5568303696

tl2:2od-balf l)(a)-JP

Co*. 641J-MN-9742-13.    2

2. A fum has Saks of ? 75,00.000, Variable Cos of f 42,00,000 and Fixed Cost of ?6.00,000.    15

It has a Dcbt of * 45,00,000 at 9% and Equity of ? 55,00,000

(a)    What is the finn’s ROI ?

(b)    Docs it havc a favourab!e Financial Leveragc ?

(c)    If the finn bclongs to an industry, whose asset tumover is 3, docs it have high or Iow asset leverage ?

(d)    What arc the Opcrating. Financial and Combincd Leverages of the firm ?

(e)    If the Salcs drop to ? 50,00,000, what will be the new EBIT ?

OR

2.    One-up Ltd. has equity sharc Capital of ? 5,00,000 divided into share of? 100 cach. It 15 wishcs to raisc further ? 3,00,000 for cxponsion-cum-modcrnisatioo scheme. The company plans the following financing altematives :

(a)    By issuing cquity shares only

(b)    ? 1,00,000 by issuing equity shares and ? 2,00,000 through dcbcnturcs or term loan @ 10% per annum.

(ę) By raising term loan only at 10% per annum.

(d) ? 1,00,000 by issuing Equity Shares and ? 2,00,000 by issuing 8% Prefercncc Shares.

You arc requircd to suggcst the best altemativc giving your commcnt assuming that the estimated caming before interest and taxcs (EBIT) after cxpansion is ? 1,50,000 and corporatc ratc of tax is 35%.

3. TB2 Ltd. requircs ? 40,00,000 and providcs you the following information :    15

(a)    Dcbt Equity ratio will be 3/5 : 2/5

(b)    Debt will cany interest of 12% for first ? 4,00.000 and 12-5% for the balance

(c)    EPS for the currcnt ycar is ? 20. Dividend payment ratio is 60%. Dividcnd GtowUi ratę expccted is 5%. Market Price per share is ? 90. Cost of floalation is ? 6 per sharc.

(d)    Presem equity Capital is ? 2,00,000 dividcd into fulły paid shares of ? 10 cach

(c) Corporate tax ratc is 30%.

Compute wcightcd Marginal Cost of Capital.

OR

ITURN OVER