MB0045 FINANCIAL MANAGEMENT

Dear students to get solved assignments of SMU MBA SUMMER 2015 call us at 8510092683 or mail us at mhanda74@gmail.com1 Critically analyze the four broad areas of strategic financing decision.

Answer: Four broad areas of strategic financing decision

Dear students to get solved assignments of SMU MBA SUMMER 2015 call us at 8510092683 or mail us at mhanda74@gmail.com2 What is FVIFA? Is it different from Sinking fund factor?

Answer: Annuity refers to the periodic flows of equal amounts. These flows can be either receipts or payments.

b. A finance company offers to pay Rs. 44,650 after five years to investors who deposit annually Rs. 6,000 for five years. Calculate the rate of interest implicit in this offer.

Answer:

3 A firm owns a machine furnishes the following information:Rs.

Book value of the machine 1,10,000Current market value 80,000Expected salvage value after the end of five years of remaining useful life NILAnnual cash operating costs 36,000The firm’s cost of capital 15 %Corporate tax rate 35 %The firm follows straight line method of depreciation (permitted by the Income-tax authorities).The management of the company is now considering selling of the machine. If it does so, the total operating costs to perform the work, now done by the machine, will increase by Rs. 40,000 p.a.Advise the management.

Dear students to get solved assignments of SMU MBA SUMMER 2015 call us at 8510092683 or mail us at mhanda74@gmail.com4 How will you compute the cost of equity capital using CAPM?

Answer: Capital Asset Pricing Model Approach establishes a relationship between the required rate of return of a security and its systematic risks expressed as “β”. According to this model,Ke = Rf + β (Rm — Rf)

Answer:

b. The Xavier Corporation, a dynamic growth firm which pays no dividends, anticipates a long-run level of future earnings of Rs. 7 per share. The current market price of Xavier’s share is Rs. 55.45. Floatation costs for the sale of new equity shares would average about 10 % of the price of the shares. What is the cost of new equity capital to Xavier Corporation?

Dear students to get solved assignments of SMU MBA SUMMER 2015 call us at 8510092683 or mail us at mhanda74@gmail.com5 Jharkhand Mining ltd. has to select one of the two alternative projects whose particulars are furnished below :

Project E Project FRajrappa, Hazaribagh Tatisilwai, Ranchi

Rs. Rs.Initial Outlay 11,87,200 10,06,700

Net Cash Inflow :End of year 1 10,00,000 1,00,000

2 2,00,000 1,00,0003 1,00,000 2,00,0004 1,00,000 10,00,000

The company can arrange necessary funds @ 8 %. Compute the NPV and IRR of each project and comment on the results.Is there any contradiction in the results? If so, state the reason for such contradictions. How would you propose to resolve the contradictions?

Answer: The PV of Re. 1, to be received at the end of each year, at different cost of capital, is the following:

6 X Premier Steel Ltd. has a present annual sales turnover of Rs. 40,00,000. The unit sale price is Rs. 20. The variable costs are Rs. 12 per unit and fixed costs amount to Rs. 5,00,000 per annum. The present credit period of 1 month is proposed to be extended to either 2 or 3 months whichever is profitable. The following additional information is available:

Credit period 1 month 2 months 3 monthsIncrease in sales by -- 10 % 30 %Bad debts on sales 1 % 2 % 5 %

Fixed costs will increase by Rs. 75,000 when sales increase by 30 %. The company requires a pre-tax return on investment of 20 %.Evaluate the profitability of the proposals and recommend the best credit period for the company.

Answer: Evaluation of Profitability under different credit periods

Dear students to get solved assignments of SMU MBA SUMMER 2015 call us at 8510092683 or mail us at mhanda74@gmail.com