DISTANCE EDUCATION
M.B.A. DEGREE EXAMINATION, DECEMBER 2017.
Third Semester
CORPORATE FINANCE AND TAX MANAGEMENT
(Upto 2012-13 Academic Year and 2013 Calendar Year)
Time Three hours Maximum 100 marks
PART A — X 8 40 marks)
Answer any FIVE questions.
1. How are Tax incentives affect business decisions?
2. Define — Debenture. Bring out the kinds of debentures.
3. What is Capital Structure? List out the determinants of
Capital Structure,
4. Bring out the features of Cost of Capital.
5. What do you mean by Payback period? State its merits
and demerits.
6. Explain the tools and techniques of Inventory
Management.
7. List out and explain the factors affecting dividend
decision.
8. What do you mean by Bridge Finance?
Sub. Code
36
DE-3131
WS
2
PART B — 15 60 marks)
Answer any FOUR questions.
9. What is financial Planning? List out the various financial
plan.
10. Critically examine the sources of long term finance to
business.
11. The following particulars relate to Ambuja Ltd.
Equity Share Capital
1,00,000 shares of Rs. 100 Rs. 10,00,000
Profit after Tax Rs. 9,00,000
Current market price of equity share Rs.75
Calculate the Cost of Equity
What is the cost retained earnings if the average
personal tax rate of shareholder's is 30% and the
brokerage cost for making new investment is
12. A Ltd. Company needs Rs. 6,00,000 for construction of a
new plant. The following three financial plans are
feasible.
The Company may issue 60,000 equity shares of
Rs 10 each.
The company may issue 30,000 equity shares of
Rs. 10 each and 3,000 preference shares of Rs. 100
each bearing coupon rate of interest.
The company may issue 30,000 equity shares of
Rs. 10 each and 3,000 preference shares of Rs. 100
each bearing rate of dividend.
DE-3131
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The Profit before interest and taxes (PBIT) is
expected to be Rs. 1,50,000. Corporate tax rate is
50%. Calculate the earnings per share under the
three plans. Which plan would you recommend and
why?
13. What is Capital Budgeting? State its nature.
14. Define Working Capital. Explain the sources of Working
Capital Finance.
15. A firm has the following capital structure after tax costs
for the different sources of funds used.
Sources of Funds Amount

Proportion

After Tax Cost

Debt
Preference Shares
Equity Shares
Retained
Earnings
15,00,000 25 5
12,00,000 20 10
18,00,000 30 12
15,00,000 25 11

60,00,000 100
You are required to compute the weighted average cost of
capital.
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