T.Y.B.M.SSpecial Studies in Finance

Semester – VExam-October, 2010 Marks – 60 / 2 Hrs

Note: 1) Section I is compulsory2) Attempt any three questions from Section – II3) Figures to right indicate marks.

SECTION - 1Q.1-A Explain the following concepts (any 5)

1) Sweat Equity

2) Business Segment

3) Pro-rata Allotment

4) Open-ended Mutual Fund

5) Moratorium

6) CRISIL

(5)

Q.1-B Attempt Any Two of the following:i) ABC ltd has equity capital of Rs. 200lacs (Face value Rs.5), and

retained earnings of Rs. 135lacs. The company has sales of Rs. 900lacs and a net profit margin of 12%. Company enjoys a P/E of 5. Calculate MVA of the company.

ii) From the following information of Delta Ltd, for the year ended 31st March, 2009, Calculate the deferred tax asset/liability as per AS-22.

Accounting Profit 55,00,000Book Profit as per MAT 23,00,000Profit as per Income Tax Act 13,00,000Tax Rate 30%MAT Rate 10%

iii) Prepare an amortisation schedule for a term loan of Rs. 60lacs, assuming that the amount is repayable in 5 equal instalments of principal along with interest payable @ 12% on outstanding balances of loan.

(10)

Q.2 Blue Diamond Ltd has an existing business set up having sales turnover of Rs. 3crores. It wants to double its turnover in the coming years and is very confident of achieving the same. The company produces and sells a basic drug component, being the raw material for OTC (over the counter) medicines.

The firm was set up 5 years ago, as a partnership firm, but converted itself into a company 2 years ago. The current capital employed of the company is totally debt free at Rs. 2crores and hopes to raise it to Rs. 4.5crores, the term loan applied for being Rs. 2crores.

The term lending institution offers the loan for 5 years tenure at a rate of 10% p.a. being advance towards purchase of additional plant and machinery. The

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company offers collateral security of its old freehold building and personal guarantee of promoters in addition to the primary security. The company has its establishment in Silvasa which enjoys an 8 year tax holiday from the date of inception. Depreciation on new machinery is estimated at Rs.40lacs p.a. The expected ROI@18% p.a. for years 1 to 3 after inception and 22% p.a. thereafter.

A] Prepare a Flash Report on Blue Diamond Ltd’s proposal.B] Prepare a statement of profitability and DSCR for the tenure of the loan.C] Comment on the viability of the project in brief.

(15)

SECTION - 2Q.3 Explain in detail authorised activities of merchant banker. (10)Q.4 ABC Ltd acquired a machine on 1.4.2007 costing US$ 50,000. The suppliers

agreed to the following terms of payment. Down payment of 50% on1st April, 2007, 1st instalment of 35% on 1st April 2008, and last instalment of 15% on 1st April, 2009. The rate of exchange is steady at US$ = Rs.50 upto 31st December,2008. On 1st January 2009, due to an official revaluation of rates, the exchange rate is adjusted to US$ 1 =Rs. 46. Show the journal entries to account for the transactions and working as necessary as per AS-11.

(10)

Q.5 The cost of equity and cost of debt for ABC ltd is 15% and 12% respectively. The company pays 30% corporate tax. The company has fixed assets worth Rs.1500lacs and life of asset is 10 years. Company depreciates the fixed assets on SLM Basis. The company has total capital of 800lacs (40% loaned and 60% owned capital) From the information given below you are required to calculate EVA for the company.

Particulars Rs. LacsSales 2500Interest on investments 50Sale of Scrap 20Profit on sale of old assets 30Total Income 2600Less:Raw Material Expenses 1375Employee costs 375Administrative Costs 25Selling and Distribution Expenses 125Donations 30Loss on Sale of Old Building 28Total Expenses 1958

(10)

Q.6 Zee ltd bought a machinery on 1st April, 2006 on hire purchase system from Forgers Ltd. with following terms of the contract:One third of the cash price to be paid as down payment, Remaining amount along with interest @ 10% to be paid in 3 yearly instalments: 31 March, 2007 Rs. 6,00,000.31 March, 2008 Rs. 3,50,000.31 March, 2009 Rs. 2,20,000.You are required to pass relevant journal entries in the books of Zee Ltd.

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