FM12 Online Exam Assignment AIMA 2020

Subject Code: FM12

Subject Name: FINANCIAL MANAGEMENT

Component name: TERM END   Assignment Start Date: 01/07/2020

Assignment End Date: 10/07/2020

Question 1:- The present value of Rs 20,000 to be received after five years from now assuming 6% time preference for money is :   

1. a) 14,940
2. b) 16,776
3. c) 12,551
4. d) 11,500

Question 2:- Operating cycle can be delayed by:

1. a) Increase in WIP period             
2. b) Decrease in raw material storage period.
3. c) Decrease in credit payment period.
4. d) Both (a) and (c) above

Question 3:- Given the following information about Nile ltd. The market price of its share using the Walter`s model is Rs. ___________ Equity capitalisation rate (Ke)= 16% , Earnings per share (E) = Rs 13, Dividend paid out ratio = 25% , Assume return on investment is 14%.    

73. a) 6
74. b) 45
75. c) 3
76. d) 22

Question 4:- Which of the following is a factor influencing the credit policy of a firm?          

1. a) Cash credit limit
2. b) Average payment period
3. c) Collection effort
4. d) Outstanding creditors

Question 5:- Axis ltd. is issuing 15% debentures (face value Rs 60). The net amount realized per debenture is Rs 54, and they are redeemable at par after 6 years. At a corporate tax rate of 40%, what is the cost of debt?

16. a) 54%
17. b) 54%
18. c) 23%
19. d) 74%

Question 6:- If the required rate of return in Excel Ltd.`s shares is 16%, risk free rate of return is 8%, and the rate of return on market portfolio is 11%, what is the `beta` of the stock? 

1. a) 67
2. b) 67
3. c) 38                       
4. d) 87

Question 7:- The market value of equity and debt is Rs 10,00,000 and Rs 5,00,000 respectively. The cost of equity is 18% and that of debt is 13%. If the tax rate is 35%, the weighted average cost of funds taking market value as weighted is :

1. a) 13%
2. b) 82%
3. c) 14%
4. d) 62%

Question 8:- If the net present value for a project is negative, then :        

1. a) IRR=Cost of Capital
2. b) IRR> Cost of Capital
3. c) BCR >1
4. d) IRR< Cost of Capital

Question 9:- If the degree of operating leverage of a company is increased by 30% while the degree of financial leverage is decreased by 20%. What will be the change in the degree of total leverage?   

1. a) 2% increase
2. b) 3% increase
3. c) 4% increase         
4. d) 2% decrease

Question 10:- A firm`s present market price of the share is Rs 40 and its EPS is Rs 12. The firm is planning to declare 45% of this as dividends. If the firm reinvests its retained earnings at the rate of 14%, the cost of its equity according to Gordon dividend capitalization model is:    

1. a) 20%
2. b) 20%
3. c) 22%
4. d) 20%

Question 11:- If the net working capital is negative then it indicates that:             

1. a) Long tem funds have been used for financing short term assets.
2. b) Long term funds have been used for financing long term assets.
3. c) Short term funds have been used for financing long term assets.
4. d) Short term funds have been used for financing short term assets.

Question 12:- The following information is available for Navkar and Co. : EBIT Rs 20,20,000 ; Profit before tax Rs 13,20,000 ; Fixed costs Rs 7,00,000. The percentage change in EPS is ……………., if the sales are expected to increase by 5%. 

16. a) 02%
17. b) 87%
18. c) 50%       
19. d) 25%

Question 13:- Which of the following is a technique for monitoring the status of the receivables?        

1. a) Ageing Schedule
2. b) Outstanding creditors
3. c) Selection matrix
4. d) Funds flow analysis

Question 14:- The cash flows from a project is estimated as follows: Year 0- Rs 160 lakh, Year 1- Rs 60 lakh, year 2- Rs 80 lakh, year 4- Rs 116 lakh. The benefit cost ratio for the above project is ( Assume the cost of capital as 12%):             

1. a) 25
2. b) 8
3. c) 25
4. d) 8

Question 15:- The net cash flow from a project (with initial investment of Rs 16,20,000) are as follows: year 1- Rs 2,00,000; year 2- Rs 4,00,000; year 3- Rs 5,00,000; year 4- Rs 5,20,000; year 5- Rs 5,25,000; year 6- Rs 5,40,000; year 7- Rs 6,50,000. What is the pay back period for the above project            

