Note:
1.     Attempt both the sections on same answer sheet
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2.     All the questions are compulsory in Section I and attempt any three questions from Section II
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3.     Working notes should be part of the answers
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4.     Figures to indicate right will give you full Marks
| SECTION I | ||
| Q1 a. Concept Testing |
05 |
|
|
1) |
ICD (Inter Corporate Deposits) | 3) MM Approach |
|
2) |
Age Analysis of debtors | 4) Marketable Securities |
|
5) |
Purchase Consideration in Amalgamation | |
| Q1 b. Attempt any two | 10 | |
| 1) The Operating information of Nidhi Limited is as follows: | ||
| Sales |
– |
Rs. 1, 50,000 |
| Variable Cost |
– |
Rs. 1, 05,000 |
| Fixed Cost |
– |
Rs. 30,000 (Including Interest 10% on 75000) |
| You are required to Calculate: | ||
| 1) a) DOL |
b) DFL |
c) DCL |
2)Â Â Â Â Determine the Sales to double the EBIT
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2)Â Â Â Â SATISH Company issues 10 % Debenture of Rs. 100 each at premium of 10% flotation cost is 2% on par value, to be redeemed after 10 years; at a premium of 10%, .Calculate the cost of debt (After Tax). Tax rate is 50%
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3)Â Â Â Â Potato Ltd. intending to acquire Onion Ltd. by exchanging 0.5 of its shares for every share of Onion Ltd. The relevant financial information is given below:
| Particulars |
Potato Ltd |
Onion Ltd |
| Earnings after Tax (Rs.) |
9,00,000 |
1,80,000 |
| Number of Equity Shares |
3,00,000 |
90,000 |
| MPS (Rs.) |
36 |
20 |
I)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â The no. of shares required to be issued by Potato Ltd. for acquiring Onion Ltd.
II)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â EPS of Potato Ltd. after Merger (if there is a synergy Loss of 10 %)
Q2. ‘Satish’ Ltd. is considering the possibility of purchasing a Multipurpose Machine Costing Rs. 10 Lakhs.
The machine has an expected life of 5 years. The machine will generate Rs. 6 Lakhs per year before depreciation and Tax. The management wishes to dispose of the machine at the end of 5 years for Rs. 1 Lakh. The depreciation allowable for the machine is 25% on W.D.V. and the company’s tax rate is 40%. The company has approached first leasing company Ltd. for a 5 year lease for financing the machine which quoted a rate of Rs. 10 per thousand per month. The company wants you to evaluate the proposals. The cost of capital of the company is 10 per cent and for lease option it wants you to consider discount rate of 15 per
| cent. The present value factors are as follows: |
15 |
|||||||
|
Year |
0 |
1 |
2 |
3 |
4 |
5 |
||
|
PV @ 10% |
1.000 |
0.9091 |
0.8264 |
0.7513 |
0.6830 |
0.6209 |
||
|
PV @ 15% |
1.000 |
0.8696 |
0.7561 |
0.6575 |
0.5718 |
0.4972 |
||
SECTION II (Any Three)
Q3. NIDHI Ltd. has an annual sale of Rs. 50, 00,000. It is currently extending 30 days credit to the dealers. It is felt that sales can pick up considerably if the dealers are willing to carry increased stocks, but the dealers
have difficulty in financing their inventory. The company is, therefore, considering shift in credit policy. The following information is available: 10
The average collection period is now 30 days., Variable costs are 80% on sales, Fixed costs Rs. 6, 00,000 per annum., Required (pre – tax) return on investment is 20% p.a.
|
Credit Policy |
Average Collection Period in days |
Annual Sales Rs. |
|
A |
45 |
56,00,000 |
|
B |
60 |
60,00,000 |
|
C |
75 |
62,00,000 |
|
D |
90 |
63,00,000 |
Determine which policy the company should adopt, assuming that year = 360 days and Debtors are valued at Total Cost, (for the purpose of calculation of investment in debtors).
| Q4. Prepare cash budget for July-December from the following information. |
10 |
|||||||
| (1) |
Estimated Sales, expenses etc. are as follows: |
(Rs. In Lakhs) | ||||||
| Particulars | June | July |
Aug. |
Sept. | Oct. | Nov. |
Dec. |
|
| Sales |
35 |
40 |
40 |
50 |
50 |
60 |
65 |
|
| Purchases |
14 |
16 |
17 |
20 |
20 |
25 |
28 |
|
| Wages & Salary |
12 |
14 |
14 |
18 |
18 |
20 |
22 |
|
| Misc. Exp. |
05 |
06 |
06 |
06 |
06 |
07 |
07 |
|
| Int. Received |
02 |
– |
– |
02 |
02 |
– |
02 |
|
| Sales of Shares |
– |
– |
20 |
– |
– |
– |
– |
|
(2)Â 20% 0f the sales are on cash and the balance on credit.
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(3)Â 1% of the Credit Sales are returned by Customers, 2% are bad debts & balance of the Total Accounts receivables are collected in the Month of the sales, and the rest in the next month.
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(4)Â The time log in payments of miscellaneous expenses and purchases in one month.
(5)Â Wages and Salaries are paid fortnightly with a time log of 15 days.
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(6)Â The company keeps minimum cash balance of Rs.5 Lakhs. Cash in Excess of Rs. 7 Lakhs is invested in Government. Securities in the Multiple of Rs. 1 Lakh. Short falls minimum cash balances are made good by borrowing from banks. Ignore interest received and paid.
Q5. A Factory produces 96,000 units during the year and sells them @ Rs. 50 per unit. Cost structure of a
| Product is as follows: | 10 | ||||
| Raw Material | 60% | ||||
| Labour | 15% | ||||
| Overheads | 10% | ||||
| Cost | 85% | ||||
| Profit | 15% | ||||
| Selling Price | 100% | ||||
| The following additional information is available: | |||||
- The activities of the purchasing, producing & selling occur evenly throughout the year.
- Raw Material equivalent to 1 month’s supply is stored in godown
- The Production Process takes 1 month.
- Finished goods equal to 3 Month’s production are carried in stock.
- Debtors get 2 month’s credit
- 10% of the sales are made at 10% above the normal selling price
- Creditors allow 1 ½ month’s credit
- Time Lag in Payment of wages and overheads is ½ month.
- Cash and Bank balance is to be maintained at 10% of the working capital (before considering the Cash)
1)Â Â Â Â Draw a forecast of working capital requirement of the factory
2)Â Â Â Â MPBF (Low Risk Category )
Q6.a) Plugging Back of Profits                        b) Profit Maximization V/s Wealth Maximization       10
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