CA PE II Question Papers \u00a0Group\u00a0II<\/p>\n
Cost\u00a0Accounting and Financial Management May 2007<\/p>\n
\n
\n
This Paper has 23 answerable questions with 0 answered.<\/p>\n
Maximum Marks : 100 (i) Statement of equivalent production; (i) The cost of maintaining the library per year excluding the cost of new books; Also, comment on the subsidy policy of the club.<\/p>\n 10 (0) You are required to compute the ratio of the mix of the raw materials \u2018AXE\u2019 and \u2018CXE\u2019.<\/p>\n 8 (0) Type of suite Number Occupancy\u00a0percentage The other expenses for the year 2006 are as follows:<\/p>\n Rs. You are required to calculate the rent to be charged for each type of suite.<\/p>\n 10 (0) 50,000 You are required to prepare:<\/p>\n (i) A statement showing profit as per Cost accounts for the year ended 31st March, 2007; and I Accounting\u00a0Information 12 (0) 8 (0) Rs. Anticipated external financing opportunities are as follows:<\/p>\n (i) Rs. 100 per debenture redeemable at par : 20 years maturity 8% coupon rate, 4% floatation costs, sale price Rs. 100. 9 (0) You are required to calculate the net present value of the project and advise the management to the appropriate decision. Also calculate the Internal Rate of Return of the Project.<\/p>\n Note: Present value of Re. 1 at different rates of interest are as follows:<\/p>\n Year 10% 12% 14% 16% This Paper has 23 answerable questions with 0 answered.<\/p>\n Total No. of Questions\u2014 9] Maximum Marks : 100 (i) Statement of equivalent production; (i) The cost of maintaining the library per year excluding the cost of new books; Also, comment on the subsidy policy of the club.<\/p>\n 10 (0) You are required to compute the ratio of the mix of the raw materials \u2018AXE\u2019 and \u2018CXE\u2019.<\/p>\n 8 (0) Type of suite Number Occupancy\u00a0percentage The other expenses for the year 2006 are as follows:<\/p>\n Rs. You are required to calculate the rent to be charged for each type of suite.<\/p>\n 10 (0) 50,000 You are required to prepare:<\/p>\n (i) A statement showing profit as per Cost accounts for the year ended 31st March, 2007; and I Accounting\u00a0Information 12 (0) 8 (0) Rs. Anticipated external financing opportunities are as follows:<\/p>\n (i) Rs. 100 per debenture redeemable at par : 20 years maturity 8% coupon rate, 4% floatation costs, sale price Rs. 100. 9 (0) You are required to calculate the net present value of the project and advise the management to the appropriate decision. Also calculate the Internal Rate of Return of the Project.<\/p>\n Note: Present value of Re. 1 at different rates of interest are as follows:<\/p>\n Year 10% 12% 14% 16% CA PE II Question Papers \u00a0Group\u00a0II Cost\u00a0Accounting and Financial Management May 2007 This Paper has 23 answerable questions with 0 answered. Total No. of Questions\u2014 9] Time Allowed : 3 Hours Maximum Marks : 100 Answers to questions\u00a0are to be given only in\u00a0English\u00a0except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a candidate … Read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[120,4731,4930],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24579"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=24579"}],"version-history":[{"count":1,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24579\/revisions"}],"predecessor-version":[{"id":115528,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/24579\/revisions\/115528"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=24579"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=24579"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=24579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nTotal No. of Questions\u2014 9]
\nTime Allowed : 3 Hours <\/em><\/p>\n
\nAnswers to questions\u00a0are to be given only in\u00a0English\u00a0except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a candidate who has not opted for Hindi medium,\u00a0answers\u00a0in Hindi, his\u00a0answers\u00a0in Hindi will not be valued.
\nQuestion Nos.1 and 6 are compulsory.
\nAttempt three questions out of the remaining question numbers 2, 3, 4 and 5 and attempt two questions from the remaining Questions Nos. 7, 8 and 9.
\nWorking notes should form part of the answer.
\nMarks
\n1. (a) Following details are related to the work done in Process \u2019A\u2018 of XYZ Company during the month of March, 2007:
\nOpening work in progress (2,000 units) Rs.
