Financial Management — Summer 2025

How does the ‘modern’ financial manager differ from the ‘traditional’ financial manager? Does the ‘modern’ financial manager’s role differ for the large diversified firm and the small to medium size firm?

In what ways is the wealth maximization objective superior to the profit maximization objective? Explain.

Q .2 (b) Acompany issues 10 per cent irredeemable preference shares. The face value per share is ₹ 100, but the issue price is ₹ 95. What is the cost of a preference share? What is the cost if the issue price is ₹ 105?

Lohia Chemicals Ltd has the following book value capital structure on 31 March 2004: Source of Finance Amount (₹ 000) Proportion (%) Share capital 450,000 45 Reserve and surplus 150,000 Preference share capital 100,000 Debt 300,000 30 TOTAL 1000,000 100 The expected after-tax component costs of the various sources of finance for Lohia Chemicals Ltd are as follows: Source Cost (%) Share capital 18 Reserve and surplus 18 Preference share capital 11 Debt Find weighted average cost of capital of Lohia Chemicals Ltd, based on the existing capital structure. Page 1 of

The Niraj Ltd., wishes to calculate its cost of capital using the Capital Asset Pricing Model approach. Company’s analyst found that its risk free rate of return equals 12 per cent, beta equals 0.85 and the return on market portfolio equals 14.50 per cent. As a financial manager of the company convey your calculation to your immediate superior.

Suppose that a project requires a cash outlay of ₹ 20,0,000, and generates cash inflows of ₹ 80,000; ₹ 70,000; ₹ 40,000; and ₹ 30,000 during the next 4 years. What is the project’s payback?

Your company is considering investing in a new digital payment gateway project aimed at improving customer transaction experiences and enhancing operational efficiency. The initial investment required for this project is ₹ 25,000. The project is expected to generate additional year-end cash inflows of: • ₹ 9,000 in Year 1, • ₹ 8,000 in Year 2, • ₹ 7,000 in Year 3, • ₹ 6,000 in Year 4, and • ₹ 5,000 in Year 5. The company's opportunity cost of capital (discount rate) is estimated to be 10%, reflecting the return expected from alternative investments with similar risks. As the Finance Manager, your task is to evaluate whether this project should be accepted based on the Net Present Value (NPV) method. • Your recommendation should include: 1. Adetailed NPV calculation. 2. An explanation of the decision criteria. 3. Afinal conclusion on whether the project is financially viable.

What is capital budgeting, and why is it crucial for a company's financial decision-making process? Q-4 (b) Afirm has 7 different items in its inventory. The average number of each of these items held, along with their units costs, is listed below. The firm wishes to introduce an ABC inventory system. Suggest a breakdown of the items into A,B and Cclassifications. Item number Average average cost number of units per unit (₹) in inventory 1 20,000 60.80 2 10,000 102.40 3 32,000 11. 4 28,000 10.28 5 60,000 3.40 6 30,000 3.00 7 20,000 1.30

How does working capital management impact the day-to-day operations of a business, and what are its key objectives in ensuring smooth financial functioning?

Suppose you deposit Rs.40,000 today in a bank which pays 10 percent interest compounded annually. How much will the deposit grow to after 10 years? Page 2 of

Case Study: Bright Tech Solutions Background: Bright Tech Solutions, a company specializing in smart home devices, has the following financial details for its current operations: • Current Sales (@ ₹150 per unit): ₹30,00,000 • Variable Cost: 40% of sales • Fixed Cost: ₹12,00,000 • Loan Borrowed: ₹12,00,000 @ 8% p.a. interest • Equity Share Capital: ₹12,00,000 (₹100 each share) The company is planning a new marketing campaign to boost sales and expects an increase of ₹8,00,000 in revenue in the coming months. As the Financial Manager, evaluate the impact of this sales increase by answering the following:

What is the current profit of the company?

What will be the new profit after the expected sales increase?

Calculate the degree of financial leverage (DFL) before and after the sales increase.

Assess whether the promotional strategy is financially beneficial for the company. Page 3 of