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Unique Paper Code 7507

Revised 0 of 20

Financial ManagementDecember 2025

B.Com (Programme) · 5 questions

Duration: 3 HoursMaximum Marks: 90

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

Before you start

Most asked here. Working capital (11 papers), Dividend theories and dividend policy (11 papers), Cost of capital (11 papers). These come back almost every year, so learn them first. The asked N× note beside each part counts the DU papers that set its topic.
Numbers and theory. 11 numerical parts and 9 theory parts. Numericals take longer to lay out, so give them your freshest time.
Pace. Two minutes a mark: about 36 minutes for each 18-mark question, with nothing spare in 3 hours. Pick your side of each OR before you start writing.
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 marks
· ~36 min

(a)Wealth maximisation and sustainable value; future value of an annuityasked 9×Explain the way in which wealth Maximisation emphasises sustainable value creation for shareholder. Suppose Mr Kunal puts a four-year annuity of ₹3,600 per year into a bank account paying 7% interest, compounded yearly.…(9)

(b)Operating risk and financial risk, and their measurement by leverageasked 8×Differentiate between the Operating risk and the Financial risk of a firm. How are these risks measured by leverage analysis?(9)

OR

(a)The goal of financial management and the role of the time value of moneyasked 10×Explain what the goal of Financial Management is. How does applying the Time Value of Money enable managers and analysts to take informed, ethical, and long-term decisions which ensure that wealth is created…(9)

(b)Leverages of Delta Limited and the effect on EPS of a 7% rise in salesasked 8×Consider the given information for Delta Limited Calculate the different type of leverages. Calculate the percentage change in earning per share. In case sales increases by 7%.(9)

2.

18 marks
· ~36 min

(a)Three discounting techniques of capital budgetingasked 11×Explain any three discounting techniques of capital budgeting.(9)

(b)Should the existing machine be replaced?asked 6×A machine is purchased six years ago for ₹1,80,000 has been depreciated to a book value of ₹1,08,000. It originally had a projected life 15 years (salvage nil). It is proposed to replace this machine. A new machine will…(9)

OR

(a)Payback period and NPV of Corvus Limited's proposalasked 11×Corvus Limited is considering an investment proposal that requires an initial investment of ₹60,000. The project's estimated life is five years, with no scrap value. The company uses the straight line method of…(9)

(b)The IRR method, and why NPV and IRR can conflictasked 11×Explain the IRR method of capital budgeting decision. Why the NPV and IRR techniques lead to a conflict in project ranking?(9)

3.

18 marks
· ~36 min

(a)MM with tax: value and WACC of firms U and Lasked 10×Companies U & L are alike in every respect, except that the former uses no debt in its capital structure, while the later employees ₹12,00,000 of 8% debt. Assuming that all the assumptions of the Modigliani Miller…(9)

(b)Net operating income approach: value and cost of equityasked 10×A company's expected annual net operating income is ₹6,00,000. It has ₹36,00,000 of 10% debentures. The overall, cost of capital is 12.5%. According to the NOI approach, calculate the value of the firm and the cost of…(9)

OR

(a)Traditional approach: costs of debt and equity and the overall cost of capitalasked 10×What happens, under the Traditional Approach to capital structure, to the cost of debt and the cost of equity as leverage increases? Describe how the overall cost of capital behaves.(9)

(b)WACC on book value and market value weightsasked 11×The capital structure of Vega Limited is given below Currently the Debentures are being traded at 94%, while Preference shares at par and equity shares at ₹13 per share. Using book value weights and market weights, find…(9)

4.

18 marks
· ~36 min

(a)MM: price, new shares and total market value of Medilife Pharmaasked 11×Medilife Pharma Ltd currently has outstanding 1.2 lakh equity shares, Current market price per share is ₹20. The current year's net income is ₹2.4 Lakhs, and the investment budget is also ₹2.4 Lakhs. The cost of equity…(9)

(b)'A bird in hand is better than two in the bush' and Gordon's theoryasked 11×In the context of Gordon's Dividend Theory of valuation, discuss how relevant the proverb "A bird in hand is better than two in the bush" is.(9)

OR

(a)Market value of the shares and the optimal payout under Walterasked 11×Determine the market value of the company's equity shares from the information below : Earnings – ₹24,00,000 Dividend paid – ₹14,40,000 Number of shares outstanding – 4,80,000 Price-Earning ratio – 8 Rate of return on…(9)

(b)MM: how arbitrage makes dividend policy irrelevantasked 11×Describe how, in the Modigliani-Miller Model, the arbitrage process shows that dividend policy does not affect the value of the firm.(9)

5.

18 marks
· ~36 min

(a)Working capital management: importance, contrast with capital budgeting, deficiency and excessasked 11×Discuss what working capital management is and why it is important. How does it differ from capital budgeting? What possible effects follow for a firm that experiences (i) a deficiency of working capital (ii) an Excess…(9)

(b)Net operating cycle, number of cycles and working capitalasked 11×Using the information given below, calculate the figures required (i) Period of the net operating cycle (ii) Number of operating cycles in one year (iii) The working capital amount Period covered – 360 days Average…(9)

OR

(a)A liberal credit policy: advantages and disadvantagesasked 6×What does a liberal credit policy mean? Analyze the advantages and disadvantages of adopting such a policy.(9)

(b)Should the credit period be doubled?asked 6×A company sells goods at ₹10 per unit, with a variable cost of ₹4 and fixed cost of ₹6,00,000 per year. Its present annual sales are ₹30,00,000. If the credit period is doubled from one month to two months and this…(9)

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