\nMaterials
\nLabour
\nOverheads
\nMaterials introduced in Process \u2019A\u2018 (38,000 units)
\nDirect labour
\nOverhead 80,000
\n15,000
\n45,000
\n14,80,000
\n3,59,000
\n10,77,000
\nUnits scrapped : 3,000 units
\nDegree of completion:
\nMaterials
\nLabour and overheads 100%
\n80%
\nClosing work\u2013in\u2013progress : 2,000 units
\nDegree of completion
\nMaterials
\nLabour and overheads 100%
\n80%
\nUnits finished and transferred to Process \u2019B\u2018 : 35,000
\nNormal Loss:
\n5% of total input including opening work\u2013in\u2013progress
\nScrapped units fetch Rs. 20 per piece.
\nYou are required to prepare:<\/p>\n
\n(ii) Statement of cost;
\n(iii) Statement of distribution cost; and
\n(iv) Process \u2019A\u2019 Account, Normal and Abnormal Loss Accounts. 2+3
\n+2+3=10 (0)
\n(b) Explain briefly each of the following categories in Activity based Costing by giving at least two examples:
\n(i) Unit level activities
\n(ii) Batch level activities
\n(iii) Product level activities
\n(iv) Facility level activities
\n2+2+2+2 (0)
\n2. (a) What is \u2018Integrated\u00a0Accounting\u00a0System\u2019? State its advantages. 4 (0)
\n(b) A Club runs a library for its members. As part of club policy, an annual subsidy of upto Rs. 5 per member including cost of books may be given from the general funds of the club. The management of the club has provided the following figures for its library department:
\nNumber of Club members
\nNumber of Library members
\nLibrary fee per member per month
\nFine for late return of books
\nAverage No. of books returned late per month
\nAverage No. of days each book is returned late
\nNumber of available old books
\nCost of new books
\nNumber of books purchased per year
\nCost of maintenance per\u00a0old book\u00a0per year 5,000
\n1,000
\nRs. 100
\nRe. 1 per book per day
\n500
\n5 days
\n50,000 books
\nRs. 300 per book
\n1,200 books
\nRs. 10
\nStaff details No. Per Employee
\nSalary per month (Rs.)
\nLibrarian
\nAssistant Librarian
\nClerk 01
\n03
\n01 10,000
\n7,000
\n4,000
\nYou are required to calculate:<\/p>\n
\n(ii) The cost incurred per member per month on the library excluding cost of new books; and
\n(iii) The net,\u00a0income\u00a0from the library per year.
\nIf the club follows a policy that all new books must be purchased out of library revenue (a) What is the maximum number of books that can be purchased per year and (b) How many excess books are being purchased by the library per year?<\/p>\n
\n3. (a) Raw materials \u2018AXE\u2019 costing Rs. 150 per kg and \u2018BXE\u2019 costing Rs. 90 per kg are mixed in equal proportions for making product \u2018A\u2019. The loss of material in processing works out to 25% of the product. The production expenses are allocated at 40% of direct material cost. The end product is priced with a margin of 20% over the total cost.
\nMaterial \u2018BXE\u2019 is not easily available and substitute raw material \u2018CXE\u2019 had been found for \u2018BXE\u2019 costing Rs. 75 per kg. It is required to keep the proportion of the substitute material in the maxture as low as possible and at the same time maintain the selling price of the end product at existing level and ensure the same quantum of profit as at present.<\/p>\n
\n(b) Answer any three of the following: 2×3=6
\n(i) Explicit and Implicit Costs (0)
\n(ii) Period Costs and Discretionary Costs (0)
\n(iii) Efficiency Audit and Propretary Audit (0)
\n(iv) Bin Cards and Stock Control Cards (0)
\n4. (a) A company runs a holiday home, For this purpose, it has hired a building at a rent of Rs. 10,000 per month alongwith 5% of total talking. It has three types of suites for its customers, viz., single room, double rooms and triple rooms.
\nFollowing information is given:<\/p>\n
\nSingle room
\nDouble rooms
\nTriple rooms 100
\n50
\n30 100%
\n80%
\n60%
\nThe rent of double rooms suite is to be fixed at 2.6 times of the single room suite and that of triple rooms suite as twice of the double rooms suite.<\/p>\n
\nStaff salaries
\nRoom attendante’ wages
\nLighting, heating and power
\nRepairs and renevation
\nLaundy charges
\nInterior decoration
\nSandries 14,25,000
\n4,50,000
\n2,15,000
\n1,23,500
\n80,500
\n74,000
\n1,58,000
\nProvide profit @ 20% on total taking and assume 360 days in a year.<\/p>\n
\n(b) \u2018Under the Rowan Premium Bonus system, a less efficient worker can obtain same bonus as a highly efficient worker.\u2019 Discuss with suitable examples. 4 (0)
\n5. (a) ABC Ltd. has furnished the following information from the financial books for the year ended 31st March, 2007:
\nProfit & Loss Account
\nRs. Rs.
