M.B.A-M.B.A Finance 2nd Year FINANCIAL MANAGEMENT(Acharya Nagarjuna University (ANU), Guntur, Andhra Pradesh-2012)

EXECUTIVE M.B.A. DEGREE EXAMINATION, MAY 2012.
First and Second Year
Paper VII – FINANCIAL MANAGEMENT
Time : Three hours Maximum : 75 marks
SECTION A — (3 × 5 = 15 marks)
Answer any THREE of the following.
1. (a) Financing decision
(b) Concept of money market
(c) Post-payback profitability
(d) EPS
(e) Net operating income approach
(f) Cost of retained earnings.
SECTION B — (3 × 15 = 45 marks)
Answer any THREE questions.
2. Explain the impact of dividend policy on share valuation.
3. What are the evils of excess working capital?
4. Enumerate the techniques employed for cash management.
5. State the approach used for valuation of bonds.
6. Elucidate the considerations while estimating working capital.
7. Bring out the determinants of optimum capital structure.
SECTION C — (15 marks)
(Compulsory)
8. A small-sized company is considering methods to finance its establishment. Initially Es. 2,00,000 will be needed. The company is considering two proposals for the purpose :
(a) Issue 10%debentures of Rs. 1,00,000 and issue of 1,000 equity shares of Rs. 100 each
(b) Issue of 2,000 equity shares of Rs. 100 each. The corporate tax rate is 50%.
(i) Compute the in difference point of the above proposed two financial plans.
(ii) Show that indifference point computed in (a) above is correct.
(iii) Compute EPS under the two proposed financial plans if EBIT is Rs. 30,000
and Rs. 40,000. How do you explain the differences in your results?
(iv) Prepare an EBIT-EPS chart for EBlT ranges of Rs. 20,000 to 80,000 with an
interval of Rs. 10,000.