MBA – II Semester

MB0029- Financial Management – 3 Credits

Book ID (B0911)

Assignment Set 1 – (60 Marks)

Note: Answer all the questions. Each question carries 10 marks

1. Explicit cost and Implicit cost are the two dimensions of cost. What role does cost play in
financial decisions.
2. Assume you are newly appointed as Finance Executive in a Manufacturing firm. What
guidelines you need to follow in financial planning?
3. Due to over capitalization the company may collapse which would certainly affect its
employees, society, consumers and its shareholders. What remedies you would suggest?
Give suitable example.
4a. Mr. Avinash aged 40 years, needs 50000 after 5 years. If the interest rate is 10% how much
should he save now to get Rs.50000 at the end of 5 years

4b. A Senior citizen intents to deposit Rs.1000 annually in ICICI bank for 3 years. The prevailing
interest rate is 10%. What is the maturity value of the deposit?

5. Explain various types of bonds.

6. Sushma Industries wishes to issue bonds with Rs.100 as par value, 5 years to maturity,
coupon rate 11% and YTM of 11%.
a. What is the value of the bond?
b. If the YTM is 10% what would be the value of the bond?
c. If the YTM is 13% what is the value of the bond
 MBA – II Semester

MB0029- Financial Management – 3 Credits

Book ID (0911)

Assignment Set 2 – (60 Marks)

Note: Answer all the questions. Each question carries 10 marks

1. Is Equity Capital Free of cost? Substantiate your statement.

2. a. What is the rate of return for a company if the β is 1.25, risk free rate of return is 8%
and the market rate of return is 14%. Use CAPM model. (3 Marks)
b. Sundaram Transports has the following capital structure.
Equity capital Rs.10 par value 250 lakhs
12% preference share capital Rs.100 each 100 lakhs
Retained earnings 150 lakhs
12% Debentures (Rs.100 each) 350 lakhs
14% Term loan from SBI 150 lakhs
Total 1000 lakhs
The market price per equity is Rs 54. The company is expected to declare a dividend per
share of Rs.2 per share and there will be a growth of 10% in the dividends for the next
5 years. The preference shares are redeemable at a premium of Rs.5 per share after 8
years. The current market price of preference share is Rs.92. Debenture redemption will
take place after 7 years at a discount of 2% and the current market price is Rs.91 per
debenture. The corporate tax rate is 40%. Calculate WACC. (7 Marks)
3. The effective cost of debt is less than the actual interest payment made by the firm. Do
you agree with this statement? If yes/no substantiate your views.
4. Why capital budgeting decision very crucial for finance managers?
5. A road project require an initial investment of Rs.10,00,000. It is expected to generate
the following cash flow in the form of toll tax recovery.
Year Cash Inflows
1 4,50,000
2 4,25,000
3 3,00,000
4 3,50,000

What is the IRR of the project?

6. What is sensitivity analysis? Mention the steps involved in it.