\nTo Opening stock
\n(500 units at Rs. 140 each)
\nMaterials consumed
\nWages
\nGross profit c\/d
\n70,000
\n10,40,000
\n6,00,000
\n12,10,000 By Sales (10,250 units)
\nBy Closing stock
\n(250 units at Rs. 200 each) 28,70,000<\/p>\n
\n29,20,000 29,20,000
\nTo Factory overheads
\nAdministration overheads
\nSelling expenses
\nBad debts
\nPreliminary expenses
\nNet Profit 3,79,000
\n4,24,000
\n2,20,000
\n16,000
\n20,000
\n1,92,000 By Gross profit b\/d
\nInterest
\nRent received 12,10,000
\n1,000
\n40,000
\n12,51,000 12,51,000
\nThe cost sheet shows the cost of materials at Rs. 104 per unit and the labour cost at Rs. 80 per unit. The factory overheads are absorbed at 60% of labour cost and administration overheads at 20% of factory cost. Selling expenses are charged at Rs. 24 per unit. The opening stock of finished goods is valued at Rs. 180 per unit.<\/p>\n
\n(ii) A statement showing the reconciliation of profit as disclosed in Cost accounts with the profit shown in Financial accounts. 5+5=10 (0)
\n(b) Explain any two of the following: 2×2=4
\n(i) National profit in Contract costing. (0)
\n(ii) Retention\u00a0money\u00a0in Contract costing. (0)
\n(iii) Economic Batch Quantity in Batch Costing. (0)
\n6. (a) The following\u00a0accounting\u00a0information and financial ratios of PQR Ltd. relate to the year ended 31st December, 2006:
\n2006<\/p>\n
\nGross Profit
\nNet profit
\nRaw materials consumed
\nDirect wages
\nStock of raw materials
\nStock of finished goods
\nDebt collection period
\nAll sales are on credit
\n15% of sales
\n8% of sales
\n20% of works cost
\n10% of works cost
\n3 months usage
\n6% of works cost
\n60 days
\nII Financial Rations:
\nFixed assets to sales
\nFixed assets to Current assets
\nCurrent ratio
\nLong\u2013term loans to current liabilities
\nCapital to Reserves and Surplus
\n1 : 3
\n13 : 11
\n2 : 1
\n2 : 1
\n1 : 4
\nIf value of fixed assets as on 31st December, 2005 amounted to Rs. 26 lakhs, prepare a summarised Profit and Loss account of the company for the year ended 31st December, 2006 and also the Balance Sheet as on 31st December, 2006.<\/p>\n
\n(b) What is Debt securitisation? State the basic debt securitisation process. 4 (0)
\n7. (a) JKL Ltd. is considering the revision of its credit policy with a view to increasing its sales and profit. Currently all its sales are on credit and the customers are given one month’s time to settle the dues. It has a contribution of 40% on sales and it can raise additional funds at a cost of 20% per annum. The marketing manager of the company has given the following options along with estimates for considerations:
\nParticulars Current
\nPosition I
\nOption II
\nOption III
\nOption
\nSales in (Rs. lakhs)
\nCredit period (in months)
\nBad debts (1% of sales)
\nCost of Credit administration (Rs. lakhs) 200
\n1
\n2
\n1,20 210
\n1\u00bd
\n2\u00bd
\n1,30 220
\n2
\n3
\n1,50 250
\n3
\n5
\n3,00
\nYou are required to advise the company for the best option.<\/p>\n
\n(b) What do you mean by factoring? Describe the benefits of factoring. 4 (0)
\n8. (a) You are required to determine the weighted average cost of capital of a firm using (i) book\u2013value weights and (ii) market value weights. The following information is available for your perusal:
\nPresent book value of the firm’s capital structure is:<\/p>\n
\nDebentures of Rs. 100 each
\nPreference shares of Rs. 100 each
\nEquity shares of Rs. 10 each 8,00,000
\n2,00,000
\n10,00,000
\n20,00,000
\nAll these securities are traded in the capital markets. Recent prices are: Debentures @ Rs. 110, Preference shares @ Rs. 120 and Equity shares @ Rs. 22.<\/p>\n
\n(ii) Rs. 100 preference share redeemable at par : 15 years maturity, 10% dividend rate, 5% floatation costs, sale price Rs. 100.
