Financial Management-1

Assignment A

Q1. What is stock split, What are its advantages?

Q2. Discuss the techniques of inventory control.

Q3. Examine risk adjusted discount rate as a technique of incorporating risk factor in capital budgeting.

Q4.Critically examine the pay back period as a technique of approval of projects.

Q5.Examine the relationship of financial management with other functional areas of finance

Assignment B

1. What are the assumptions of MM (Modigliani Miller) approach?

2. Summaries the features of DCF (Discounted cash flow) technique.

3. Examine the type and sources of risk in capital budgeting.

Instead of Case Study you need to solve the below Question

4.[a] Deepak steel has issued non convertible debentures for Rs.5 Cr. Each debenture is of par value of Rs.100, carrying a coupon rate of 14%, interest is payable annually and they are redeemable after 7yrs at a premium of 5 %. The company issued the Non convertible debentures at a discount of 3 %. What is the cost of debenture to the company? Tax rate is 40%.

[b] Supersonic Industries Ltd. has entered into an agreement with Indian Overseas bank for a loan of Rs.lOCr. with an interest rate of 10%. What is the cost of loan if the tax rate is 45%?

Assignment – C

1. We all live under conditions of__________ and____________ .

a) Risk, return

b) Risk, uncertainty

c) Return, premium

d) Uncertainty, premium

2. Find the present value of Rs.1,00,000 receivable after 10 yrs.if 10% is time preference for money,
a) 38400

b) 38500

c) 38600

d) 38700

3 What is the future value of a regular annuity of Re. 1 earning a rate of 12% interest p.a. for 5 Years?

a) 5.353

b) 6.353

c) 7.353

d) 7.153

4.1f a borrower promises to pay Rs.20000 eight years from now in return for a loan of Rs.12550 today, what is the annual interest being offered?

a) 6% approx

b) 7% approx

c) 8% approx

d) 9% approx

5. Aloan of Rs.5,00,000 is to be repaid in 10 equal instalments. If the loan carries 12% interest p.a.. What is the value of one installment?

a) 68492

b) 78492

c) 88492

d) 98492

6 If you deposite Rs.10,000 today in a bank that offers 8% interest, in how many years will this amount
double by 72 rule?

a) 9 b) 8 c) 7 d) 6

7 An employee of a bank deposits Rs.30,000 into his FD A/c at the end of each year for 20 yrs. What is the
amount he will accumulate in his FD at the end of 20 years, if the rate of interest is 9%.

a) 1534800

b) 1535000

c) 1535200

d) 1535400

8 _________ decisions could be grouped into two categories.

a) Make or buy

b) Capital budgeting

c) Fixed capital

d) Working capital

9._________ and revenue generation are the two important categories of capital budgeting.

a) Cost reduction

b) Production

c) Investment

d) dividend

10.______ appraisal examines the project from the social point of view.

a) Financial

b) Cost

c) Economic

d) Technical

11.A11 technical aspects of the implementation of the project are considered in_______ appraisal.

a) Financial

b) Cost

c) Economic

d) Technical

12._______ of a project is examined by financial appraisal.

a) Financial viability

b) Cost viability

c) Economic viability

d) Technical viability

13.Among the elements that are to be examined under commercial appraisal, the most crucial one is the

a) Supply of the product

b) Demand for the product

c) Cost of the product

d) Elements of cost

14. Formulating is the third step in the evaluation of investment proposal,
a) No

b)Yes

15. A_______ is not a relevant cost for the project decision.

a) Sunk cost

b) Direct cost

c) Indirect cost

d) Works cost

16. Effect of a project on the working of other parts of a firm is known as__________ .

a) Separation principal

b) Formulation

c) Externalities

d) After effects

17.The essence of separation principal is the necessity to treat___________ elements of a project separately

from that of________ elements.

a) Production, operations

b) Financing, production

c) Investment, financing

d) Investment, production

18. Payback period____________ time vlue of money.

a)Ignores

b) Considers

c) None of the above

19. IRR gives a rate of return that reflects the____________ of the project.

a) Cost

b) Profitability

c) Cash inflows

d) Cash outflows

20. The methods of appraising an investment proposal can be grouped into________ methods and_________

methods.

a) Traditional, modern

b) Primary, secondary

c) First, second

d) old, new

21.The time gap between acquisition of resources from suppliers and collection of cash from

customers is known as_______ .

a) Financial year

b) Calendar year

c) Operating cycle

d) Current cycle

22._______ is the average length of time required to produce and sell the product.

a) Inventory period

b) Stock cycle

c) Inventory conversion period

d) None of the above

23._______ is the average length of time required to convert the firm’s receivables into cash.

a) Receivables period

b) Receivables cycle

c) Receivables conversion period

d) None of the above

24.__________ is length of time between firm’s actual cash expenditure and its own receipt.

a) Cash conversion period

b) Cash cycle

c) Cash period

d) Cash and bank cycle

25. Capital intensive industries require___________ amount of working capital.

a) Lower

b) Medium

c) Higher

d) None of the above

26. There is a___________ between volume of sales and the size of working capital of a firm.

a) Positive direct correlation

b) Negative direct correlation

c) Negative indirect correlation

d) Positive indirect correlation

27.Under inflationing conditions same level of inventory will require____________ investment in working

capital.

a) Decreased

b)Increased

c) Same

d) zero

28. Longer the manufacturing cycle______ the investment in working capital.

a) Larger

b) smaller

29._________ is used to estimate working capital requirement of a firm.

a) Trend analysis

b) Risk analysis

c) Capital rationing

d) Operating cycle

30. Operating cycle approach is based on the assumption that production and sales occur on______________

a) Continuous basis

b) Alternate basis

c) Alternate & Continuous basis

d) None of the above

31._________ is considered to be superior to RADR.

a)IRR b)NPV

c) CE D)PI

32._________ analyse the changes in the project NPV on account of a given change in one of the input

variables of the project.

a) Sensitivity analysis

b) Profitability Index

c) Project evaluation

d) Risk analysis

3 3.Examining and defining the mathematical relation between the variable of the NPV is one of the steps
of_________ .

a) Sensitivity analysis

b) Profitability Index

c) Project evaluation

d) Risk analysis

34.Forecasts under Sensitivity analysis are made under different_____________ .

a) Political conditions

b) Economic conditions

c) Industry conditions

d) Regional conditions

35. Receiving a required inventory item at the exact time needed,
a) ABC

b)JIT c)FOB d) PERT

36. Post completion audit is__________ in the phases of capital budgeting decisions.

a) First Step

b) Last step

c) Middle step

d) None of the above

37. Why is a discount rate used to calculate net present value?

a) Money has value

b) Money has enhancing value

c) Money has diminishing value

d) Money has constant value

38. What does net present value give?

a) future values of present cash flows

b) present value of present cash flow

c) present value of future cash flows

d) future values of future cash flows