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Fundamental of Financial Management | Question paper 2017 | BHM 6th semester

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                                           POKHARA UNIVERSITY 

 

Level: Bachelor                   Semester Spring                Year : 2017

Programme: BHM/BCIS                                               Full Marks: 100

Course: Fundamental of Financial Management           Pass Marks: 45 Time : 3hrs.

Candidates are required to give their answers in their own words as far as practicable. 

T he figures in the margin indicate full marks. 

Section “A”

                          Very Short Answer Questions                                                                                          

Attempt all the questions.                                                                                           10X2

  1. What is stock split?
  2. What do you mean by business risk?
  3. Write some disadvantages of Treasury Stock.
  4. What do you mean by DFL?
  5. How CCC can be reduced?
  6. List out the advantages of PBP?
  7. List out the features of Annuity.
  8. Calculate  expected  return  on  stock  if  risk  free  rate  is  6  percent, market risk premium is 5 percent and beta is 1.5.
  9. XYZ Enterprises has weekly credit sales of Rs 20,000 and the average collection period is 35 days. The cost of goods sold is 80 percent of selling price. What is the firm’s investment in average accounts receivable?
  10. What is Do-pont idendtity?

 

Section “B”                                                                   6X10

Descriptive Answer Questions

Attempt any six questions

  1. What is the goal of financial management? How does value maximization goal overcome the drawbacks of profit minimization goal? Explain.
  2. On the basis of the following information, complete the balance sheet that follows; (Assume 360 days in a year)

Long term debt to net worth                 0.5 to 1

Total assets turnover                             2.5 times

Days Sales Outstanding                       18days

Inventory Turnover                              9 times

Gross profit Margin                             10%

Acid-test ratio                                      1:1

Cash

Account

Receivable

Inventory

Plant & equipment

……….

……….

……….

……….

……….

Notes Payable

Long term debt

Common stock

Retained earning

Rs.100,000

……….

100,000

100,000

Total Assets Total liabilities and equity

 

  1. You deposit Rs.100,000 in your bank account. If the bank pay 4 percent interest, how much will you accumulate in your account after 5 years? If bank pays semi-annual interest how much will you have at the end of 8 years? If interest rate is 10% and compounded quarterly what should be the effective annual rate?
  2. Describe about the method of selling security.
  3. Hotel Aryal Ltd. was recently formed. It has the following capital structure in market value terms:

 

Debentures                                          Rs. 6,000,000

Preferred stock                                    2,000,000

Common stock (320,000 shares)         8,000,000

Rs.16,000,000

The Hotel has a marginal tax rate of 34 percent. A study of publicly held companies in this line of business suggests that the required return on equity is about 17 percent. The Company’s debt is currently yielding 13 percent, and its preferred stock is yielding 12 percent. Compute the Aryal’s present weighted average cost of capital.

 

  1. Om Shanti Noodles Corporation has its inventory turnover 8 times in a year, a receivable collection period of 38 days, and a payables deferral period of 30 days.

a) What is the length of the firm’s cash conversion cycle?

b) If Gandaki’s annual sales are Rs.3, 421,875 and all sales are on credit, what is the

firm’s investment in accounts receivable?

  1. Explain about types of dividends and dividend payment procedure.

 

Section “C”

Case Analysis 

 

  1. Read the case situation given below and answer the questions that 20 follow:

Following are the cash flow of Mutually exclusive projects

Year

1

2

3

4

5

 

Project X

Rs(150,000)

40,000

40,000

40,000

40,000

Project Y

Rs.(125,000)

75,000

0

40,000

45,000

 

  1. Which project(s) would you choose if the NPV 75 the decision criterion and the opportunity cost of capital is 10 percent?
  2. Which project(s) would you choose if the IR is the decision criterion and the opportunity cost of capital is 11 percent?
  3. Which project(s) would you choose if the Discounted PBP is the decision criterion?

 

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