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\i,-: r-.i l',{'{ r-i ir. 5'190-09. {FURTt :R R=VeSf:D r*:f,}Utt$Lr} n$-5735

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ru.B" (1) Answer any five questions. All qLiestions carry equal marks.(2) presentation should be neat and clean. Marks i';ili be deducted for poorpresentation.(3) All the sub-questions of the main question should be anernpte3 together.(4) Every new question should start on a new page'There are two main regulators to regulate the lndian Financial system - FiBI and SEBI.Explain the role of sggl in detail. Do you think that tryi: two agencies can be mergedto create a super regulatory body for an effective regulaiion of the financial system ?(a) Explain the different ways in which a venture capitalist can finance an ;rvestment(b) What do you understand by financial derivatives ? Explain in detail"Write short notes on any three of the following :-(a)Creditratingmethodologyforafinancialinstrument

(b) Book building Process for IPO("i Revival progiamme for a sick industrial unit(d) Functions of investment bankGi Rationale of disinvestrnent in PublicSector Enterprise(f) Sources of foreign currency finance fola company'Followinginformationisavailablefrorntlre."?A:.::TJ.fii,..t.

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SalesCost of Raw MaterialsLabour cost for manufacturing500200't00

lnterest on borrowings 60The capitatizationiraie for deit is 10 % and the capita.lization rate for the entire firm is12.5%. Assuming thar rhe firm cloes not retain any earning and there is no tax, as per netoperating income aPProach -(a) -Whut is the iotal market value of the firm ?iUi What is the market value of the debt of the tirm ?i.j What is the markel value of the equity of the tirm ?iO) Wi'ut is the equity capitalization rale ?5. A firm has sales of Rs. 10,00,000. Variable c.9st is 7o%,.total cost is Rs' 9'00'000 andn"t, of Rs. 5,0b,000 at 107o rate of interest' lf lax rate is 40% calculate :_-(a) OPerating leverage

(b) Financial leverage(c) Combined Leverage(d) lf the firrn wants to double up its earning before interesl and tax (EBIT), hov'r muchofaraiseinsaleswou|dbeneerJedonapereentagebasis?isets of Rs' 50 Lakh' The comPany6. (a) ABC company Ltd' is expecting 10 7" return on lotalashas outsraniing shares 20,000. Ihe direclors of the:oTPut'Y.$9,,Ye_decicied to pay

+O Z of *urninJ ur UiuiO"ncJs. The rate of relyT requirecl by srrti+rrolders is 12'5"/"'Rate of return ixpected on investment is 15% You''are required to determine the'price of the shares using Waitei's fiodel' The company(b) The current market price of the shares of X Ltd. is l--Is.120 per share'is consiclering Rs. 6.40 per sfrare ou OiuiOenO' I'he comparry belongs

to a risk classfor which thJcaoitalizaticn rate is g.6a%. Based qn ni and M approach calculate

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Con. 5190-DS-523S-09.7 The income statement of Modern Electronics Limited for years I and ll is given below (Allfigures are in Rs. Lakh) :-lncome Staternent Year I (Rs.) Year ll {Rs.iNet sales 2,400 2,670Cost of goods sold 1,830 2,04AGross profit -,1 574 630Selling expenses 180 195General and administration expenses 180 156Depreciation 150 192Operating profit 60 87Non-operating surplus / deficit 24 30Earnings before interest and tAx B4 117lnterest 30 33Earnings before tax 54 B4Tnx 21 30Earnings after tax 33 54Dividends 1B 21Retained earnings 15 33

The balance sheet of lr4odern Electronics Ltd. as of the end o{ years I and ll is givenbelow :-Balance Sheet Year I {Rs.) Year ll (Rs.)Assefs.'Fixed assets (net)lnvestmentCurrent assets, loans arid acjvances-ash and bankReceivableslnventoriesPrepaid expensesF,4iscellaneous expenclitures and losses

Liabilities :Share capital ._EquityReserves and surplusSecured loans--T-erm loansBank borrowingsCurrent liabilities -Trade creditorsProvisions

2,223 2,595Using the per cent of sales meihcd (except, assuryie that dividends ai"e raised to24, depreciation to 180 and interest to 36) prepare the pro forma income statementfor year lll. Assume that the sales will be Rs. 3,060 in year lll.Assume that all items on the assets side, except investment and misceilaneousexpenditures and losses, will grow proportionally to sales. Likewise, trade credit

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Con.5190-DS-5735-09. 3B' The following is the balance sheet ef a corporate firm as on March 31. ;r.rri.ent year :*(Rs in t:xh)Liabilities Amount Assets Amount(Rs.)Share callital (fis. 100reach ' . tRslfutly paid-up) ZOO Land and buitdings B0Reserves an$surplus B0 plant and machinery 1;;Sundry creditors and otherliabilities 60 Marketable securities 203:",::,, f30 Cash and bank balances 10340 340Profit before tax for currenl year-end amount to Rs.128 lakh, including Rs. e tatfr asextraordinary income. Besides, the firm has earned inlerest income of Rs. 2 lakh in tf,ecurrent year from investments in marketable securities. lt is not usual for lhe ilr,.i to haveexcess cash and invest in marketable securities. Howevei, an additional arnount ofRs' 10 lakh per annum, in terms of advertisement and other expenses, lvill be requiredto be spent forthe smooth running of the business in the-yearsto come. l,4alrlet valuesof land and buildings, and plant and macfrinery are estimated at Rs.lB0lakh and Rs. 200 lakhrespectively. ln order to match the revalued figures of these fixed assets, aCciiiionaldepreciation of Rs.12 lakh is required to be taken into consideration. Effective co:noratetax rate may be taken at 30 percent. The capitalization rate applicable to businesses ofsuch risks is 15 percent.(a) From the above information, compute the value of business, value of equity andpriceperequityShare'basedonthecapitalizationmethod(b) Assuming everything to be the same as given above calculate the expecied marketprice of the share, given the P/E multipie of - (i) B times and (ii) 5 tii-nes.

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