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Monday, March 19, 2012

Dibrugarh University - Financial Management (2010)


1.(a) “Finance has changed from a field that was concerned primarily with the procurement of funds to one that includes the management of assets, the allocation of capital and valuation of the firm”. Give your views on the above statement.
                                                                              Or
(b) Discuss in detail the main functions of the modern finance manager.

2.(a) what do you mean by cost of capital? How is it determined? What are the problems involved in determination of cost of capital?
(b) A company is considering the replacement of its existing machine by a new one. The written down value of the existing machine is Rs 50,000 and its cash salvage value is Rs20, 000. The removal of this machine would cost Rs. 5,000. The purchase price of the new machine is Rs.20 lakh and its expected life is 10 years. The company follows straight line depreciation without considering scrap? Value. The other expenses associated with the new machine are:
Carriage inward and installation charges Rs 15,000 cost of training workers to handle the new machine Rs. 5,000.
Additional working capital Rs 10,000 (which is assumed to be received back by sale of scraps in last year) and the fees paid to a consultant for his advice to buy the new machine Rs. 10,000.
                The annual savings (before tax) from the new machine would amount to Rs 2, 00,000.the income tax rate is 50% the cutoff rate of return is 10%.
                Should the new machine be bought? Present values of re 1 at 10% discount rate are as follows:               
1
2
3
4
5
6
7
8
9
10
0.91
0.83
0.75
0.68
0.62
0.56
0.51
0.47
0.42
0.39

3.(a) Discuss the methods usually adopted for evaluating the leasing proposals.
                                                                                               Or 
(b)  Between Equity shares and debentures, which one is profitable form raising additional long—term capital for a manufacturing company and why?

4(a) what is the Modigliani—miller approach of irrelevance concept of dividends? Under what assumptions do the conclusions hold well?
                                                                                    Or
(b) (I) explain fully Walter’s formula on dividend policy.
(ii) Ramu & co. LTD. Earns Rs 6 per share. With capitalisation rate of 10% and having a return on investment at the rate of 20%, what according to Walter’s model should be the price per. Share at 30% dividend payout ratio? Is this the optimum payout ratio as per Walter?

5(a) “Efficient inventory management is reflected in the liquidity and profitability of the firm.” Explain.
                                                                                                   Or
(b) Define Receivable Management. Discuss the various dimensions of receivable management.