Title FINANCIAL MANAGEMENT.pdf ✅

Part B Answer any six questions. Each question carries 5 marks. 13. Why is time value of money considered as a central concept in Financial management? 14. Xavier Ltd issues equity share of Rs 150 each a t a premium of 25% floatation cost including underwriting commission is 10% of the issue price. The company expects to pay the initial dividend of Rs 25 per share and it has been estimated that the dividend rate will grow by 8%. Compute cost of equity. 15. Earnings per share is equal to zero is a critical point in capital structure planning – Analyze the statement. 16. Alpha Ltd needs Rs.40,00,000 for an new expansion project. The new expansion project expects an EBIT of Rs. 24,00,000. The company proposes to raise funds using any of the following alternatives. 1. Issue 50,000 equity shares of Rs.100 each. 2. Issue 25,000 equity shares of Rs.100 each and 25,000 10% debentures of Rs.100 each. Suggest the company which alternative is suitable and maximize the EPS. Assume tax rate at 50%. The company’s existing capital structure consists of 50,000 equity shares of Rs.100 each. 17. Lal Ltd issues Rs 50000/- 14%redeemables debentures at a discount of 8%. The cost of floatation is 3%. The debentures are redeemable after 8 years. Calculate before tax and after tax cost assuming a tax rate of 30%. 18. What is the significance of capital budgeting? 19. From the following information , Calculate Working Capital requirements: Budgeted sales Rs. 6,50,000 Percentage of Net profit on Cost of sales 25% Average credit allowed to customers 10 weeks Average credit allowed by suppliers 4 weeks Average stock Carrying 8 weeks 20. From the following information extracted from the books of a manufacturing concern compute the working capital operating cycle. Average credit period allowed by suppliers-16 days, Average total of debtors outstanding- Rs.4,80,000, Raw material consumption- Rs.44,00,000, Total production cost- Rs. 1,00,00,000, Total cost of sales - Rs. 1,05,00,000, Sales for the year Rs. 1,60,00,000, Average stock of raw materials Rs.3,20,000, Average stock of work- in –progress Rs. 3,50,000, Average stock of finished goods Rs.2,60,000. Page 2/3