8/2/2019 IMT-41 December 2007

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ET E De ce mb er 20 07 Page 1 of 1 IMT-41

INSTITUTE OF MANAGEMENT TECHNOLOGY

CENTRE FOR DISTANCE LEARNINGGHAZIABAD

Subject Code : IMT-41 Time allowed : 180 minutesSubject Title : Indian Financial Services Maximum : 50 marks

Instructions: (a) Answer any four questions choosing from Section-A and each question carries 9 marks.Section-B (Case Study) is compulsory and case study carries 14 marks.

(b) No doubts/clarifications shall be entertained. In case of doubts/clarifications make reasonable assumptions and

proceed.

SECTION-A (Answer any four questions from this section)

1. Define Credit Rating? What are the parameters considered by rating agency before assign a ratingsymbol?

2. The role of factors has increased significantly in India Support your answer with suitable example?

3. Lease is often called hedge against obsolescence. Under what conditions it is true? Discuss.

4. Write short notes on any three of the following:

(a) Commercial paper(b) Bankers to the Issue(c) Financial lease(d) Hire Purchase Credit

5. Define NBFC. Briefly explain the different types of NBFC and the nature of their main activities?

6. How are the benefits of merger shared between the acquiring and target firm. Explain with suitableexample?

7. Company X acquires Company Y on Share Exchange Basis. The position before take over was asunder:

Company X Company YNo. of Shares 10000 5000Total Earnings Rs. 1,00,000 Rs. 50,000Market Price of share (MPS) Rs 20 Rs 15

The shareholders of the company Y are offered 3 shares of Company X for 4 Shares Company Y.

You are required to calculate the EPS of the amalgamated company vis--vis before take over position, ofthe two companies and gain/loss of the share holders of both the firms consequent to amalgamation.

SECTION-B (Case Study is compulsory)

The following details relate to an investment proposal of the HI LTD (HIL):

Investment outlay Rs 180 LakhsUseful life 4 yearsNet salvage value after 4 years Rs 18 Lakhs

Annual tax relevant rate of depreciation 40%Net salvage after 3 years Rs 30 Lakhs

The HIL has two alternatives to choose from to finance the investment:

Alternative 1: Borrow and buy the equipment. The cost of capital of the HIL, 0.12; marginal rate of tax, 0.35; costof debt, 0.17 per annum.

Alternative 2: Lease the equipment from the HLL (a financing subsidy) on a 3-year full payout basis @ Rs444/Rs 1,000 payable annually in arrear. The lease can be renewed for a further period of 3 years at a rental ofRs 18/Rs 1000 payable annually in arrear.

Which alternative should the HIL choose? Why?