FALL-2015
Get solved
assignments at nominal price of Rs.125 each.
Any issues
mail us at: subjects4u@gmail.com or contact at
09882243490
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
Q1: 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 fail to meet its current obligations thus inviting
the risk of bankruptcy. On the contrary, if the current
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 by
dividing72 by the rate of interest. Though it is a crude way of calculating,
this rule is
Q3. Write
short notes on:
a)
Operating Leverage
b)
Financial leverage
c)
Combined leverage
Answer.
a). Operating leverage arises due to the presence of
fixed operating expenses in the firm’s income flows. It has a close
relationship to business risk. Operating leverage affects business risk
factors, which can be viewed as the uncertainty inherent in estimates of future
operating income. The operating leverage takes place when a change in revenue
produces greater change in Earnings Before Interest and Taxes (EBIT). It
indicates the impact of changes
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.
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 with a view to achieve the target
capital structure. Every time the funds have to be procured, the financial
manager weighs the pros and cons of various sources of finance and selects the
most advantageous sources keeping in view the target capital structure. Thus,
the capital
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.
Stand-alone
risk
Stand alone risk of a project is
considered when the project is in isolation. Stand-alone risk is measured by
the variability of expected
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
FALL-2015
Get solved
assignments at nominal price of Rs.125 each.
Any issues
mail us at: subjects4u@gmail.com or contact at
09882243490
No comments:
Post a Comment