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14 (COM-2) 2.9A
2017
ADVANCED FINANCIAL MANAGEMENT
Paper 2.9A
Full Marks 80
Time: Three hours
The figures in the margin indicate

full marks for the questions.
Answer as directed: 1x5-5
(aTraditional Approach of Financial

Management emphasises
(i) utilisation of fund
raising of fund
(ii)
fund
(üi) supervising the utilisation of
(iv) planning for investment of fund.
b State which of the following statements

is true.
i)
() Retained earnings do not involve
any cost
Contd.
discount rate
is the
cost
(i)
() Implicit
the present val ue
which equates
with the present
inflows
of cash outflows.
value of cash
to the cost
cost reiers
(iil) Composite
preference share
of equity and
capital
The cost of capital is
the minimum
(iv)
rate of return expected by
its
investors.
cProfitability index is also known as

ratio. (Fill in the gap with appropriate
answer)
(i) Profit to sale
(il) Operating profit to
operating
expenditure
(üi) Benefit/Cost
(iv) Profit/Fixed Asset.
Dividend policy of a firm
long term financing and affects the
the gap with (Fill in
appropriate
(i) Consumer interest answer
(i) Creditors wealth
(ii) Shareholders' wealth
iv) Government policy.
14 (COM-2) 2:9A/G
2
(e) State which of the
are false ? following statcments
Capitalisation, capital structure and

financial structure donot mean the
same
(1) Capital structure is the mix ol

preference share capital, equity
share capital and borrowed
capital
(iüi) Increased use of debt increases the
financial risk of equity
shareholders
(iv) According to MM theory the total
value of firm is static.
2 Answer the following: 3x5-15

a Mention the basic functions of Financial
Managers.
(b) How is combined leverage different from
financial leverage?
Write a note on the importance of
of
capital structure.
What is the significance of Dividend
Payout Ratio ?
What are the differences between

Vertical Merger and Conglomerate
Merger?
14(COM
ol beta coeificient
significance
What is the method of
What is the
of securities ?
coefficient ?
Computation of beta
information, compute the
From the following
4+4+8
beta coefficient.
r(6)
Years Market Return | Horizon Infotech
1 18:60 23.46
2 -16:50 -36 13
3 63:83 52 64
-20-65 -7-29
5 -17:87 -12.95
Or
Critically analyse the profit maximisation

and wealth maximisation as goal of
financial
management. 16
Elucidate the Capital Asset

for determining cost of Pricing Model
Mention the limitations equity capital.
approach.
inherent with this
12+4
14 (COM-2) 2.9A/G
4
Or
Define the concept of cost of perpetual Debt
and Cost of Redeemable Debt. Explain the
method of computing cost of perpetual debt.
From the following information compute the

cost of redeemable debt by applying shortcut
method.
A company issues 15 per cent debenture of

Rs. 1,000 face value to be redeemed after
10 years. The debenture is expected to be
sold at 5 per cent discount. It will also
involve floatation costs of 2:5 per cent of
face value. The company's tax rate is
35 per cent. 3+3+3+7
5. (a) A firm is contemplating stricter

collection policies. The following details
are available:
(1) At present, the firm is selling

35,000 units on credit at a price
ofRs. 30 each; the variable cost
per unit is
Rs. 25 while the average
Rs. 28; average
cost per unit is
is 58 days and
collection period
amount to Rs.
collection expenses
debts are 3 per cent.
10,000; bad
Cantd
procedures are
collection
(2) If the
tightened, additional collection
amounting to Rs. 20,000

charges debts will
would be required, bad
be 1 per cent, the collection period
volume is
will be 40 days ; sales
declined by 450 units.
likely to be
Assuming a 25 per cent rate of
return on investment, what would
be your recommendation?
(b)
(b) What is the basic objectives of
Receivable Management?
12+4
Or
Eritically review the applicability of payback

period method for appraisal of long term
investment decision. How is the payback
period method different from Net Present
Value Method?
12+4
Examine the applicability of Walter

for dividend decision. What is approach
6
the basic
difference between Walter
approach and MM
approach dividend decision?
of
10+2
Or
Discuss the motives and
and acquisition.
benefits of Merger
14 (COM-2) 2.9A/G
6
Suppose, firm P has a total market value of
Rs. 150
Rs. 18 crores (i.e 12 lakh shares of
market value per share). Firm Q
has a total
market value of Rs. 3 crore (5
lakh of Rs.
market value share). Firm P is
60 per
of firm Q. The
considering the acquisition
combined
value P after merger (that is the
is expected to be
value of merged firm)
operating
Rs. 25 c r o r e s due to the
Rs.
Firm P is required to pay Rs.
efficiencies.
What is the
45 crores to acquired firm Q.
economic advantage to firm P if it
net
acquires firm Q?
7+5

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Total number of printed pages-7

ADVANCED FINANCIAL MANAGEMENT

Time: Three hours

The figures in the margin indicate

(aTraditional Approach of Financial

b State which of the following statements

cProfitability index is also known as

Capitalisation, capital structure and

(1) Capital structure is the mix ol

2 Answer the following: 3x5-15

What are the differences between

Critically analyse the profit maximisation

Elucidate the Capital Asset

From the following information compute the

A company issues 15 per cent debenture of

5. (a) A firm is contemplating stricter

(1) At present, the firm is selling

amounting to Rs. 20,000

Eritically review the applicability of payback

Examine the applicability of Walter

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