4 (Sem-5/CBCS) COM HC2 (FoFM)
2021 (Held in 2022)
COMMERCE (Honours)
(Fundamentals of Financial
Management)
Full Marks: 80
Time: Three hours
The figures in the margin
indicate full marks for the questions.
1. (A) Choose the correct option of the following: 1x5=5
(1) Which of the following is a part of financial decision-making?
(a) Investment decision.
(b) Financing decision.
(c)
Dividend decision.
(d) All of the above.
(2) Capital budgeting is a part of
(a) Investment decision.
(b) Working capital management.
(c)
Capital structure.
(d) Dividend decision.
(3) Cost of capital refers to
(a) Floatation cost.
(b) Dividend.
(c)
Minimum required rate of
return.
(d) None of the above.
(4) The working capital ratio is
(a) Working capital/sales.
(b) Working capital/total assets.
(c)
Current assets/current
liabilities.
(d) Current assets/sales.
(5) The long-term objective of financial management is to
(a) Maximize earning per share.
(b) Maximize the value of the firm’s common stock.
(c)
Maximize return on investment.
(d) Maximize market share.
(B) Write whether the
following statements are True or False: 1x5=5
(1) Profit maximization ignores risk and uncertainty.
(2) The value of a share is equal to the present value of its expected
future dividend.
(3) The NPV method does not consider the time value of money.
(4) Retained earnings do not involve any cost.
(5) Gross working capital means total current assets.
2. Answer the following questions: 2x5=10
(a) What is financial management?
(b) What is dividend?
(c)
What is internal rate of
return?
(d) What is marginal cost?
(e) What is leverage?
3. Answer any four from the following
questions: 5x4=20
(a) Write a brief note on valuation of equity shares.
(b) Explain various types of dividend.
(c)
What is optimum capital
structure? Explain.
(d) State the advantages and disadvantages of pay-back period method.
(e) Explain the main objective of inventory management.
(f)
Explain the main tools of cash
planning and control.
4. Explain the characteristics of financial
management. Describe the goals of financial management. 4+6=10
Or
Discuss the various factors that affect bond
value. Also explain the steps in bond valuation. 5+5=10
5. Define capital budgeting. Discuss the
capital budgeting process. 2+8=10
Fundamentals of Financial Management Solved Question Paper 2021 Gauhati University
Or
A company has to select one of the two
alternative projects whose particulars are given below:
|
Particulars |
Project A (Rs.) |
Project B (Rs.) |
|
Initial
outlay: |
1,18,720 |
1,00,670 |
|
Net
cash flow at the end of the year: |
|
|
|
1st year |
1,00,000 |
10,000 |
|
2nd year |
20,000 |
10,000 |
|
3rd year |
10,000 |
20,000 |
|
4th year |
10,000 |
1,00,000 |
The company can arrange necessary fund at 8%.
Compute NPV of each project and comment on results. 10
[The PV factor of Re. 1 received at the end
of 1st year is 0.926, 2nd year is 0.857, 3rd
year is 0.794 and 4th year is 0.735]
6. Explain the concept of cost of capital.
Also explain the methods for calculating cost of capital. 2+8=10
Or
a) A company plans to issue
1,000 new shares of Rs. 100 each at par. The floatation costs are expected to
be 5% of the share price. The company pays a dividend of Rs. 10 per share
initially and the growth in dividends is expected to be 5%. Compute the cost of
new issue of equity shares. 5
b) Distinguish between
operating leverage and financial leverage. 5
7. State the meaning of dividend policy.
Explain the Modigliani and Miller hypothesis of dividend decision. 2+8=10
Or
Explain the concept and determinants of
working capital. 2+8=10
***
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