1. P/V Ratio
2. Fixed expenses
3. Break even sales
4. Percentage of margin of safety to total sales.

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CASE STUDY - 2
Goodluck Ltd. is currently operating at 75% of its capacity. In the past two years, the level of
operationswere 5f5%and65% respectively.Presently,the production is 75,000 units. The company
is planning for 85% capacity level during 2013 – 2014. The cost details are as follows:
55% 65% 75%
Rs. Rs. Rs.
Direct Materials 11,00,000 13,00,000 15,00,000
Direct labour 5,50,000 6,50,000 7,50,000
factory overheads 2,00,000 2,00,000 2,00,000
Selling overheads 3,10,000 3,30,000 3,50,000
Administrative overheads 3,20,000 3,60,000 4,00,000
-------------- --------------- ----------------
24,40,000 28,00,000 31,60,000
-------------- --------------- ----------------
Profit is estimated @ 20% on sales.
The following increases in costs are expected during the year.
In percentage
Direct material 8
Direct labour 5
Variable selling overheads 8
Fixed factory overheads 10
Fixed selling overheads 15
Administrative overheads 10
Required:Prepare flexiblebudgetforthe period20X1 – 20X2 at 85% level of capacity. Also ascertain
profit and contribution
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