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assignments for Rs.150 each
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Fall-2013
Master of
Business Administration - MBA Semester 2
MB0045–Financial
Management-4 Credits
(Book ID:
B1628)
Assignment (60
Marks)
Note: Answers
for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. TCS has emerged as India's most admired company ahead of
Hindustan Unilever, ITC, and Infosys, says global management consultancy Hay
Group. TCS replaced last year's winner group company Tata Steel by scoring
highest on parameters such as corporate governance, financial soundness, and
talent management. Two criteria in particular, Leadership, and Creating
Shareholder Value separated the winners. How do you think effective interaction
between HR and finance department of a firm helps in achieving its skills? Do
you think that TCS has preferred the profit maximization approach over the
wealth maximization approach?
Answer. Finance and
HR
Financial
management is also related to human resource department as it provides manpower
to all the functional areas of the management. Financial manager should
carefully evaluate the requirement of manpower to each department and then
allocate the required finance to the human resource department as wages,
salary, remuneration, commission, bonus, pension, and other monetary benefits
to the human resource department. Attracting and retaining the best manpower in
the industry cannot be done unless they are paid
Q2. A) The current price of an Ashok Leyland share is Rs.
30. The company is expected to pay a dividend of Rs. 2.50 per share which goes
up annually at 6%. If an investor’s required rate of return is 11%, should he
or she buy this share or not?
B) A bond with a face value of
Rs. 100 provides an annual return of 8% and pays Rs. 125 at the time of
maturity, which is 10 years from now. If the investor’s required rate of return
is 12%, what should be the price of the bond?
Answer. (a) P =
D1 (1+g) / (Ke-g)
P= 2.5(1+0.06)
/ (0.11-0.06)
Q3. a) How do you think the trend
of capital structure across the Indian corporate affect the economy as a whole?
b) What proportion of debt and
equity should be taken up in the capital structure of a firm?
c) Discuss the theories that are
propounded to understand the relationship between financial leverage and value
of the firm.
Answer. (a) Factors Affecting Capital
Structure Capital structure should be planned at the time a company is
promoted. The initial capital structure should be designed very carefully. The
management of the company should set a target capital structure, and the
subsequent financing decisions should be made
Q4. HPCL was established in 1952,
operates from 500 different locations, including refineries, terminals, LPG
plants, aviation service facilities, etc. They developed a Lotus Notes workflow
tool and deployed it across the organization so that any capital investment
proposal from any operating location in the country can be routed to relevant
reviewers and approving authorities. With the implementation of the new online
system, the total cost savings as a result of reduced man-hours amounts to
about Rs 25 lakh per annum.
1. What do you think would have
been the complexities involved in implementing this new project at HPCL?
2. What are the various phases in
the capital budgeting process? To what extent do you believe that automation
can ease out the process?
Answer. (1) Capital Budgeting Process:
After the
screening of proposals for potential involvement is over, the company should
take up the following aspects of capital budgeting process:
Ø A proposal
should be commercially viable. The following aspects are examined to ascertain
the commercial viability of any investment proposal:
Ø Market for the
product
Ø Availability of
raw materials
Ø
Sources of raw
Q5. (A) Indicate whether the
operating cycle in the following industries is short (less than 30 days),
medium (less than 6 months) or long (more than 6 months)
Steel, rice, vegetables, fruits,
jewelry, processed food, furniture, mining, flowers and textiles
(b) Companies with the shortest
working capital cycles have current ratios much lower than the firms with longer cycles. What is
your view on this statement? How do you think the operating cycle affects
operating profit margins?
(c) Discuss the relationship
between working capital management and market performance of a company? Do you
think the kind of relationship varies depending on the type of industry?
Answer. (a) Duration
·
Short: vegetables, fruits, flowers
·
Medium: rice, fruits, processed food,
·
Long: Steel, jewelry, furniture, mining, textiles
The cash
conversion
Q6. Nirma acquired Core Healthcare
Ltd. in FY 2007. To bring about improvement in terms of liquidity in the script
of the Company, it has gone for a stock split because it hasn’t had any buyback
in the recent past. Nirma paid Interim dividend in 2007 to avoid the higher
dividend tax announced in that year’s budget. Henkel, on the other hand, has a
very weak Dividend Policy. The major reason being that the company has weak
operations and low margins. There is no record of Stock Splits and Buybacks by
Henkel India in the past.
Discuss the dividend polices of these
two companies. (a) Analyze the dividend policies of the two companies for the
last 10 years,
(b) Explain stock split and buyback
of shares.
Answer. (a) Dividend polices of these two companies:
Dividend policy is the set of guidelines a company uses to decide how
much of its earnings it will pay out to shareholders. Some evidence suggests
that investors are not concerned with a company's dividend policy since they
can sell a portion of their portfolio of equities if they want cash. This
evidence is called the "dividend
Solved
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