MB0045-Financial Management

Winter-2015
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Master of Business Administration - MBA Semester 2
MB0045-Financial Management-4 Credits
(Book ID: B1628)
Assignment (60 Marks)
Note: Answer all questions within 400 words each. Each Question carries 10 marks 6 X 10=60
Q1. Capitalisation of a firm refers to the composition of its long –term funds debt and equity. Discuss
the theories of capitalization.
 Explain each theory of capitalisation
Answer. The two theories of capitalization are:1. Cost theory
2. Earnings theory
Q2. a. The share of Megha Ltd is sold at Rs 500 a share. The dividend likely to be declared by the
company after one year is Rs 25 per share. Hence, the price after one year is expected to be Rs 550.
What is the return at the end of the year on the basis of likely dividend and price per share?
b. A bond of face value of Rs 1000 and a maturity of 3 years pays 15% interest annually. What is the
market price of the bond if YTM is also 15 %.
Answer.
Q3. Discuss the sources of capital of a company. Analyse the factors that affect the capital structure.
 Sources
 Factors that affect the capital structure
Answer. Sources of capital of a company:Retained earnings: This source is available only to pre existing businesses. Profits re-invested as retained
earnings otherwise would have been paid dividends. This is a good option as this avoids for payment in
cash. This is an attractive source of fund as the new ventures could be taken without involvement of
Q4. A project costs Rs 50,000. It is expected to generate cash inflows as shown in table. If the risk free
rate is 10%, compute NPV.
YEAR
CASH INFLOWS
CERTAINITY EQUIVALENT
1
32000
0.9
2
27000
0.6
3
20000
0.5
4
10000
0.3
 Compute NPV
Answer. Calculation of riskless cash flows:
Q5. Annual demand of a company is 30,000 units. The ordering cost per order is Rs 20 (fixed) along
with a carrying cost of Rs 10 per unit per annum. The purchase cost per unit i.e., price per unit is Rs 32
per unit. Determine EOQ, total number of orders in a year and the time gap between two orders.
 EOQ
 total number of orders in a year and
 The time gap between two orders.
Answer. a.
Q6. Discuss the dividend policy of Dabur India Ltd for the last three years.
 Analyse the dividend policy of Dabur India Ltd. For three years
 Comment on dividend policy
Answer. 1. Dividend shall be declared or paid only out of:
i) Current Year’s profit
a) After providing for depreciation in accordance with law
Winter-2015
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