\n(iii) Equity shares : Rs. 2 per share floatation costs, sale price Rs. 22.
\nIn addition, the dividend expected on the equity share at the end of the year is Rs. 2 per share; the anticipated growth rate in dividends is 5% and the firm has the practice of paying all its earnings in the form of dividend. The corporate tax rate is 50%.<\/p>\n
\n(b) Explain briefly the propositions made in Modigliani and Miller approach on cost of capital. 3 (0)
\n9. (a) A company is considering the proposal of taking up a new project which requires an investment of Rs. 400 lakh on machinery and other assets. The project is expected to yield the following earnings (before depreciation and taxes) over the next five years:
\nYear Earnings (in Rs. lakh)
\n1
\n2
\n3
\n4
\n5 160
\n160
\n180
\n180
\n150
\nThe cost of raising the additional capital is 12% and assets have to be depreciated at 20% on ‘Written Down Value’ basis. The scrap value at the end of the five years period may be taken as zero. Income\u2013tax applicable to the company is 50%.<\/p>\n
\n1
\n2
\n3
\n4
\n5 0.91
\n0.83
\n0.75
\n0.68
\n0.62 0.89
\n0.80
\n0.71
\n0.64
\n0.57 0.88
\n0.77
\n0.67
\n0.59
\n0.52 0.86
\n0.74
\n0.64
\n0.55
\n0.48
\n8 (0)
\n(b) State the differences between Global Depository Receipts and American Depository Receipts. 4 (0<\/p>\n
\nTime Allowed : 3 Hours<\/p>\n
\nAnswers to questions\u00a0are to be given only in\u00a0English\u00a0except in the cases of\u00a0candidates\u00a0who have opted for Hindi medium. If a candidate who has not opted for Hindi medium,\u00a0answers\u00a0in Hindi, his\u00a0answers\u00a0in Hindi will not be valued.
\nQuestion Nos.1 and 6 are compulsory.
\nAttempt three questions out of the remaining question numbers 2, 3, 4 and 5 and attempt two questions from the remaining Questions Nos. 7, 8 and 9.
\nWorking notes should form part of the answer.
\nMarks
\n1. (a) Following details are related to the work done in Process \u2019A\u2018 of XYZ Company during the month of March, 2007:
\nOpening work in progress (2,000 units) Rs.
\nMaterials
\nLabour
\nOverheads
\nMaterials introduced in Process \u2019A\u2018 (38,000 units)
\nDirect labour
\nOverhead 80,000
\n15,000
\n45,000
\n14,80,000
\n3,59,000
\n10,77,000
\nUnits scrapped : 3,000 units
\nDegree of completion:
\nMaterials
\nLabour and overheads 100%
\n80%
\nClosing work\u2013in\u2013progress : 2,000 units
\nDegree of completion
\nMaterials
\nLabour and overheads 100%
\n80%
\nUnits finished and transferred to Process \u2019B\u2018 : 35,000
\nNormal Loss:
\n5% of total input including opening work\u2013in\u2013progress
\nScrapped units fetch Rs. 20 per piece.
\nYou are required to prepare:<\/p>\n
\n(ii) Statement of cost;
\n(iii) Statement of distribution cost; and
\n(iv) Process \u2019A\u2019 Account, Normal and Abnormal Loss Accounts. 2+3
\n+2+3=10 (0)
\n(b) Explain briefly each of the following categories in Activity based Costing by giving at least two examples:
\n(i) Unit level activities
\n(ii) Batch level activities
\n(iii) Product level activities
\n(iv) Facility level activities
\n2+2+2+2 (0)
\n2. (a) What is \u2018Integrated\u00a0Accounting\u00a0System\u2019? State its advantages. 4 (0)
\n(b) A Club runs a library for its members. As part of club policy, an annual subsidy of upto Rs. 5 per member including cost of books may be given from the general funds of the club. The management of the club has provided the following figures for its library department:
\nNumber of Club members
\nNumber of Library members
\nLibrary fee per member per month
\nFine for late return of books
\nAverage No. of books returned late per month
\nAverage No. of days each book is returned late
\nNumber of available old books
\nCost of new books
\nNumber of books purchased per year
\nCost of maintenance per\u00a0old book\u00a0per year 5,000
\n1,000
\nRs. 100
\nRe. 1 per book per day
\n500
\n5 days
\n50,000 books
\nRs. 300 per book
\n1,200 books
\nRs. 10
\nStaff details No. Per Employee
\nSalary per month (Rs.)
