Explain the following terms: a. Yield to maturity b. Zero coupon bond c. Annuity and perpetuity d. Cash cycle e. Operating leverage f. Rule of 72 g. Cash flow
Explain in detail the factors influencing working capital requirement of a firm.
[7 marks]Illustrate operating leverage and financial leverage in the context of a manufacturing company. Explain the impact of total leverage on the capital structure of the firm.
[7 marks]The market value of Rs. 100 par value bond, carrying a coupon rate of 10% and maturing after 6 years is Rs.104. Calculate the Yield to Maturity (YTM) of this bond.
[7 marks]"Acompany's dividend policy is often seen as a testament to its confidence in future earnings growth and sustainability of the business". Discuss the statement in light of impact of dividend policy on value of share.
[7 marks]Setu Ltd. wants to undertake a project requiring capital investment of Rs. 120,00,000. The company has two options. Option 1) Raise the entire amount by way of issuing equity shares at a par value of Rs. 100 each, Option 2) Take a loan of Rs. 80,00,000 at 12% and Rs. 40,00,000 by way of issuing equity shares (Par value Rs. 100 each). The tax rate is 50%. Calculate the point of indifference for this financing proposal.
[7 marks]Explain the five Cs of finance with example.
[7 marks]Pandya and Company ltd borrows Rs.10,00,000 at an interest rate of 10 percent. The loan is to be repaid in 5 equal annual instalments payable at the end of each of the next 5 years. Prepare the loan amortization schedule. Page 1 of
[2 marks]Sachin Limited expects its cash flow to behave in a random manner. Calculated return point and upper control limit from the following information a. Annual yield on investment is 10%. b. The fixed conversion cost is Rs.2500. c. The standard deviation of change in daily cash balance is Rs.10,000. d. Minimum cash balance Rs.2,00,000.
[7 marks]Explain net income approach (NI) and net operating income (NOI) approach of capital structure in brief.
[7 marks]Write a Short note on Baumol’s Model of cash management.
[7 marks]Analyze the impact of debt financing on overall (weighted average) cost of capital, including pros and cons of debt financing.
[7 marks]Rahane is a management graduate from a reputed university. He is working as a project finance officer at J P Morgan’s. As his first assignment he is given a loan proposal to access on the basis of his academic knowledge. The proposal is about funding a new venture where the applicant has applied for a loan of Rs.20,00,000 to buy a machinery. The expected cash flows from the project during its first 5 years is as under: Year Cash flow (Rs) 0 -20,00,000 1 4,00,000 2 6,00,000 3 7,00,000 4 8,00,000 5 5,00,000
[ marks]Calculate payback period for the project.
[7 marks]Calculate IRR for the project. If the loan is given at 12%, will the project be profitable?
[7 marks]Calculate discounted payback period at 12% cost of capital.
[7 marks]Calculate NPV of the project at 10% cost of capital. Should the project be accepted at this rate? Page 2 of
[2 marks]