Advanced Financial Management Question papers

Note : Section I :- All Questions are Compulsory (30 marks)

Section II :- Attempt any three. (30 marks)

Section I

Q.1 a) Each Question of 1 Mark (5C x 1M = 5M)

i) Explain Non-Core Asset

ii) 2/10 Net 60

iii) RTGS

iv) Formula of cost of redeemable debt

v) Explain ‘Capital Market Conditions’ as a factor determining capital structure

Q.1 b) Each Question of 5 Marks. Attempt any two. (5 x 2 = 10 Marks)

(i) Given below is Balance Sheet of A Ltd.

Liabilities		Assets
ESC (Rs.10 / Share) 10% Preference Shares 8% Debentures	1000000 1100000	Sundry Assets	3100000

1) If ROI is 18% and Tax rate is 40%,

Calculate:-

a) DFL b) EPS c) DOL

Company’s assets turnover ratio is 0.6 and the P/V ratio is 33.33% (1/3)

(ii) XYZ Ltd. is planning to acquire PQR Ltd. Since the current EPS is $ 5 for the ABC Company, the management is keen to get EPS of $ 6 at least post merger. They seek your advice on the possible exchange ratio that would give the merged entity an EPS of $ 6. It is also provided that the acquisition would result in a synergy of 200 Lakh. The following financial data is given:

Particulars	XYZ Ltd.	PQR Ltd.
EPS No. of Shares Market Price	$ 5 200 Lakh $ 100	$ 4 80 Lakh $ 70

(iii) Capital Structure

Equity (70, 000 sh. of $ 10) 10% Preference 15% Debt	7 Lakh 1.75 Lakh 12.25 Lakh
	21 Lakh

Expected Profit after tax is $ 577500

Stock price today (Po) = $ 32/-

Tax @ 40%

Calculate WACC.

Q.2) Amruta Enterprises (having installed capacity of 2, 00, 000 units p.a.) produced 1, 00, 000 units in the financial year 2010 – 2011. The cost – structure in 2010 – 2011 was as under :

(a) (b) (c) (d) (e)	Raw Materials Wages Factory Overheads Administrative and Selling Overheads Total Cost Profit Selling Price	40% 15% 10%
		80% 20%
		100%

The selling price, which was $ 500 per unit in 2010 – 11, is estimated to be fixed as at $ 600 per unit for the year 2011 – 12; and production & sale expected to increase by 40, 000 units. It is, further, anticipated that raw materials cost per unit would increase by 10% due to price rise, whereas wage rate per unit would decrease by 20% due to automation. 56% of all the overheads are fixed and balances are variable. As a Management Accountant, you are required to prepare (a) Cost Statement for the year 2011 – 12 & (b) Statement showing estimated working capital required for the year 2011 – 12 after considering the following additional information :

(a) Raw Materials stock equivalent to two & half month’s consumption would be stored.

(b) Production time is one month. Raw materials are introduce at the beginning of the process, whereas wages and factory overheads accrue evenly during the production period.

(c) Two months stock of finished goods (Valued at factory cost) would be carried in stock.

(d) 20% of raw materials would be imported from China an advance payment of two months would be made there against. 15% of indigenous raw materials requirement would be procured locally against immediate cash payment. Suppliers of balance of indigenous raw materials, allow a credit of one month.