\nLibrarian
\nAssistant Librarian
\nClerk 01
\n03
\n01 10,000
\n7,000
\n4,000
\nYou are required to calculate:<\/p>\n
\n(ii) The cost incurred per member per month on the library excluding cost of new books; and
\n(iii) The net,\u00a0income\u00a0from the library per year.
\nIf the club follows a policy that all new books must be purchased out of library revenue (a) What is the maximum number of books that can be purchased per year and (b) How many excess books are being purchased by the library per year?<\/p>\n
\n3. (a) Raw materials \u2018AXE\u2019 costing Rs. 150 per kg and \u2018BXE\u2019 costing Rs. 90 per kg are mixed in equal proportions for making product \u2018A\u2019. The loss of material in processing works out to 25% of the product. The production expenses are allocated at 40% of direct material cost. The end product is priced with a margin of 20% over the total cost.
\nMaterial \u2018BXE\u2019 is not easily available and substitute raw material \u2018CXE\u2019 had been found for \u2018BXE\u2019 costing Rs. 75 per kg. It is required to keep the proportion of the substitute material in the maxture as low as possible and at the same time maintain the selling price of the end product at existing level and ensure the same quantum of profit as at present.<\/p>\n
\n(b) Answer any three of the following: 2×3=6
\n(i) Explicit and Implicit Costs (0)
\n(ii) Period Costs and Discretionary Costs (0)
\n(iii) Efficiency Audit and Propretary Audit (0)
\n(iv) Bin Cards and Stock Control Cards (0)
\n4. (a) A company runs a holiday home, For this purpose, it has hired a building at a rent of Rs. 10,000 per month alongwith 5% of total talking. It has three types of suites for its customers, viz., single room, double rooms and triple rooms.
\nFollowing information is given:<\/p>\n
\nSingle room
\nDouble rooms
\nTriple rooms 100
\n50
\n30 100%
\n80%
\n60%
\nThe rent of double rooms suite is to be fixed at 2.6 times of the single room suite and that of triple rooms suite as twice of the double rooms suite.<\/p>\n
\nStaff salaries
\nRoom attendante’ wages
\nLighting, heating and power
\nRepairs and renevation
\nLaundy charges
\nInterior decoration
\nSandries 14,25,000
\n4,50,000
\n2,15,000
\n1,23,500
\n80,500
\n74,000
\n1,58,000
\nProvide profit @ 20% on total taking and assume 360 days in a year.<\/p>\n
\n(b) \u2018Under the Rowan Premium Bonus system, a less efficient worker can obtain same bonus as a highly efficient worker.\u2019 Discuss with suitable examples. 4 (0)
\n5. (a) ABC Ltd. has furnished the following information from the financial books for the year ended 31st March, 2007:
\nProfit & Loss Account
\nRs. Rs.
\nTo Opening stock
\n(500 units at Rs. 140 each)
\nMaterials consumed
\nWages
\nGross profit c\/d
\n70,000
\n10,40,000
\n6,00,000
\n12,10,000 By Sales (10,250 units)
\nBy Closing stock
\n(250 units at Rs. 200 each) 28,70,000<\/p>\n
\n29,20,000 29,20,000
\nTo Factory overheads
\nAdministration overheads
\nSelling expenses
\nBad debts
\nPreliminary expenses
\nNet Profit 3,79,000
\n4,24,000
\n2,20,000
\n16,000
\n20,000
\n1,92,000 By Gross profit b\/d
\nInterest
\nRent received 12,10,000
\n1,000
\n40,000
\n12,51,000 12,51,000
\nThe cost sheet shows the cost of materials at Rs. 104 per unit and the labour cost at Rs. 80 per unit. The factory overheads are absorbed at 60% of labour cost and administration overheads at 20% of factory cost. Selling expenses are charged at Rs. 24 per unit. The opening stock of finished goods is valued at Rs. 180 per unit.<\/p>\n
\n(ii) A statement showing the reconciliation of profit as disclosed in Cost accounts with the profit shown in Financial accounts. 5+5=10 (0)
\n(b) Explain any two of the following: 2×2=4
\n(i) National profit in Contract costing. (0)
\n(ii) Retention\u00a0money\u00a0in Contract costing. (0)
\n(iii) Economic Batch Quantity in Batch Costing. (0)
