SMU MBA SUMMER 2015 ASSIGNMENTS, SMU MBA SEM 1 SUMMER 2015 ASSIGNMENTS, SMU MBA ASSIGNMENTS, SMU SOLVED ASSIGNMENTS, smu assignments

1. ASSIGNMENT
ASSIGNMENT
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 Critically analyze the four broad areas of strategic financing decision.
Four broad areas of strategic financing decision 10 10
2 What is FVIFA ? Is it different from Sinking fund factor ?
A finance company offers to pay Rs. 44,650 after five years to investors who deposit
annually Rs. 6,000 for five years. Calculate the rate of interest implicit in this offer.
What is FVIFA ? Differentiate FVIFA and Sinking Fund factor
Solve the case
5
5
10
DRIVE SUMMER 2015
PROGRAM MBA/ MBADS/ MBAFLEX/ MBAHCSN3/ PGDBAN2
SEMESTER II
SUBJECT CODE &
NAME
MB0045
FINANCIAL MANAGEMENT
BK ID B1628
CREDITS 4
MARKS 60
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2. 3 A firm owns a machine furnishes the following information :
Rs.
Book value of the machine 1,10,000
Current market value 80,000
Expected salvage value after the end of five years of
remaining useful life
NIL
Annual cash operating costs 36,000
The firm’s cost of capital 15 %
Corporate tax rate 35 %
The firm follows straight line method of depreciation (permitted by the Income-tax
authorities).
The management of the company is now considering selling of the machine. If it does
so, the total operating costs to perform the work, now done by the machine, will
increase by Rs. 40,000 p.a.
Advise the management.
Solve the case. 10 10
4
How will you compute the cost of equity capital using CAPM ?
The Xavier Corporation, a dynamic growth firm which pays no dividends, anticipates a
long-run level of future earnings of Rs. 7 per share. The current market price of
Xavier’s share is Rs. 55.45. Floatation costs for the sale of new equity shares would
average about 10 % of the price of the shares. What is the cost of new equity capital to
Xavier Corporation ?
How will you compute the cost of equity capital using CAPM ?
Solve the case
5
5
10

3. 5 Jharkhand Mining ltd. has to select one of the two alternative projects whose
particulars are furnished below :
Project E Project F
Rajrappa,
Hazaribagh
Tatisilwai,
Ranchi
Rs. Rs.
Initial Outlay 11,87,200 10,06,700
Net Cash Inflow :
End of year 1 10,00,000 1,00,000
2 2,00,000 1,00,000
3 1,00,000 2,00,000
4 1,00,000 10,00,000
The company can arrange necessary funds @ 8 %. Compute the NPV and IRR of each
project and comment on the results.
Is there any contradiction in the results ? If so, state the reason for such
contradictions. How would you propose to resolve the contradictions ?
Solve the case 10 10
6
Premier Steel Ltd. has a present annual sales turnover of Rs. 40,00,000. The unit sale
price is Rs. 20. The variable costs are Rs. 12 per unit and fixed costs amount to Rs.
5,00,000 per annum. The present credit period of 1 month is proposed to be extended to
either 2 or 3 months whichever is profitable. The following additional information is
available :
Credit period 1 month 2 months 3 months
Increase in sales by -- 10 % 30 %
Bad debts on sales 1 % 2 % 5 %
Fixed costs will increase by Rs. 75,000 when sales increase by 30 %. The company
requires a pre-tax return on investment of 20 %.
Evaluate the profitability of the proposals and recommend the best credit period for the
company.
Solve the case 10 10