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FINANCIAL MANAGEMENT

MASTER OF COMMERCE


Term-End Examination


June 2010


MCO-07: FINANCIAL MANAGEMENT


Time: 3 hours                                                                                  Maximum Marks 100


 

Note :         Attempt any five questions. All questions carry equal marks.

  1. What are the basic financial decisions? In what ways is the wealth maximization objective superior to the profit maximization objective? Explain.                                                      20



  1. (a) Explain the mechanics of calculating the present value of cash flows ?                          10


(b) Mr Y deposited of the end of each year Rs. 500, Rs.900, Rs. 1400, Rs. 1900, Rs. 2400, in his              bank account for 5 years, 1 to 5 respectively. Calculate his future value of series of deposits if the bank pays 5 percent compound rate of interest.                                                                        10

  1. (a) In capital Budgeting, discuss how the project selection is done under conditions of uncertainty ?                                                                                                                                      10


(b) What is NPV? Discuss the steps involved in computation of NPV.                                                 10

  1. (a) What is an ordinary share? How does it differ from a preference share and a debenture? Explain its most important features.                                                                                     12


(b) Briefly explain the different forms of Lease Finance.                                                                    8

  1. (a) What are the recent developments in capital markets in India ?                                        10


(b) What is Project Financing? Discuss in brief the requirements for Project Financing.                       10

  1. (a) Calculate the degree of operating leverage, the degree of financial leverage and the degree of combined leverage for the following firms and interpret the result.                                         12
















Output (Units)Fixed cost (Rs.)Unit variable Cost (Rs.)

Interest expenses (Rs.)

Unit Selling price (Rs.)		PQR
300,000350,0001.00

25,000

3.00		75,000700,0007.50

40,000

25.00		500,00075,0000.10

Nil

0.50

(b) What is buy back of shares? What is the rationale behind it ?                                    8

  1. (a) What do you understand by Optimum Cash Balance ?                                    8



  • What is Securitisation? Discuss the role of Special Purpose Vehicle (SPV) ?          12



  1. (a) What are the sources of working capital finance?Discuss.                             10


(b)  Based on the following information. Determine reorder level, minimum level, maximum              level and average stock level.                                                                                    10

Normal usage - 100 units per week,

Lead time      -  4 to 6 weeks.

Minimum usage - 50 units per week,

Maximum usage - 150 per week,

Reorder Quantity - 600 units.

  1. Write explanatory notes on any two of the following:                                       10+10



  • Foreign Exchange Exposure.

  • Dividend Policy.

  • Bower's Model of Investment Decision.

  • Capital budgeting process.

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