National Law University, Jodhpur

BBA, LLB VI Semester

Finance III (Financial Management)
Test 3
Marks: 15
Instructions:
1. The Answer script is to be uploaded on online6ug08@nlujodhpur.ac.in and
onlinebackup6@nlujodhpur.ac.in email id
2. The Answer script is either typed (MS Word, Times New Roman, Font size 12
with Spacing 1.5) or in your own handwriting on plain paper and upload it in the
PDF format file. 
3. The student should mention name, roll no., semester and subject on the first
page of the answer script.
Q.1) The following information is available in respect of a firm:

Capitalization rate (k ) 10%

e

Earnings per share (E) Rs 20

Assumed rate of return on investments (r): (i) 8 (ii) 15
Show the effect of dividend policy on the market price of shares, assuming dividend payout
ratio as zero percent, 50 percent and 100 percent, using Walter’s Model. Interpret the results.
(7.5 Marks)

Q.2) Describe in brief the following determinants of working capital – Profit level and Price
level changes.

(7.5 Marks)