\n6. (a) The following\u00a0accounting\u00a0information and financial ratios of PQR Ltd. relate to the year ended 31st December, 2006:
\n2006<\/p>\n
\nGross Profit
\nNet profit
\nRaw materials consumed
\nDirect wages
\nStock of raw materials
\nStock of finished goods
\nDebt collection period
\nAll sales are on credit
\n15% of sales
\n8% of sales
\n20% of works cost
\n10% of works cost
\n3 months usage
\n6% of works cost
\n60 days
\nII Financial Rations:
\nFixed assets to sales
\nFixed assets to Current assets
\nCurrent ratio
\nLong\u2013term loans to current liabilities
\nCapital to Reserves and Surplus
\n1 : 3
\n13 : 11
\n2 : 1
\n2 : 1
\n1 : 4
\nIf value of fixed assets as on 31st December, 2005 amounted to Rs. 26 lakhs, prepare a summarised Profit and Loss account of the company for the year ended 31st December, 2006 and also the Balance Sheet as on 31st December, 2006.<\/p>\n
\n(b) What is Debt securitisation? State the basic debt securitisation process. 4 (0)
\n7. (a) JKL Ltd. is considering the revision of its credit policy with a view to increasing its sales and profit. Currently all its sales are on credit and the customers are given one month’s time to settle the dues. It has a contribution of 40% on sales and it can raise additional funds at a cost of 20% per annum. The marketing manager of the company has given the following options along with estimates for considerations:
\nParticulars Current
\nPosition I
\nOption II
\nOption III
\nOption
\nSales in (Rs. lakhs)
\nCredit period (in months)
\nBad debts (1% of sales)
\nCost of Credit administration (Rs. lakhs) 200
\n1
\n2
\n1,20 210
\n1\u00bd
\n2\u00bd
\n1,30 220
\n2
\n3
\n1,50 250
\n3
\n5
\n3,00
\nYou are required to advise the company for the best option.<\/p>\n
\n(b) What do you mean by factoring? Describe the benefits of factoring. 4 (0)
\n8. (a) You are required to determine the weighted average cost of capital of a firm using (i) book\u2013value weights and (ii) market value weights. The following information is available for your perusal:
\nPresent book value of the firm’s capital structure is:<\/p>\n
\nDebentures of Rs. 100 each
\nPreference shares of Rs. 100 each
\nEquity shares of Rs. 10 each 8,00,000
\n2,00,000
\n10,00,000
\n20,00,000
\nAll these securities are traded in the capital markets. Recent prices are: Debentures @ Rs. 110, Preference shares @ Rs. 120 and Equity shares @ Rs. 22.<\/p>\n
\n(ii) Rs. 100 preference share redeemable at par : 15 years maturity, 10% dividend rate, 5% floatation costs, sale price Rs. 100.
\n(iii) Equity shares : Rs. 2 per share floatation costs, sale price Rs. 22.
\nIn addition, the dividend expected on the equity share at the end of the year is Rs. 2 per share; the anticipated growth rate in dividends is 5% and the firm has the practice of paying all its earnings in the form of dividend. The corporate tax rate is 50%.<\/p>\n
\n(b) Explain briefly the propositions made in Modigliani and Miller approach on cost of capital. 3 (0)
\n9. (a) A company is considering the proposal of taking up a new project which requires an investment of Rs. 400 lakh on machinery and other assets. The project is expected to yield the following earnings (before depreciation and taxes) over the next five years:
\nYear Earnings (in Rs. lakh)
\n1
\n2
\n3
\n4
\n5 160
\n160
\n180
\n180
\n150
\nThe cost of raising the additional capital is 12% and assets have to be depreciated at 20% on ‘Written Down Value’ basis. The scrap value at the end of the five years period may be taken as zero. Income\u2013tax applicable to the company is 50%.<\/p>\n
\n1
\n2
\n3
\n4
\n5 0.91
\n0.83
\n0.75
\n0.68
\n0.62 0.89
\n0.80
\n0.71
\n0.64
\n0.57 0.88
\n0.77
\n0.67
\n0.59
\n0.52 0.86
\n0.74
\n0.64
\n0.55
\n0.48
\n8 (0)
\n(b) State the differences between Global Depository Receipts and American Depository Receipts. 4 (0<\/p>\n","protected":false},"excerpt":{"rendered":"