DRIVE
Spring 2019
PROGRAM
MASTER OF BUSINESS
ADMINISTRATION- MBA
SEMESTER3
MBA FIN 301
SECURITY ANALYSIS &
PORTFOLIO MANAGEMENT
SET-1
Q.1
Explain the concept of Random Walk in the context of Efficient Market
Hypothesis.
Discuss
the concept of Random Walk.
10
Answer-
Random
Walk Theory-
EMH
is associated with the idea of a “random walk”. Random walk is a term used to
characterise a price series where all subsequent price changes represent random
deviations from previous prices. The logic of the random walk idea is that if
the flow of information is not hindered and if information is immediately
incorporated and reflected in the stock prices, it follows that tomorrow’s
security price will incorporate tomorrow’s news and security price changes
tomorrow will be independent of the price changes today. Since news by
definition is unpredictable and random, the resulting price changes must be
random too. The theory asserts that prices have no
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Q.2
Elucidate the concept of Efficient Frontier.
Discuss
on Efficient Frontier. 10
Answer-
Efficient
Frontier or Efficient Set-
Efficient
frontier represents the trade-off between risk and expected
return faced by an investor when forming his portfolio. Efficient frontier was
first defined by Harry Markowitz as part of his portfolio theory. The theory
considers a universe of risky investments and explores what might be an optimal
portfolio based upon investments in these risky securities. Assume a one-year
holding period for investment in these securities. Today's values for all the
risky investments are known
Q.3
Discuss on the issues in Beta Estimation.
Converse
on the issues in Beta Estimation 10
Answer-
Issues
in Beta Estimation
When
interpreting an estimate of beta, it is important to be aware of some practical
problems in estimation. Apart from econometric issues, there will be a
difference in the calculated beta depending on the following factors.
1.
The length of time over which the return is calculated (e.g. daily, weekly,
monthly)
2. The number of observations used
3.
The specific time period used
4.
The market
SET-II
Q.1 Discuss on International
Diversification
Converse on International
Diversification 10
Answer-
International
Diversification-
Investment of one's portfolio in securities that are
traded in various countries. This is done to reduce risk, often political risk.
For example, if one country's government announces a larger than normal budget
deficit, or the central bank raises interest rates, this may affect security
prices in one country, but not
Q.2 a. Distinguish between Business risk
and Financial Risk 5
b. Explain the stages in the Industry Life
Cycle 5
Answer-
Business
and financial risk-
Investors
look for a return that is relative to the perceived risk associated with the
company. The risk can be measured as variability of the company’s after-tax
cash flows. A company’s overall risk has two components – business risk and
financial risk.
Business
risk is
uncertainty about future operating income or earnings before interest and tax
(EBIT). This is the risk attributable to the composition of the company’s
assets. Factors affecting business risk are:
·
sensitivity
of company sales to general economic conditions
·
industry
conditions including competition, growth prospects, and the company’ ability to
affect its selling and input prices
·
Company
characteristics including size of the company, management, and operating
leverage. Operating
·
Q.3 Often there are discrepancies between
market price and intrinsic value due to behavioural influence of the investors.
Explain the various Market inefficiency
causing Discrepancies.
Answer:
Market
Inefficiency
There
are discrepancies between market price and intrinsic value often due to
behavioural influence of the investors. The two assumptions are:
1.
Some
investors are not rational as their demand for risky assets is influenced by
beliefs or sentiments that are not fully supported by fundamentals. These types
of investors are termed as noise traders.
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DRIVE
SPRING
2019
PROGRAM
MASTER
OF BUSINESS ADMINISTRATION (MBA)
SEMESTER
III
SUBJECT
CODE & NAME
FIN302
– MERGERS AND ACQUISITIONS
SET
– I
Q 1. Explain the criteria which
All-India level financial institutions and banks follows for basis for arriving
at fair price.
Explanation of the criteria which
All-India level financial institutions and banks follows for basis for arriving
at fair
price.
Answer:-
Basis
for arriving at fair price
All-India
level financial institutions and banks follow the following criteria for
calculating the fair value.
1. Past record
of the company: The fair price is worked out on the basis of the track
record of the company, using three key elements.
(i)
The break-up value per
Q 2. List and Explain the basics Steps
in Organizing a Merger.
Explanation of the basics Steps in
Organizing a Merger.
Answer:-
Step 1:
Pre-acquisition review
Step 2: Searching and
screening of target acquisitions
Step 3: Valuation of
the target company
Step 4: Negotiation
Step 5: Post-merger
integration
a) Explanation of basic steps in organizing a
merger:
Mergers and
acquisitions are normally decided after thorough examination of all facts and
aspects. Like capital budgeting decisions, these are difficult to reverse once
they are put through, and so the organisation has to be meticulous. The steps
in an exercise of organising an acquisition are as follows:
Q
3. Differentiate between Master limited
partnerships (MLPs) and Employee Stock Ownership Plans (ESOP).
Difference between Master limited
partnerships (MLPs) and Employee Stock Ownership Plans (ESOP).
