1) Wcm | 1) The selling price of a product is Rs. 20/- each and its break up is: Materials 40%, Labour 20%, Other Direct Cost 10%, General Overheads 10%, Selling and Distribution Cost 10%, Profit @ 10%. A company produces 3,60,000 units of a product in a year and the following details for the year are given for consideration: a. Raw materials remain in stock for 3 months, and the suppliers of Raw materials extend 2 months credit. B.The Work in Progress is to be valued @ 50% of the total direct cost of one month’s producing. C.The customers are given three months credit.d. The wages are paid after the end of the month.e. 40% of the total sales are for cash and balance on credit.f. There is no opening and closing stock of finished goods. G. Cash and Bank balance is carried to the extent of 50% of a month profit on an average basis. You are required to compute Working Capital Requirement of the business. | ||||||||||||||||||||||||||||||
2) Rm | A bank is analysing the receivables of Jackson Company in order to identify acceptable collateral for a short-term loan. The company’s credit policy is 2/10 net 30. The bank lends 80 percent on accounts where customers are not currently overdue and where the average payment period does not exceed 10 days past the net period. A schedule of Jackson’s receivables has been prepared. How much will the bank lend on pledge of receivables, if the bank uses a 10 per cent allowance for cash discount and returns? Account Amount Rs. Days Outstanding in days Average Payment Period historically 74 25,000 15 20 91 9,000 45 60 107 11,500 22 24 108 2,300 9 10 114 18,000 50 45 116 29,000 16 10 123 14,000 27 48 1,08,800 | ||||||||||||||||||||||||||||||
3) CM | 1) From the following particulars prepare a cash budget for the quarter ended 31st march 2010.
Other information: a) 10% of sales and purchases are on cash b) credit to debtors: 1 month. On an average 50% of debtors make payment on the due date while the rest make payment one month thereafter. C) credit from creditors: 2 months, 1% cash discount if payment is made within one month. D) It is estimated that 50% of creditors will be paid within one month E) Lag in payment of wages in 15 days F) Expenses generally paid in the same month. G) Plant costing Rs.1,00,000 installed on 31st Jan, on payment od 25% of the cost in addition to the installation cost of Rs.5000 and balance ti be paid in 3 equal installments from the following month including interest @ 12% p.a. on unpaid balance. Cash and bank balance on 1st Jan 2010 is expected to be Rs.2,00,000/- | ||||||||||||||||||||||||||||||
4) Coc | Girish & Gaurav Ltd. a widely held company is considering a major expansion of its production facilities and the following alternatives are available: Alternatives (Rs. in lakhs) A B C Share Capital 50 20 10 14% Debentures - 20 15 Loan from a Financial Institution @ 18% p.a . Rate of Interest. - 10 25 Expected rate of return before tax is 25%. The rate of dividend of the company is not less than 20%. The company at present has low debt. Corporate taxation 50% Which of the alternatives you would choose? | ||||||||||||||||||||||||||||||
5) WACC | Cost of equity 30% Cost of debt 9% , Equity is 1/3rd of capital and debt is 2/3rd Calculate weighted average cost of capital. | ||||||||||||||||||||||||||||||
6) CSP | The following is the capital structure of Simons Company Ltd. as on 31.12.1998: Rs. Equity shares : 10,000 shares (of Rs. 100 each) 10,00,000 10% Preference Shares (of Rs. 100 each) 4,00,000 12% Debentures 6,00,000 20,00,000 The market price of the company’s share is Rs. 110 and it is expected that a dividend of Rs. 10 per share would be declared for the year 1998. The dividend growth rate is 6%: (i) If the company is in the 50% tax bracket, compute the weighted average cost of capital. (ii) Assuming that in order to finance an expansion plan, the company intends to borrow a fund of Rs. 10 lakhs bearing 14% rate of interest, what will be the company’s received weighted average cost of capital? This financing decision is expected to increase dividend from Rs. 10 to Rs. 12 per share. However, The market price of equity share is expected to decline from Rs. 110 to Rs. 105 per share. | ||||||||||||||||||||||||||||||
7) Lev | A firm has sales of Rs. 75,00,000 variable cost of Rs. 42,00,000 and fixed cost of Rs. 6,00,000. It has a debt of Rs. 45,00,000 at 9% and equity of Rs. 55,00,000. (i) What is the firm’s ROI? (ii) Does it have favourable financial leverage? (iii) If the firm belongs to an industry whose asset turnover is 3, does it have a high or low asset leverage? (iv) What are the operating, financial and combined leverages of the firm? (v) If the sales drop to Rs. 50,00,000, what will be the new EBIT? (vi) At what level the EBT of the firm will be equal to zero? | ||||||||||||||||||||||||||||||
8) CB | XYZ Ltd. requires an equipment costing Rs.10,00,000; the same will be utilized over a period of 5 years. It has two financing options in this regard : (i) Arrangement of a loan of Rs.10,00,000 at an interest rate of 13 percent per annum; the loan being repayable in 5 equal year end installments; the equipment can be sold at the end of fifth year for Rs.1,00,000. (ii) Leasing the equipment for a period of five years at an early rental of Rs.3,30,000 payable at the year end. The rate of depreciation is 15 percent on Written Down Value (WDV) basis, income tax rate is 35 percent and discount rate is 12 percent. Advise the XYZ Ltd. that which of the financing options is to be exercised and why. | ||||||||||||||||||||||||||||||
9) BR |
Yes Ltd. No Ltd. (in crores) Sources of funds: Share capital: Authorised 25 5 Issued and Subscribed : Equity Shares of Rs. 10 each fully paid 12 5 Reserves and surplus 88 10 Shareholders funds 100 15 Unsecured loan from Yes Ltd. — 10 100 25 Funds employed in : Fixed assets: Cost 70 30 Less: Depreciation 50 24 20 6 Written down value Investments at cost: 30 lakhs equity shares of Rs. 10 each of No Ltd. 3 Long-term loan to No. Ltd. 10 Current assets 100 34 Less : Current liabilities 33 67 15 19 100 25 On that day Yes Ltd. absorbed No Ltd. The members of No Ltd. are to get one equity share of Yes Ltd. issued at a premium of Rs. 2 per share for every five equity shares held by them in No Ltd. The necessary approvals are obtained. You are asked to pass journal entires in the books of the two companies to give effect to the above |
Saturday 17 September 2011
FM Revision set 3
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