FACULTY OF MANAGEMENT
M.B.A. II Semester (CBCS) Examination, May June 2018
Subject: Financial Management
Paper MB 202
Time: 3 Hours Max.Marks: 80
Note: Answer all the questions from Part-A and Part-B.
Each question carries 4 marks in Part-A and 12 marks in Part-B.
PART A (5x4 20 Marks)
[Short Answer Type]
1 What are the objectives of financial management?
2 Briefly explain the process of capital budgeting
3 What is EBIT EPS analysis?
4 Explain the significance of stable dividends
5 .What are the advantages of merger?
PART B (5x12 60 Marks)
[Essay Answer Type]
6 What do you understand by financial decision? Discuss the major financial
decisions.
OR
Mr. Anand has to receive Rs. 5,000 per year for 5 years. Calculate the present
value of the annuity assuming that he can earn an interest of 12% on his
investment.
7 "Capital budgeting is long term planning for making and financing proposed
capital outlays". Explain.
OR
Kakatiya electrons Ltd. is considering the purchase of a machine. Two machines
A and B are available, each costing Rs. 50,000. The cost of capital of the firm is
10%. The expected net cash flows are as follows. Calculate NPV. Which machine
should be purchased?
Year
Cash flows from
Machine A
(Rs.
Cash flows from
Machine B

1 15,000 5,000
2 20,000 15,000
3 25,000 20,000
4 15,000 30,000
5 10,000 20,000
..2
OU 2260 OU 2260
Code No. 4541

8 What is meant by capital structure? What are the major determinants of capital
structure?
OR
Calculate Operating, Financial and Combined leverage under situations I and II
and financial plans A and B respectively from the following information relating to
the operation and capital structure of a company.
Installed capacity 2000 units
Annual production and sales 50% of installed capacity
Selling price per unit Rs. 20
Variable cost per unit Rs. 10
Fixed cost: Situation-I
Situation I Rs. 4,000
Situation II Rs. 5,000
Finance
Plan A
Financial
Plan B
Equity Rs. 5,000 Rs. 15,000
Debt (Cost Rs. 15,000 Rs. 5,000
Total Rs. 20,000 Rs. 20,000
9 Define working capital? Discuss the need and importance of working capital for a
manufacturing concern.
OR
A company belongs to a risk class of which the appropriate capitalization rate is
10 per cent. It currently has 1,00,000 shares selling at Rs. 100 each. The firm is
contemplating the declaration of Rs. 6 dividend at the end of current financial
year, which has just begun. Answer the following questions based on Miller and
Modigliani model and the assumption of no taxes.
What will be the price of the share at the end of the year, if dividend is not
declared? If it is declared?
ii) Assuming that the firm pays dividend, has a net income of Rs. 10,00,000 and
makes new investment of Rs. 20,00,000 during the period, how many new
shares must be issued?
iii) What will be the value of firm?
If dividend is not declared?
If it is declared?
10 What is corporate restructuring? State the forms in which it can be carried out.
OR
Discuss the principle of good corporate governance.