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PROGRAM
MASTER OF BUSINESS ADMINISTRATION
(MBA)
SEMESTER
II
SUBJECT CODE & NAME
MB0045 – FINANCIAL MANAGEMENT
Qus:1 Explain Investment Decision
and Liquidity Decisions.
Answer:
To survive and grow, all
organisations have to be innovative. Innovation demands managerial proactive
actions. Proactive organisations continuously search for innovative ways of
performing the activities of the organisation. Innovation is wider in nature.
It could be:
Qus:2 Explain Cost Theory and
Earnings theory. Also, the merits and demerits of both theories.
Answer: Cost theory
Under this theory, the total amount of capitalisation for a
new company is the sum of:
Cost of fixed assets
Cost of
Qus:3 Explain
Operating Leverage and its classifications
Answer:
Operating leverage arises due to the
presence of fixed operating expenses in the firm’s income flows. It has a close
relationship to business risk. Operating leverage affects business
Qus:4 There are two firms, A and B,
similar in all aspects except in the degree of leverage employed by them.
Financial data for these firms are given below: Calculate average cost of
capital for both the firms. Details of Firms A and B
Answer:
|
Amount (in Rs.)
|
Firm A
|
Firm B
|
|
Net operating income
|
10,000
|
10,000
|
|
Interest on debt
|
0
|
3,000
|
|
Equity earnings
|
10,000
|
7,000
|
|
Cost of equity capital
|
10%
|
10%
|
|
Cost of debt capital
|
6%
|
6%
|
|
Market value of equity
|
100,000
|
70,000
|
|
Market value of debt
|
0
|
50,000
|
|
Total value of firm
|
100,000
|
120,000
|
Average
cost of capital for Firm A
Average
cost of capital for Firm B
Answer:
|
Amount (in Rs.)
|
Firm A
|
Firm B
|
|
Net operating income
|
10,000
|
10,000
|
Qus:5 The
below table describes the cash inflows of three projects. Compute the NPV and
profitability index of all the three projects and rank them on the basis of
capital rationing. Cost of Capital is 15 %
Details of the Projects Cash
Inflows
|
Project
|
Initial Cash outlay
|
Year 1
|
Year 2
|
Year 3
|
|
A
|
1,00,000
|
60,000
|
50,000
|
40,000
|
|
B
|
50,000
|
20,000
|
40,000
|
20,000
|
|
C
|
50,000
|
20,000
|
30,000
|
30,000
|
Answer:
Table
shows the NPV computation for project A.
Qus:6 Explain
the costs associated with maintaining receivables
Answer: There are four different varieties of costs associated with
maintain ingreceivables: capital cost, administration cost, delinquency cost
and bad debts or default cost. Figure 14.1 depicts the costs
Get
fully solved assignment. Buy online from website
online
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or
plz
drop a mail with your sub code
we
will revert you within 2-3 hour or immediate
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if urgent then call us on 08791490301,
08273413412
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