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Master of Business Administration- MBA Semester 2
MB0045-Financial Management-4 Credits
(Book ID: B1628)
Assignment (60 Marks)
Note: Answer all questions within 400
words each. Each Question carries 10 marks 6 X 10=60
Qus1: Explain the liquidity decisions and its important elements.
Write complete information on dividend decisions.
Answer.
The liquidity decision is concerned with the management of
the current assets, which is a pre-requisite to long-term success of any
business firm. This is also called as working capital decision. The main
objective of the current assets management is the trade-off between
profitability and liquidity, and there is a conflict between these two
concepts. If a firm does not have adequate working capital, it may become
illiquid and consequently
Q2. Explain
about the doubling period and present value. Solve the below given problem:
Under
the ABC Bank’s Cash Multiplier Scheme, deposits can be made for periods ranging
from 3 months to 5 years and for every quarter, interest is added to the
principal. The applicable rate of interest is 9% for deposits less than 23
months and 10% for periods more than 24 months. What will be the amount of Rs.
1000 after 2 years?
Answer.
Doubling period
A very common question arising in the minds of an investor
is “how long will it take for the amount invested to double for a given rate of
interest”. There are 2 ways of answering this question:
1. One way is to answer it by a rule known as ‘rule of 72’.
This rule states that the period within which the amount doubles is obtained
Q3. Write
short notes on:
a)
Operating Leverage
b)
Financial leverage
c)
Combined leverage
Q4. Explain
the factors affecting Capital Structure. Solve the below given problem:
Given
below are two firms, A and B, which are identical in all aspects except the
degree of leverage employed by them. What is the average cost of capital of
both firms?
Answer.
Q5. Explain
all the sources of risk in capital budgeting with examples.
Solve
the below given problem:
An
investment will have an initial outlay of Rs 100,000. It is expected to
generate cash inflows. Cash inflow for four years.
If
the risk free rate and the risk premium is 10%,
a)
Compute the NPV using the risk free rate
b)
Compute NPV using risk-adjusted discount rate
Answer.
There are several definitions for the term ‘risk’. It may
vary depending on the situation, context and application. Risk may be termed as
a degree of uncertainty. It may be defined as the possibility that the actual
result from an investment will differ from the expected result. Risk in capital
budgeting maybe defined as the variation of actual cash flows from the expected
cash flows.
Q6. Explain
the objectives of Cash Management. Write about the Baumol model with their
assumptions.
• Meeting payments schedule
• Minimizing funds held in the form of
cash balances
Meeting
payments schedule
In the normal course of functioning, a
firm has to make various payments by cash to its employees, suppliers and
infrastructure bills. Firms will also receive cash through sales of its
products and collection of receivables
Spring-2015
Get solved assignments
at nominal price of Rs.100 each.
08894344452
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