SHRI D. N.

INSTITUTE OF BUSINESS ADMINISTRATION, ANAND

INTERNAL EXAMINATION: 2014
B.B.A. (GEN) SEM: VI

Advanced Financial Management (UM06EBBA02)

DATE : 06/03/2014
TIME : 9:00 AM TO 10:00

Q-1

(A)
(B)

Q-1

(A)

Q-2

(A)
(B)

TOTAL MARKS: 30

Whatever may be the pattern of or composition of the capital structure, (05)

the investment value remain constant Discuss.
Smita Limited has Net Operating Income of Rs. 4,00,000 on an (05)
investment of Rs. 20 lacs in assets. It has debt of Rs. 6,00,000 at 16% rate
of interest. Assume that there are no taxes. Using Net Income Approach
and an equity capitalization rate of 18%; Compute the total value of the
firm and the overall cost of capital.
OR
Ankit Limited has a following capital structure;
(10)
Rs.
80,000 Equity Shares of Rs. 10 each
8,00,000
9%, 4,000 Redeemable Preference Shares of Rs. 100 each
4,00,000
8% Debentures of Rs. 100 each
8,00,000
20,00,000
The present earnings of the company before interest and taxes are
Rs. 3,00,000 per year. The company is in requirement of Rs. 4,00,000 for
purchasing a special machine. The additional investment is expected to
earn 15% per year.
Advise the company as whether the requisite amount should be raised
by issuing equity shares or preference shares or debentures? (Assume
50% tax rate)
Discuss the any five variables that influence dividend policy of the firm (05)
in detail.
Determine the market price of equity shares of Meera Limited from the (05)
following information;
Earnings of the company
Rs. 10,00,000
Dividend Paid
Rs. 6,00,000
No. of equity shares issued
2,00,000
Price Earnings Ratio
8
Rate of return on investment
15%
Are you satisfied with the current dividend policy of the firm? If not,
what should be the optimal dividend payout ratio? Use Walters model.
OR

Q-2

(A)

Critically evaluate the Walters model of dividend policy.

(05)

(B)

Q-3

(A)
(B)

Q-3

Calculate the market price of a share of Aishwarya Limited under (i) (05)
Walters Model (ii) Dividend growth model (Gordon Model) using the
following data;
Earnings Per Share (EPS)
Rs.10
Dividend per Share (DPS)
Rs. 6
Cost of Equity Capital (Ke )
20%
Internal Rate of Return (r )
25%
Retention Ratio (b)
50%
Define Foreign Exchange Market. Explain the meaning of Spot rate and
Forward rate with example.
Write note on: Purchasing Power Parity (PPP) theory
Discuss the Internal techniques of foreign exchange risk management.

All the Best

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(10)