Write your academic details on the first page of the assignment.
Four questions must be attempted to be answered. Every answer counts for five marks. Show all workings clearly as part of the answer. Answers may be written either in English or in Hindi, but the same medium should be used throughout the paper.
Q. 1 Explain the scope of financial management. Examine the objectives and functions of financial management.
Q.2. Solve any two practical problems:
a) If you invest ₹1,000 today at an annual interest rate of 5%, what will be the value of your investment in 5 years? b) What is the present value of ₹2,000 to be received in 3 years if the discount rate is 6% per annum? c) What is the present value of receiving ₹500 annually for 4 years, assuming a discount rate of 8%? d) How much will you have in 10 years if you invest ₹200 at the end of each year at an interest rate of 5%?
Q. 3 A company is evaluating the purchase of a new production line costing ₹500,000. The project is expected to generate annual sales of 300,000 with variable costs of 50% of sales. Fixed operating costs, excluding depreciation, are ₹60,000 per year. The production line will be depreciated using the straight-line method over 10 years with no salvage value. The company’s tax rate is 35%, and the required rate of return is 10%. Find:
a) Calculate the annual EBIT for the project.
b) Determine the EBIT breakeven point in terms of sales revenue. c) Analyze how a 10% increase in variable costs would impact the EBIT. d) Calculate the project's NPV assuming the sales revenue remains constant.
Q. 4 A company is considering replacing an old machine with a new one. The old machine can be sold for ₹50,000, and the new machine costs ₹200,000. The new machine is expected to reduce operating costs by ₹60,000 annually for 5 years. The new machine will be depreciated using the straight-line method to a zero salvage value over 5 years. The company’s tax rate is 30%, and the required rate of return is 12%.
1. Calculate the Payback Period for the replacement project.
2. Determine the Net Present Value (NPV) of the project, considering the tax shield from depreciation. 3. Compute the Internal Rate of Return (IRR) for the project.
OR
Q. 5 A company is evaluating a project that requires an initial investment of ₹250,000. The
project is expected to generate the following cash inflows over the next 5 years:
YEAR Cash Inflows
1 50,000 2 70,000 3 90,000 4 110,000 5 130,000
The required rate of return is 9%.
1. Calculate the Payback Period for the project.
2. Determine the Net Present Value (NPV) of the project. 3. Compute the Internal Rate of Return (IRR) for the project.
