AIMA Exam Solution 2021 FM12 FINANCIAL MANAGEMENT

𝐀𝐢𝐦𝐚 𝐬𝐨𝐥𝐯𝐞𝐝 𝐞𝐱𝐚𝐦 𝐬𝐨𝐥𝐮𝐭𝐢𝐨𝐧𝐬 𝟐𝟎𝟐𝟏 

𝐅𝐨𝐫 𝐒𝐨𝐥𝐮𝐭𝐢𝐨𝐧 𝐂𝐚𝐥𝐥 𝐚𝐭 +𝟗𝟏-𝟗𝟗𝟏𝟏𝟖𝟗𝟗𝟒𝟎𝟎 (𝐖𝐡𝐚𝐭'𝐬 𝐀𝐩𝐩 𝐀𝐯𝐚𝐢𝐥𝐚𝐛𝐥𝐞)

WARNING - Clicking on the "SUBMIT ASSIGNMENT" button will submit the Assignment. Be sure that you have reviewed your answers before clicking it. Attempt all the questions. All questions are compulsory. Each question carries 4 marks. There is No Negative Marking for wrong answer/s. Please note: There are 25 questions out of which Q.No.21-25 are based on the Case Study. Subject Code: FM12 Subject Name: FINANCIAL MANAGEMENT Component name: TERM END Assignment Start Date: 10/02/2021 Assignment End Date: 20/02/2021 Question 1:- The degree of operating leverage is 2.5 and degree of financial leverage is 1.6 of a firm then the % change in EPS is………… if quantity increases by 5% a)   2%                         b)   0.20%                         c)   0.02%                         d)   20%                         Question 2:- An ordinary share of a company, which engages no external financing, is selling for Rs.50. The EPS is Rs.7.50 of which 60% is paid in dividends. The growth rate un dividends is expected to be 4%. The corporate tax rate can be assumed to be 30%. The post-cost tax of the fund is? a)   10.11%                         b)   11.87%                         c)   13.36%                         d)   12.54%                         Question 3:- A company is presently paying dividend of Rs. 9 per share and is expected not to deviate from this in future. The value of the share is…………..., if the required rate of return is 15%. a)   Rs 6                         b)   Rs 60                         c)   Rs 600                         d)   None of the above                         Question 4:- The EPS of a company is Rs.20. The market rate of discount applicable to the company is 15%. Retained earnings can be employed to a yield return of 13%. If the company is considering a payout of 30%, then the value of the share is? a)   135.66                         b)   114.89                         c)   99.89                         d)   120.88                         Question 5:- Equity shares of P Ltd. are quoted in the market at Rs.17. The dividend expected a year hence is Rs.1.50. The expected rate of dividend growth is 8%. The cost of equity capital to the company is? a)   11.08%                         b)   15.46%                         c)   13.80%                         d)   14.23%                         Question 6:- Based on the given information calculate financial leverage. Net worth Rs.25,00,000, Debt/Equity 3:1, Interest rate 12%, Operating profit Rs.2,00,000 a)   2.43                         b)   2.16                         c)   1.82                         d)   2.11                         Question 7:- The annual EBIT of S Ltd. is Rs.100 lakh. The company has Rs.200 Lakhs of 15% Debentures in its capital structure. The equity capitalization rate is 14%. The company desires to redeem the debentures by issuing the additional equity shares. The additional shares can be issued in the market at a premium of Rs.10. According to the Net Income Approach, the total value of the firm is? a)   Rs 550 Lakhs                         b)   Rs 680 Lakhs                         c)   Rs 720 Lakhs                         d)   Rs 700 Lakhs                         Question 8:- The market price of the share is Rs.10 per share and the total outstanding shares are 2,50,00,000. Common stock is to repurchased through the issue of Rs.160 million debt. What is the increase/ decrease in the market price of the stock and what is the market value of the firm? a)   Increase by Rs.2 and Rs.410 million                         b)   Decrease by Rs.3 and Rs.160 million                         c)   Unchanged and Rs.410 million                         d)   Unchanged and Rs.250 million                         Question 9:- If the interest rate is a12% p.a. the amount to be invested today to earn an annuity of Rs,.1,000 for 5 years commencing from the end of first year is? a)   Rs 6,353                         b)   Rs 5,798                         c)   Rs 4,980                         d)   Rs 3,605                         Question 10:- Which of the following investments have no default risk? a)   Inter- Corporate Deposits                         b)   T-Bills                         c)   Commercial Papers                         d)   Money market Mutual funds                         Question 11:- An increase in ordering costs will a)   Decrease the Economic Ordering Quantity (EOQ)                         b)   Not affect the EOQ                         c)   Increase the EOQ                         d)   Increase the reordering point                         Question 12:- H Ltd offers a scheme under which an investor has to deposit Rs.1,500 per year for a period of 10 years. After he can get back Rs.23,905 at the end of the 10th year. What is the relevant interest rate? a)   10%                         b)   12.25%                         c)   