Fm revision set 6

1)      Wcm	1)                  Q Ltd. sells goods at a uniform rate of gross profit of 20% on sales including depreciation as part of cost of production. Its annual figures are as under:      Rs. Sales (At 2 months’ credit)                                                                             24,00,000 Materials consumed (Suppliers credit 2 months)                                              6,00,000 Wages paid (Monthly at the beginning of the subsequent month) 4,80,000 Manufacturing expenses (Cash expenses are paid – one month in arrear)                                              6,00,000 Administration expenses (Cash expenses are paid – one month in arrear)                                              1,50,000 Sales promotion expenses (Paid quarterly in advance)                                    75,000 The company keeps one month stock each of raw materials and finished goods. A minimum cash balance of Rs. 80,000 is always kept. The company wants to adopt a 10% safety margin in the maintenance of working capital. The company has no work in progress. Find out the requirements of working capital of the company on cash cost basis.
2)      Rm	1)      1. A company has prepared the following projections for a year: Sales                                                    21,000 units Selling Price per unit                Rs.40 Variable Costs per unit                        Rs.25 Total Costs per unit                  Rs.35 Credit period allowed              One month The Company proposes to increase the credit period allowed to its customers from one month to two months. It is envisaged that the change in the policy as above will increase the sales by 8%. The company desires a return of 25% on its investment. You are required to examine and advise whether the proposed Credit Policy should be implemented or not. 2)      2. JKL Ltd. is considering the revision of its credit policy with a view to increasing its sales and profit. Currently all its sales are on credit and the customers are given one month’s time to settle the dues. It has a contribution of 40% on sales and it can raise additional funds at a cost of 20% per annum. The marketing manager of the company has given the following options along with estimates for considerations: Particulars                                Current Position                       I Option                       II Option                      III Option Sales (Rs. in lakhs)                              200                  210                  220                 250 Credit period (in months)                     1                                  1½                   2                      3 Bad debts (% of sales)                         2                                  2½                   3                      5 Cost -Credit administration  in L          1.20                             1.30                 1.50                 3.00 You are required to advise the company for the best option.
3)      CM	1)      Following is budgeted data of Mukambika Ltd. Prepare Cash Budget for the quarter ended March 2012. Month Sales Purchases Wages Misc. Exp November December January February March 1,30,000 1,50,000 90,000 1,26,000 98,000 98,000 1,10,000 1,14,000 1,16,000 85,000 12,000 15,000 9,000 12,000 8,000 8,000 9,000 7,000 14,000 7,000 Additional Information: 1. Cash on Hand as on 01-1-2012 is Rs. 5,000. Sales: 20% realized in month of sale, discount allowed 2% and 2. Balance in subsequent 2 months. 3. Purchases are paid for in following month of supply. 4. Wages are 50% in arrears and paid in subsequent month. 5. Miscellaneous Expenses are paid a month in arrears. 6. Rent Rs. 1,000 per month quarterly in advance. 7. Income tax is due on 15-03-2012 Rs. 21,500. 8. Interest on Deposit Receivable from bank for quarter ended March is Rs. 1,500.
4)      Coc	D Ltd. is foreseeing a growth rate of 12% per annum in the next two years. The growth rate is likely to be 10% for the third and fourth year. After that the growth rate is expected to stabilize at 8% per annum. If the last dividend was Rs. 1.50 per share and the investor’s required rate of return is 16%, determine the current value of equity share of the company. The P.V. factors at 16% Year                       1                     2                     3                     4 P.V. Factor                  .862                 .743                 .641                .552
5)      WACC	Assuming No taxes and given the EBIT, interest I at 12% and equity capitalization rate calculate the total market value  of Firm C & D from the following data: Firm EBIT Rs Interest Rs Equity capitalization rate C 6,00,000 3,00,000 12% D 7,00,000 3,40,000 16% Determine WACC for each of the above firm.