Answer:
Master
limited partnerships
Master
limited partnerships (MLPs) are limited partnerships dealing with
publicly-traded shares. The limited partnership interests are divided into
units which are traded as shares of common stock. Units are shares of ownership.
The operations of MLPs are generally in natural resources (petroleum and
SET
– 2
Q1. Explain the structure of
Management Buyouts (MBO).
Structure of MBO.
Answer:
Structure of a MBO:
The following points are often included:
1.
Business Plan Development: It is very crucial that the MBO team clearly
understands the aim it wants to achieve and the way it plans to achieve it. The
financial projections of the company, the team’s strategy to
Q2. Explain the key provisions
under the listing agreement.
Explanation of the key provisions
under the listing agreement.
Answer:
Mergers
In
cases where shares are listed on stock exchanges, the listing agreement
requires companies to make relevant and timely disclosure of price-sensitive
information. Any decision taken in respect of merger is included in such
information.
Acquisition
The
provisions of takeover regulation apply in cases involving substantial
acquisition of shares in a company
Q3. List and Explain the Five Rules
of Integration Process.
Explanation of the Five Rules of
Integration Process.
Answer:
Explanation of Five rules of Integration Process.
1. Starting the post merger integration (PMI)
process early: The integration
effort should start much before the deal is closed and the contracts
signed; in fact
to this extent, the expression ‘post merger’ is itself a misnomer. It is
essential to consider PMI issues at the very initial stage and plan
meticulously while choosing the target company. The main advantage is the
preparedness for potential risks and challenges. It also helps in evaluating
the target company’s culture. This is also confirmed by the findings of
Parenteau and Weston (2003).
2.
The integration manager: A due diligence team (from areas like HR, finance,
tax, technology etc.) and one or more top managers are responsible for the
acquisition. This team, which is involved in the acquisition, achieves the best
insight into the target company. However, the team is either dissolved or moved
to the next acquisition. The manager of the acquiring business unit has the
charge of
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DRIVE
Spring 2019
PROGRAM
MBA
SEMESTER
3
SUBJECT CODE &
NAME
FIN 303
TAXATION
MANAGEMENT
Note:
Answer all questions. Kindly note that answers for 10 marks questions should be
approximately of 400words. Each question is followed by evaluation scheme.
Q1.Explain the objectives of tax planning.
Discuss the factors to be considered in tax planning.
(Objectives
of tax planning, Factors in tax planning) 5,5
Answer-1
Objectives
of Tax Planning
The
prime objectives of tax planning are:
Multi-dimensional investment decisions: In a democratic welfare state
like India the government requires substantial investment in infrastructure,
education and healthcare. The tax laws give attractive benefits to investors in
these areas; and by taking up these investments one can contribute to
nation-building and at the same time enjoy normal returns on one’s
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Q2. Mr. C acquired a plot of land
on 15th June, 2007 for Rs.10,00,000 and sold it on 5th January, 2016
for Rs.41,00,000. The expenses of transfer were Rs.1,00,000.
Mr. C made the following
investments on 4th February, 2016 from the proceeds of the plot.
a) Bonds of Rural Electrification
Corporation redeemable after a period of three years, Rs.12,00,000
b) Deposits under Capital Gain
Scheme for purchase of a residential house Rs.8,00,000 (he does not own any
house)
Compute the capital gain
chargeable to tax for the AY2016-17.
A)
Categories of capital assets
B)
Indexed cost of acquisition
C)
Long term capital gain
D)
Taxable long term capital gain
Answer:
Assessment
Year 2016-17
Q3.
Explain
major considerations in capital structure planning. Write about the dividend
policy and factors affecting dividend decisions.
A) Factors of capital structure planning
B) Dividend policy
C) Factors Affecting dividend decisions
Answer-3
Major
considerations in capital structure planning
Broadly,
the following factors would be worth considering, while planning the capital
structure.
1.
Risk of two kinds, that is,
financial risk and business risk: In the context of capital
structure planning, financial risk is more relevant.
2.
Cost of capital: Cost of
capital is an important consideration in capital structure decisions. It is
obvious that a business should be at least capable of earning enough revenue to
meet its cost of capital and finance its growth.
3.
Control: Along with cost
SET
2
Q1.X Ltd. has Unit C which is not functioning
satisfactorily. The following are the details of its fixed assets:
The
written down value (WDV) is ` 25 lakh for the machinery, and15 lakh for the
plant. The liabilities on this Unit on 31st March, 2016 are35 lakh.
The
following are two options as on 31st March, 2016:
Option
1: Slump sale to Y Ltd for a consideration of 85 lakh.
Option
2: Individual sale of assets as follows: Land ` 48 lakh, goodwill ` 20 lakh, machinery
32 lakh, Plant 17 lakh.
The
other units derive taxable income and there is no carry forward of loss or
depreciation for the company as a whole. Unit C was started on 1st January,
2005.Which option would you choose, and why?
