Q1. An investor issues a deep discount Bond is issued for Rs.
5,000 today and will mature in 15years
for Rs.20,000. Advise an investor whose opportunity rate of return 11%?
Q2. A firm is evaluating a proposal costing Rs.1,60,000 and expected to generate cash flows of Rs.
40,000, Rs.60,000, Rs.50,000, Rs.50,000 and Rs. 40,000. there is no salvage value there after.
Q3. Hunny Projects Ltd. Is evaluating two mutually exclusive investment proposals X and Y, The
company's required rate of return from such projects is 10%. The cash flows pattern of both the
proposals are given. Evaluate the proposals as per NPV and IRR methods.
Q4. A Business firm has to chose one of the two [Link] relevant data for both of them is as
follows:
Projects A B
Initial Investment 150000 300000
Expected Cash Flows at the end of
Year 1 40000 80000
Year 2 56000 112000
Year 3 60000 120000
Year 4 45000 90000
Year 5 65000 130000
Evaluate both the projects using financial function NPV (at 12% rate of Interest) and IRR and
recommend which project should be accepted.
Q5. EPS 10
P-Eratio 10
Ke 10%
No. of Outstanding shares 20,000
Expected Dividend 5
Expected Net Income 200,000
New Investment 400,000
As per MM Approach, show that the payment of dividend does not affect the value of the firm. Use the
above data to prove the statement.
Q6.
Following are the details regarding 3 companies
A Ltd B Ltd C Ltd
IRR (r) 15% 10% 8%
Cost of Capital (Ke) 10% 10% 10%
Earning Per share 10.00 10.00 10.00
Using Walter model, calculate the effect of dividend payment on the value of share of the above companies under:
i) When no dividend is paid
ii) When dividend is paid @8Rs per share
ii) When dividend is paid @10Rs per share
Q7. Assuming that the rate of return expected by investors is 11%, internal rate of return is 12% and
earning per share is 15. Calculate price per share by Gordon Model if C/P ratio is 10% and 30%
Calculation of price per share by "Gordon model" if dividend payout ratio is 10% and 30%.
Q8. The following information for a particular year has been extracted from the books of a
manufacturing company:
Particulars Opening Closing
Raw Materials 200,000 300,000
Work in Progress 100,000 200,000
Finished Goods 300,000 400,000
Debtors 300,000 400,000
Creditors 200,000 300,000
Profit and Loss Account Amount
Purchases 1,600,000
Consumption 1,500,000
Total Production cost 2,500,000
Total cost of goods sold 2,800,000
Total Cost of sales 3,000,000
Sales 3,600,000
Q9. A performa cost sheet of a company provide you with the following particulars of Estimated
Cost per unit. Calculate working capital requirement from the data given below.
Cost elements Amount per unit
Raw materials 100
Direct Labour 40
Overheads 60
Total 200
Additional information:
Selling Price 250 per unit
Level of activity 104,000 units of production
Raw materials in stock 4 average weeks
Work in progress 2 average weeks
Finished goods in stock 4 average weeks
Credit allowed by suppliers 4 average weeks
Credit allowed to debtors 8 average weeks
Lag in payment of wages 2 average weeks
Cash at bank is expected to be 10% of gross working capital.
