The modern approach is an improvement over the traditional approach of financial management.Do you agree
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Finance Management
1. ”The modern
approach is an improvement over the traditional approach of financial
management.”Do you agree?
2. A company has
Rs.200000 as EBIT .It has Rs.1000000,10% debentures .The equity capitalization
rate (Ke)of the company is 12.5%.Find out the value of the firm under Net
Income Approach. Also prove the NI approach.
3. A company
earns Rs.5 per share ;it is capitalized at a rate of 10% and has a rate of
return on investments of 16%. According to Walter’s model what should be the
price per share at 50% dividend pay out ratio? Is this the optimum pay out
ratio according to Walter?
4. ”The
principal focus of finance is on decisions and actions which affect the value
of the firm.”How can financial management help to maximize it?
5. Sales
Rs.2000000, Variable cost Rs.600000, Fixed costs Rs.100000, Interest Rs.5000
i)
Using the concept of operating leverage, by what
percentage will EBIT increase,if there is a 10% increase in sales?
ii) Using the concept of financial
leverage, by what percentage will EBT
increase,if
there is a 6% increase in EBIT?
iii)
Using the concept of combined leverage, by what percentage will EBT increase,if
there is a 6% increase in sales? earnings before interest and taxes (EBIT)
6. ”It is the
capital expenditure decision that spells the difference between the business
success and business failure.”Do you agree with this statement? Substantiate
your views with reasons.
7. X Ltd.,wishes to issue 1000 7%
debentures of Rs.100 each for which the
1.
”Financial analysis requires an explicit consideration of
the time value of money.”Elaborate.
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