No. of Printed Pages : 05 Roll No. .......................

18BB2004
M.B.A. EXAMINATION, 2020

(Second Semester)

(C Scheme) (Re-appear)

(MBA)

MBA108C

CORPORATE FINANCE

Time : 2½ Hours] [Maximum Marks : 75

Before answering the question-paper candidates

should ensure that they have been supplied to correct
and complete question-paper. No complaint, in this
regard, will be entertained after the examination.

Note : Attempt Four questions in all. All questions

carry equal marks.

(2)M-18BB2004 1
1. Examine the inter-relationship among
“investment decision, financing decision,
dividend decision and working capital
management decision with an example.

2. Explain the following :

(a) Shareholders’ wealth maximization

objective

(b) Differentiate between Capital Market and

Money Market.

3. What is the importance of risk assessment in

capital budgeting ? Explain Risk-Adjusted
Discount Rate method of risk analysis in capital
budgeting with example and its relevance.

4. JPP Ltd. is considering two investment

proposals, labeled Project X and Project Y,
with the details shown ahead :

(2)M-18BB2004 2
Particulars Project-X Project-Y Present Present
Value Value of
one rupee one rupee
due at the due at the
end of n end of n
Years Years
(PVIF) (PVIF)
at 10% at 10%
Investment
Amount/
Cost (Rs.) 2,25,000 2,35,000
Live of
Project (Years) 05 05
Discount Rate 10% 12%
Depreciation
Rate (SLM) 20% 20%
Tax Rate 25% 25%
Cash flow
(Years) 1 60,000 (Rs.) 65,000 (Rs.) 0.909 0.892
Cash flow
(Years) 2 75,000 (Rs.) 75,000 (Rs.) 0.826 0.797
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Cash flow

(Years) 3 85,000 (Rs.) 95,000 (Rs.) 0.751 0.711

Cash flow

(Years) 4 65,000 (Rs.) 75,000 (Rs.) 0.683 0.635

Cash flow

(Years) 5 55,000 (Rs.) 65,000 (Rs.) 0.620 0.567

You are required to compute NPV and IRR of

both projects and decide the suitable project
for investment purpose.

5. What is the relevance of traditional approach

of capital structure in financing decision
making ? Explain it with numerical example
and also show the effect of financing decision
on the value of firm and overall cost of capital.

6. Explain CAPM to determine cost of equity

(ke) with example. Also examine the relevance
of CAPM in financing decision for a company.
(2)M-18BB2004 4
7. The EPS of a company is Rs. 10. It has an
internal rate of return 15% and the
capitalization rate of its risk class is 12.5%. If
Walter's model is used :
(i) What should be the optimum payout ratio
of the company ?
(ii) What would be the price of the share at
this payout ?
(iii) How shall the price of the share
be affected, if 20% payout will be
employed ?

8. How would you assess the working capital

requirements for seasonal industries (i.e.
Consumer Durables) ? Examine with relevent
points and examples in the support of your
answer.

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