(Computation
of capital gain for both the options, Computation of tax liability for both the
options, Conclusion) 4,4,2
Answer-
Option
1: Slump sale
Computation
of net worth of Unit C
|
(in
lakhs)
|
Land
(book value)
|
30
|
Q2.
Explain
the Service Tax Law in India and concept of negative list. Write about the
exemptions and rebates in Service Tax Law.
A) Service Tax Law in India
B) Concept of negative list
C) Exemptions and rebates in Service Tax Law
Answer-
Service
Tax Law in India
Service
tax was introduced in India in 1994 by Chapter V of the Finance Act,1994. It
was imposed on an initial set of three services in 1994 and the scope of the
service tax has since been expanded continuously by subsequent Finance Acts.
The
new section 65B introduced in the Finance Act, 2012 defines services in Clause
44.In 2012, and there has been a paradigm shift in
Q3.What do you understand by customs duty?
Explain the taxable events for imported, warehoused and exported goods. List
down the types of duties in customs
An
importer imports goods for subsequent sale in India at $10,000 on assessable
value basis. Relevant exchange rate and rate of duty are as follows:
Particulars
|
Date
|
Exchange
Rate Declared
by CBE&C
|
Rate of
Basic Customs
Duty
|
Date of
submission
of bill of entry
|
18
March 2016
|
67.45/$
|
7.5%
|
Date of
entry
inwards
granted to
the vessel
|
8 April 2016
|
` 67.50/$
|
7.5%
|
Calculate
assessable value and customs duty.
(Meaning
and explanation of customs duty, Explanation of taxable events for imported,
warehoused and exported goods, Listing of duties in customs, Calculation of
assessable value and customs duty) 2, 3, 2, 3
Answer-
Meaning and explanation of
customs duty
Customs
duty is the duty imposed on goods imported into the country. In the years
before globalization it was difficult to import goods on account of stiff duty
rates and procedures, especially for less developed and developing nations like
India. A joke used to be that the word ‘customs’ was said to come from Sanskrit
‘kashtam’ meaning difficulty. But the
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ASSIGNMENT
DRIVE
SPRING 2019
PROGRAM
MBA
SEMESTER
III
SUBJECT
CODE & NAME FIN304- Internal Audit and Control
SET-I
Q. 1 What do you understand by Financial Audit? Discuss
various Advantages of Financial Audit.
Meaning of Financial Audit 4
Advantages of Financial Audit. 6
Answer:
Meaning of Financial Audit
:
According to Ronald Irish “Auditing in its modern concept is
a scientific and systematic examination of books, vouchers and other financial
and legal records in order to verify and report upon the facts regarding the
financial condition disclosed by the balance sheet and the net income revealed
by the profit and loss account.” In the above definitions, the focus is on
examination of the financial records and reporting thereon. But over time
auditing has extended to costing records, operational data and
Q.2 Explain Code of Ethics for the Internal Auditor.
A Code of Ethics for the Internal Auditor 10
Answer:
Code of Ethics for the Internal Auditor :
The code of ethics that govern an internal auditor at two
levels – the profession and the company. “This code of ethics sets the minimum
requirements for the performance and conduct of internal auditors. This code
applies to all internal auditors but does not supersede or replace the
requirement on individual to comply with ethical codes issued by professional
institutes of which they are members
Q.3 Define the Importance of Internal Audit Planning. Also
explain different factors to be considered in Internal Audit Planning
Importance of Internal Audit Planning. 4
Factors to be considered in Internal Audit Planning 6
Answer :
Importance of Internal Audit
Planning :
Planning the internal audit programme is the key to
effective and efficient internal audit. Effectiveness means attainment of the
internal audit objectives and efficiency means conduct of the audit with the
maximum utilisation of the internal audit resources. Thus planning results in
the high returns
SET-II
Q.1 What are the
Advantages of Internal Check? Elucidate various Principles of an Effective
Internal Check System.
Advantages of Internal Check 5
Principles of an Effective Internal Check System. 5
Answer :
Advantages of Internal Check :
1. Clear
definition of responsibility: Internal
check system ensures a proper division of responsibilities among the employees
of an organisation. As responsibilities are well-defined, it becomes easier for
management to
2 Explain Internal control system in Bank & Insurance
Companies
Internal control
system in Bank 5
Internal control system in Insurance Companies 5
Answer :
Internal control system in Bank :
Different factors influence the internal control structure
of any organisation: size, complexity and risk profile of its operations. In
this regard an effective internal control system for a bank should consider the
following aspects:
1. Control
environment: Control
environment is the foundation of an internal control system. It includes and
reflects the
Q.3 Discuss important
features of a good internal audit report.
A Features of a good internal audit report 10
Answer :
Features of a Good Internal Audit
Report :
The Internal Auditor’s report contains conclusions and
recommendations on the activities audited, to be accepted and acted upon by the
management. The management may also use the report to evaluate the performance
of the internal auditor. The contents of an internal audit report are
influenced by the way the internal auditing function has been envisaged in the
organisation, the level of the
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