1. a) 2 years
2. b) 3 years
3. c) 4 years
4. d) 5 years

Question 16:- Which of the following is not a money market instrument:

1. a) Treasury bill
2. b) Commercial papers
3. c) Convertible debentures
4. d) Certificate of deposits

Question 17:- The average daily cost of production is Rs 35 lakh and average conversion period is 3 days. The closing stock work in progress is 10% higher than the opening stock of work in process. The value of closing stock of work in progress is:   

1. a) 100 lakhs
2. b) 110 lakhs
3. c) 120 lakhs        
4. d) 130 lakhs

Question 18:- During the four busiest days in a month od March, the firm` cash outflows were Rs 20,000; Rs 30,000; Rs 40,000 and Rs 50,000. The Finance Manager desires sufficient cash to cover payments for 4 days during the peak periods. The safety levels is Rs:

1. a) 1,10,000
2. b) 1,40,000
3. c) 1,20,000
4. d) 1,00,000

Question 19:- If the current assets and current liabilities are Rs 2,000 lakh and Rs 1,200 lakh respectively. How much amount can be borrowed on a short term basis without reducing current ratio below 1.5?         

1. a) Rs 400 lakh
2. b) Rs 1,000 lakh
3. c) Rs 1,200 lakh
4. d) Rs 1,400 lakh

Question 20:- The following details pertain to Anand Industries Ltd: Average stock of work in progress Rs 16 lakh; Annual cost of production Rs 160 lakh. Assume 360 days in a year. The work in process period for the company is :             

1. a) 10 days
2. b) 16 days
3. c) 23 days
4. d) 36 days

Case Study

ADG Ltd. is considering investing in a new start-up project. The company has a plan that after five years it will sell the project at a good profit to a big Industrialist. The project outlays are Land Rs.80 Lakhs, Plant & Machinery Rs. 500 Lakhs, Building Rs.100 Lakhs, Gross working capital Rs. 450 Lakhs, Other fixed assets Rs.100 Lakhs and technical knowhow fees Rs.160 Lakhs. The project will be financed by Equity Share capital of Rs. 500 Lakhs, 16% Term Loan Rs.300 Lakhs,12% Preference Share Capital Rs. 250 Lakhs and 18% Bank Loan for Working Capital Rs. 340 Lakhs. The unit is expected to generate sales value of Rs.10 Crores in the first year, Rs.12 Crores in the second year and Rs.15 Crores for the next three years. The cost of production (excluding depreciation) would be 70% of sales. The depreciation to be charged on building @4% on Original cost method & 33.33% on Plant & Machinery and other assets as per Written down value method. The technical knowhow fees will be written off over a period of 5 years. The salvage value of Plant & Machinery after 5 years would be 20% of its acquisition cost, book value for Land & Building and nil for other fixed assets. The term loan for the project will be repaid after 5 years when the project would be sold. The tax rate applicable is 30%.          

Question 21:- The total net salvage of Plant & Machinery and other fixed assets in the last year?  

1. a) 320
2. b) 300
3. c) 280
4. d) 270

Question 22:- The Net Present value at cost of capital of 20%      

1. a) 82 Lakhs
2. b) (-) Rs.75 Lakhs
3. c) 19.87 Lakhs
4. d) (-) Rs.72.15 Lakhs

Question 23:- The Profitability Index at cost of capital is 20%       

1. a) 93
2. b) 82
3. c) 12
4. d) 98

Question 24:- The total depreciation on Plant & Machinery and other fixed assets in the last year?  

38. a) 38.99 Lakhs
39. b) 43.51 Lakhs
40. c) 45.89 Lakhs
41. d) 51.47

Question 25:- Will your recommendation change, if an additional cash flow of Rs. 5 crores arise by disposing of the project?

210. a) The project is having a positive NPV of Rs.210.45 Lakh, so project is accepted
211. b) The project is having a negative NPV of (-) Rs.128.79 Lakh, so project is not accepted   
212. c) The project is having a positive NPV of Rs.300.75 Lakh, so project is accepted
213. d) The project is having a positive NPV of Rs.128.79 Lakh, so project is accepted