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Il»:2ad-hitf t3(a)-JP

Con. 6413-MN-9742-13.

3.    ABC Ltd. wishes to raisc additional financc of Z 20 Lakhs for mccting its invcstmcnt 15 plans. The company has Z 4,00.000 in tlić form of rctaincd camings availablc for investmcnt purposcs. The following arc the further dctails :

(a)    Dcbl cquity ratio 25 : 75

(b)    Cost of debt at the ratę of 10% (before tax) upto Rs. 2,00,000 and 13% (beforc tax) beyond that

(c)    Eaming per sharc Z 12

(d)    Dividcnd payout 50% of caniings

(e)    Expectcd growth ratę in dividcnd 10%

(0 Current market price per share Z 60

(g) Company tax ratę is 30% and $hareholdcr's personal tax is 20%.

Reqnired :

(i) Calculate the post tax avcrage cost of additional debt

(ii)    Calculate the cost of rctaincd eamings and cost of cąuity

(iii)    Calculate the overall wcighted averagc (after tax) cost of additional financc.

4. (a) Fili in the blanks and re-write with appropriatc option :—    8

•    (i) Financial management ineludes    ■

(1)    Tax management    (2)    Humań rcsource management

(3)    Production management (4)    Marketing management

(ii)    The interest paid on the principal for a fixed period of timc at a fixed ratę

of interest if called_.

(I)    Simple interest    (2)    Compound interest

(3)    PV    (4)    FV

(iii)    A Iow invcntory tumover ratio indic&tes    ■

(1)    Investmcnt tied up in stock

(2)    Absolute goods on hand

(3)    Advcrse liquidity

(4)    Ali oftbe abovc

(iv)    The cost whkh cquatcs the PV of cash inflow with the PV of cash outflow

is_.

(1)    Explicitcost    (2)    Historical cost

(3)    Futurę cost    (4)    Implicit cost

(v) The factor which b not rc!cvanr for determinalkm of debt cąuity mix_.

(1)    Taxadoa    (2)    Naturę of Assct base

(3)    Industry norms    (4)    Viability of cash fiows

(vi) Ideał situation for profit maximisation is_

(1)    Thin Financial levcrage

(2)    Low operating lcverage

(3)    Low operating and high financial !cvcragc

| TU RN OVER

(4)    Nonę of the abovc