Unique Paper Code FMP20
Revised 0 of 6

Financial Management2020

B.Com (Programme) · 6 questions

Duration: 3.8 HoursMaximum Marks: 112.5

From an older CBCS paper

Reworded by Kunji from the printed paper. The original paper belongs to the University of Delhi. See DU's question bank.

Before you start

  1. Numbers and theory. 5 numerical parts and 1 theory parts. Numericals take longer to lay out, so give them your freshest time.
  2. Pace. Two minutes a mark: about 38 minutes for each 18.75-mark question, with nothing spare in 3.8 hours. Move on when the time is up.
  3. Keep score. Every part opens a worked answer checked against the books. Turn the key when you have revised it; the boxes at the top fill in, on this device.

1.

18.75 marks
· ~38 min
The three financial decisions and how they are interrelated"Financial management is concerned with solving the three major decisions that a firm must make." What are the three decisions, and how are they interrelated?(18.75)

2.

18.75 marks
· ~38 min
NPV and IRR rankings; choosing between two machinesCan the NPV and IRR methods result in different rankings of investment proposals? Why? The management of LMN Ltd. may buy either Machine A or Machine B. Machine A, at a cost of Rs. 1,08,000, has an expected life of 6…(18.75)

3.

18.75 marks
· ~38 min
MM as the justification of NOI; NOI valuation as debt risesExplain: for the NOI approach to Capital Structure theory, the 'Modigliani-Miller model' is the behavioral justification. A company's annual net operating income is Rs.10.8 lakhs, and it has Rs.48 lakhs 8% debentures.…(18.75)

4.

18.75 marks
· ~38 min
Market versus book value weights; WACC both waysComment: "Market value weights are superior to book value weights" MNO Ltd.'s capital structure is as below. Presently, the debentures trade at 90%, the preference shares at par, with Rs. 15 per share for the equity…(18.75)

5.

18.75 marks
· ~38 min
MM dividend irrelevance; why a stable dividend policy mattersRST Ltd. currently has 150 lakh equity shares outstanding, at a Current market price per share of Rs. 12. Its net income for the current year is Rs. 2.5 crore, and its investment budget is also Rs. 2.5 crore. The Cost…(18.75)

6.

18.75 marks
· ~38 min
Excess and shortage of inventory; gross working capitalExplain: "For a business firm, excess as well as shortage of inventory is not desirable". Estimate the gross working capital requirements of MNO Ltd., taking 3,600 units as its monthly sales level. A cash balance equal…(18.75)

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