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Afm QP - 2

The document outlines the VI Semester B.Com Preparatory Examination for Advanced Financial Management at Mangalore Institute of Management & Science. It includes instructions for answering questions across three sections, covering topics such as explicit costs, WACC, capital structure, and various financial management concepts. The exam consists of multiple-choice questions, short answer questions, and detailed problem-solving questions related to financial management principles.

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8 views2 pages

Afm QP - 2

The document outlines the VI Semester B.Com Preparatory Examination for Advanced Financial Management at Mangalore Institute of Management & Science. It includes instructions for answering questions across three sections, covering topics such as explicit costs, WACC, capital structure, and various financial management concepts. The exam consists of multiple-choice questions, short answer questions, and detailed problem-solving questions related to financial management principles.

Uploaded by

maheshmahi6778
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MANGALORE INSTITUTE OF MANAGEMENT & SCIENCE

# 68, Ullal Main Road, Near, Bangalore University Qtrs, Bangalore-560056

VI SEMESTER B.COM PREPARATORY EXAMINATION – JUNE 2024


SUBJECT:ADVANCED FINANCIAL MANAGEMENT
Time: 2 Hour 30 Min Reg. No. Max. Marks: 60
Instructions: Answer all the sections

SECTION - A
Answer any SIX questions. Each question carries TWO marks. (6X2=12)
1.
a. What is explicit cost?
b. Give the meaning of WACC.
c. What is optimum capital structure?
d. What is financial risks? Give an example.
e. Give the meaning of stock dividend.
f. What is agency theory?
g. Name two methods of mergers.
h. What is MBO?

SECTION - B
Answer any THREE questions. Each question carries FOUR marks. (3X4=12)

2. A company issues 10,000, 10% redeemable preference shares of ₹ 100 each, redeemable after
10 years at a premium of 5%. The cost of issue is ₹ 2 per share. Calculate the cost of redeemable
preference share capital.
3. Explain NOI approach.
4. Explain the types of risks in capital budgeting.

5. A company belongs to a risk class for which the appropriate capitalization rate is 10%. It
currently has outstanding 25,000 shares selling at ₹ 100 each. The firm is contemplating the
declaration of a dividend of ₹ 5 per share at the end of the current financial year. It expects to
have a net income of ₹ 2,50,000 and has a proposal for making new investments of ₹ 5,00,000.
Show that under the MM assumptions, the payment of dividend does not affect the value of the
firm.
6. Write a short note on leveraged buyout.
SECTION - C
Answer any THREE question. Question carries TWELVE marks. (3X12=36)

7. Mr. Innocent is considering an investment proposal of ₹ 20,000. The returns during the life of
the investment are as under:-
Year - 1

Events Cash inflow Probability


I 8,000 0.3
II 12,000 0.5
III 10,000 0.2

Year - 2
Cash inflows 8,000 12,000 10,000
in Ist year
events Cash Prob. Cash inflow Prob. Cash inflow Prob.
inflow
1 15,000 0.2 20,000 0.1 25,000 0.2
2 20,000 0.6 30,000 0.8 40,000 0.5
3 25,000 0.2 40,000 0.1 60,000 0.3
Using 10% as cost of capital advise the acceptability of the proposal.

8. Explain the techniques of measuring risks.


9. From the following information ascertain which project is more risky on the basis of standard
deviation.

Project A Project B
Cash Probabilities Cash Probabilities
inflow inflow
2,000 0.2 2,000 0.1
4,000 0.3 4,000 0.4
6,000 0.3 6,000 0.4
8,000 0.2 8,000 0.1

10.What are the fundamental ethical principle in business?


11. Explain the different types of dividend declared by companies.

*-*-*- ALL THE BEST -*-*-*

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