DCM2102 FINANCIAL MANAGEMENT MARCH 2025

Description

SESSION	MARCH 2025
PROGRAM	BACHELOR OF COMMERCE (B.COM.)
SEMESTER	III
COURSE CODE & NAME	DCM2102 FINANCIAL MANAGEMENT

 

 

Assignment Set – 1

 

Q1. An investor deposits Rs 1000 in a bank account for 5 years at 8 per cent interest. Find out the amount which he will have in his account if interest is compounded

(a) annually

(b) semi-annually

(c) quarterly

(d) monthly 2.5+2.5+ 2.5+2.5          

Ans 1.

Compound Interest Formula:

Where:

= Final amount (maturity value)

= Principal (initial deposit) = ₹1000

= Annual interest rate (decimal) = 8% = 0.08

= Time (in years) = 5

= Number of times interest is compounded per year (annually = 1, semi-annually = 2,

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Q2. Calculate the cost of equity for X Ltd, which issued Rs 100 equity shares at a 10% premium. The expected dividend at year-end is 15%, growing annually at 8%. Also, find the cost of equity if dividends is constant.     5+5

Ans 2.

Given:

• Face value of equity share = ₹100
• Issued at 10% premium ⇒ Issue price = ₹100 + ₹10 = ₹110
• Expected dividend = 15% of face value = ₹15
• Growth rate (g) = 8% per annum

(a) When Dividend is Growing – Gordon Growth Model

Where:

 

Q3. ABC Ltd is investing in a project with an initial investment of $250,000 that is expected to produce $60,000 annually for the next 6 years. The discount rate is 10%. Evaluate the viability of this project by using the following methods:

1. Net Present value (NPV) Method
2. Pay Back Period Method (Standard payback is 5 year) 5+5

Ans 3.

Given:

• Initial Investment = $250,000
• Annual Cash Inflows = $60,000
• Time = 6 years
• Discount Rate = 10%
• Standard Payback = 5 years

1. Net Present Value (NPV) Method

 

 

Assignment Set – 2

 

Q4. Discuss various short-term and long-term sources of finance for firm. 10

Ans 4.

Finance is the lifeblood of any business. Companies need funds for both day-to-day operations and long-term investments. These funds are broadly classified into short-term and long-term sources based on the duration and nature of financial requirements.

1. Short-Term Sources of Finance

Short-term finance is typically required for a period of less than one year. It is used to manage

 

Q5. For ABC Ltd Company, which earns Rs 10 per share, capitalized at 10%, and has 20% return on investment:

1. a) Calculate the share price at a 20% dividend payout ratio using Walter’s model.
2. b) Determine if this is the optimal payout ratio per Walter’s theory. 5+5

Ans 5.

Given:

• Earnings per share (E) = ₹10
• Capitalization rate (Ke) = 10% = 0.10
• Return on investment (r) = 20% = 0.20
• Dividend payout ratio = 20% ⇒ Dividend per share (D) = 20% of ₹10 = ₹2

(a) Share Price using Walter’s Model

Walter’s Formula:

Where:

• = Price of the share

 

 

Q6. What are the objectives of inventory management? Discuss various Inventory Management Techniques.    5+5     

Ans 6.

Inventory management refers to the process of ordering, storing, and controlling a company’s inventory—whether it’s raw materials, work-in-progress, or finished goods. The main objectives are:

1. Ensure Uninterrupted Production

Maintain sufficient inventory of raw materials and components to avoid halts in the production