MDN/KS/09 - 1878
Second Semester Master of Business
Administration (MBA) Examination
(New Course)
Specialisation - I( Gr - B- Financial Management)
PROJECT PLANNING AND FINANCIAL
STRATEGY
Paper - II
Time : Three Hours ] [Max. Marks : 80
Time : Three Hours ] [Max. Marks : 80
N. B. : (1) Attempt five questions ; atleast two questions
from each section are compulsory. (2) All questions carry equal marks.
SECTION A
1. Explain the steps in planning of a new project.
2. `'Takeover strategy for expansion will be a craze inCorporate World". - Elucidate.
3. A company is considering two exclusive projects Xand Y, project X costs Rs. 30,000 and project Y R.s. 36,000. You have been given below the net present value probability distribution for each project.
Project - X Project - Y
NPV Probability NPV Proability
(Rs.) (Rs.)
3,000 0.1 3,000 0.2
6,000 0.4 6,000 0.3
| 12,000 | 0.4 | 12,000 | 0.3 |
| 15,000 | 0.1 | 15,000 | 0.2 |
(i) Compute the expected net present value of project X and Y.
(ii) Compute the risk attached to each project.
(iii) Which project do you consider more risky and why %
(iv) Compute the profitability index of each project.
4. Explain the concept of optimal capital structure. Discuss MM approach and Traditional position of capital structure evaluation.
5. JBC Ltd. sells goods- on a gross profit of 25%. Depreciation is considered as a part of cost of production. The following are the annual figurers given to you
.
| Particulars | | Amount |
| Sales (2 months credit) | Rs. | 18,00,000 |
| Material (1 month credit) | | 4,50,000 |
| Wages paid (1 month lag in payment) | | 3,60,000 |
| Cash Manufacturing Expenses (1 month lag in payment) | | 4,80,000 |
| Administrative Expenses (1 month lag in payment) | | 1,20,000 |
| Sales Promotion Expenses (Paid quarterly in advance) | | 60,000 |
The company keeps one month's stock each of Raw materials and finished goods. It also keeps Ks. 1,00,000 in cash. You are required to estimate the working capital requirements of the company on cash cost basis, assuming I:i% safety margin.
SECTION B
6. "Efficient Cash Management will aim at Maximizing the availability of cash inflow by decentralizing collections and decelerating cash out flow by centralizing the disbursement" % Discuss and explain.
7. What is the Memorandum of Understanding (MOU) : What were its objectives : Do you subscribe to the view that MOVs in PSEs have led to their better performance ?
8. Discuss various aspects of computation of Economic Value Added (EVA) and its application in business planning and valuation.
9. DLP .I'vt. Limited is considering the possibility of purchasing a multipurpose machine which costs Rs. 10,00,000. The machine 'has an expected life of 5 years. The machine generates Rs. 6,00,000 per year before depreciation and tax and the management wishes to dispose the machine at the end of 5 years which will fetch Rs. 1,50,000. The depreciaion allowable for the machine -i-,25% on written down value and the company tax- -rate is, 50%. The company approached a NBFC for a five year lease for financing the asset which quoted arate of Rs. 28 per thousand per month. The company wants you to evaluate the propo--sal withpurchase option. The cost of capital of the company is 12% and for lease option it wants your to consider a discount rate of 16%.
10. A trader whose current sales are Rs. 15,00,000 per Annum and average collection period is 30 days wants to pursue a more liberal credit policy to improve sales. A study made by a consultant firm reveals the following information.
| Credit Policy | Increase in | | Increase |
| | Collection Period | | in sales |
| | 1 5 days | Rs. | 60,000 |
| B | 30 days | | 90,000 |
| C | 45 days | | 1,50,000 |
| D | 60 days | | 1,80,000 |
| E | 90 days | | 2,00,000 |
The selling price per unit is Rs. 5. Average cost per unit is 4_and variable-cost per unit is
Ks. 2.75. The required rate of return on additional investment is 20%. Assume 3(i0 days a year and also assume that there are no bad~ cleats. Which of the above policies would you recommend for adoption?
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