11.87%                         d)   13.76%                         Question 13:- Which of the following will not have an impact on the project’s cost? a)   Increase in the expected cost of land                         b)   Decrease in margin money requirements                         c)   Increase in pre-operative salaries                         d)   Increase in excise duty on the items to be produced                         Question 14:- If the credit terms are 1/10 net 40, what will be the implicit cost of trade credit. (Assume 360 days in a year) a)   11.11%                         b)   12.12%                         c)   13.13%                         d)   14.14%                         Question 15:- The present value of the cash flows from a project is Rs. 6.72 crore while the net benefit cost ratio is 0.2. What will be its present value? a)   Rs.1.12 crore                         b)   Rs.1.20 crore                         c)   Rs.3.40 crore                         d)   Rs 5.60 crore                         Question 16:- K Sports sells 1500 footballs every year. The average cost of purchasing each football is Rs.250. The cost for K sports to place an order for footballs is Rs. 50 and it incurs 5% of the average cost to carry them in inventory. The total number of orders it should place each year is a)   11.55                         b)   12.8                         c)   14                         d)   16                         Question 17:- If the current assets and current liabilities are Rs.2,000 lakh and Rs.1,200 lakh respectively. How much amount can be borrowed on a short-term basis without reducing current ratio below 1.5? a)   Rs 400 lakh                         b)   Rs 600 lakh                         c)   Rs 500 lakh                         d)   Rs 450 lakh                         Question 18:- The initial outlay for a project is Rs.20 crore. The cash inflows from year 1 to year 6 are Rs.4 crores, Rs.5 crores, Rs.5 crores, Rs. 5 crores, Rs.4 crores & Rs.7 crores respectively. The payback period for this project will be? a)   4 years                         b)   4.25 years                         c)   4.50 years                         d)   4.75 years                         Question 19:- T Ltd.’s initial outlay for a project is Rs.100 lakhs. The cash inflows from year 1 to year 4 are 25 lakhs, 30 lakhs, 40 lakhs and Rs.48 lakhs respectively. The Internal rate of return for this project will be? a)   12.54%                         b)   13.84%                         c)   14.24%                         d)   15.84%                         Question 20:- Which of the following is/are criterion/ criteria on which the supplier of raw materials evaluates a firm? a)   Good track record of profitability and liquidity                         b)   A record of prompt payment by the company to other suppliers                         c)   The state of company management                         d)   All of the above                         Case Study JKL Ltd. manufactures chemical in its plants across South India and is a giant leader in the industry. It requires 3,60,000 units per annum of drums of raw materials as inputs for its plants. The cost per order is Rs.500 and carrying costs are 20% of the cost of stock held. The cost of the drum is Rs.200. Find the Assume the EOQ is equal to the average consumption of the firm, the stock out cost is Rs.100 per unit and the probability distribution of the different levels of usage are: Usage in units- 1000, 1500, 1800, 2000, 2200, 2700, 3300, 3600 and 4400. The corresponding probability at different levels of usage is: 0.06, 0.15, 0.08, 0.09, 0.06, 0.20, 0.15, 0.12 and 0.09 respectively. Question 21:- The levels of safety stock to be analyzed are……….. a)   0,300,600 and 1,400 units                         b)   0,310,450 and 1,350 units                         c)   0,320,700 and 1,500 units                         d)   0,400,500 and 1,400 units                         Question 22:- The probability of stock-out is……… a)   25%                         b)   28%                         c)   30%                         d)   36%                         Question 23:- Safety stock- a)   Is equal to the EOQ                         b)   Is equal to the difference between the reorder level and the level of normal consumption                         c)   Is equal to one month’s production quantity                         d)   All of the above                         Question 24:- The reorder level is……… a)   1000 units                         b)   2000 units                         c)   3000 units                         d)   4000 units                         Question 25:- Which of the following is true when the level of inventory is increased? a)   Ordering costs decreases but carrying cost increases                         b)   Carrying cost increases but ordering costs remains same.                         c)   Both ordering and carrying cost increases                         d)   Both ordering and carrying cost decreases