6)      CSP	Ravi Ltd, has a capital structure exclusively of ordinary share of Rs.10 each amounting to  Rs.5,00,000. The company desires to raise additional funds of Rs.5 lakhs for financing its extension programme.  The company can raise 50% as equity at par and balance in 5% debentures. The existing EBIT is Rs.60,000 which will raise by 75% on expansion.  The market price per share is Rs.100 and tax rate is 30%. Calculate EPS after expansion.
7)      Lev	The following summarises the percentage changes in operating income, percentage changes in revenues, and betas for four pharmaceutical firms. Firm/ Change in revenue /Change in operating income/ Beta PQR Ltd/. 27%/ 25%/ 1.00 RST Ltd. /25% /32% /1.15 TUV Ltd. /23%/ 36%/ 1.30 WXY Ltd. /21% /40%/ 1.40 Required: (i) Calculate the degree of operating leverage for each of these firms. Comment also. (ii) Use the operating leverage to explain why these firms have different beta.
8)      CB	1)      A company has to make a choice between two projects namely A and B. The initial capital outlay of two Projects are Rs.1,35,000 and Rs.2,40,000 respectively for A and B. There will be no scrap value at the end of the life of both the projects. The opportunity Cost of Capital of the company is 16%. The annual incomes are as under: Year                             Project A                      Project B          Discounting factor @ 16% 1                                  Nil                               60,000                        0.862 2                                  30,000                                     84,000                         0.743 3                                  1,32,000                      96,000                         0.641 4                                  84,000                                     1,02,000          0.552 5                                  84,000                                     90,000                         0.476 You are required to calculate for each project: (i) Discounted payback period (ii) Profitability index (iii) Net present value
9)      BR	Bora and Nath were in partnership sharing profits and losses equally. Their Balance Sheet on 31-3-2009 was as given below: Balance Sheet of Bora and Nath On 1-4-2009 a company, Asomi Ltd. was formed with an Authorised Capital of Rs. 1,00,000 divided into 10,000 shares of Rs. 10 each to take over the business of Bora and Nath on the basis of the above Balance Sheet. The Company agreed to acquire the Liabilities and all Assets including cash at a purchase consideration fixed at Rs. 75,000 which was to be discharged by the issue of fully paid equity shares of Rs.10 each. Pass journal entries to record the above transactions and prepare the balance sheet of the company on the above date. The company opened its new set of books. X and Y were in partnership sharing profits and losses equally. Their Balance Sheet on 31-3-2009 was as given below: Balance Sheet of X and Y On 1-4-2009 a company, XY Ltd. was formed with an Authorised Capital of Rs. 1,00,000 divided into 10,000 shares of Rs. 10 each to take over the business of X and Y on the basis of the above Balance Sheet. The Company agreed to acquire the Liabilities and all Assets excluding cash at a purchase consideration fixed at Rs. 80,000 which was to be discharged by the issue of fully paid Equity shares of Rs.10 each. The expenses of liquidation of the business of X and Y amounted to Rs. 1,000 which is included in the purchase consideration stated above. Pass journal entries to record the above transactions and prepare the balance sheet of the company on the above date. The company opened its new set of books The following is the Balance Sheet of ‘A’ Ltd. as on 31.3.2007: Liabilities Rs.                                                                            Assets Rs. 14,000 Equity shares of Rs.100 each fully paid           14,00,000     Sundry assets                                                                           Discount on issue of    18,00,000 General reserve                       10,000                debentures               10,000 10% Debentures                    2,00,000             Preliminary expenses 30,000 Sundry creditors                    2,00,000                  P & L A/c               60,000 Bank overdraft                       50,000 Bills payable                           40,000                                              19,00,000                                                   19,00,000 ‘R’ Ltd. agreed to take over the business of ‘A’ Ltd. Calculate purchase consideration under Net Assets method on the basis of the following: The market value of 75% of the sundry assets is estimated to be 12% more than the book value and that of the remaining 25% at 8% less than the book value. The liabilities are taken over at book values. There is an unrecorded liability of Rs.25,000.