Special Studies in Finance Prelims Question Paper 2013 – Vipin Saboo Tutorials


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Special Studies in Finance

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Sec 1

Q1. Explain in short (1*5=5)

  • What is operating lease
  • Sweat equity
  • Credit rating
  • Underwriting
  • MVA

Q2. A.

Solve any 2 (2*5=10)

  • Kamal Ltd. has purchased machinery from Suman Ltd. on hire purchase basis. The details of purchase are: Cash Price Rs. 31,70,000. Down Payment 20% and remaining amount to be discharged in four yearly installments of Rs. 8,00,000 each. Prepare a table to show the analysis of payment and calculation of interest
  • Calculate EVA from the following data for the year ended 31st March 2003.
Average Debt (Rs. Crores)

200

Average Equity (Rs. Crores)

110

Cost of Debt (Post Tax)

7.72%

Cost of Equity

16.54%

Profit after tax, before exceptional item

61.64

Interest

20

  • Bravo Ltd. furnishes the following data for the year ended 31st March, 2010:

Depreciation provided as per accounting records amounted to Rs. 50,00,000 whereas the depreciation provided as per tax records, under the block of assets concept amounted to Rs. 87,50,000.  Unamortized preliminary expenditure as per tax records amounted to Rs. 7,00,000. The income tax rate applicable is 40% and there is adequate evidence of future profit sufficiency.How much deferred tax asset/liability should be recognized as transition adjustment, as per Accounting Standard – 22 as issued by the Institute of Chartered Accountants of India?

 

Q2 B. In Mumbai the suburban railway services are inadequate for the ever rising population. Every day there are millions of people flocking in this city in search of a better quality of livelihood. In order to meet the daily commutation requirements there is a need to provide rail transportation services through metro rail. The task of providing such infrastructure project is shouldered by Tata’s. For this purpose the required technology is imported from Switzerland. Also training is provided by the European company to Indian technicians for repairs and maintenance. Promoters are B.E. (Civil) and having 122 years past experience of operating in India. For setting up a Metro Rail at Mumbai the technical requirements are 4000 Sq. Ft. land for Railway Stations and Railway tracks 20,000 sq. ft administration building, and others a total 8,200 acres land. The members of Directors family are also possessing MBA qualifications and take keen interest in the business activities.

Cost of Project Rs. in Crores
Land & Site Development

400

Plant & Machinery

200

Working Capital

100

Total Requirements

700

Sources of Finance

Additional Equity Share Capital

200

Internal Earnings

100

Term Loan (Interest @ 11% p.a.)

400

Total Sources

700

Depreciation SLM @ 20% p.a. Tenure of term loan 5 years. Principal to be repaid in equal installments. Income tax @ 35%. Tax holiday for initial 4 years. Life of project 5 years. ROI @ 30% for initial 2 years which will increase to 35% for the remaining years.

Prepare flash report and calculate DSCR for all the years. Give your recommendation. (15 MARKS)

 

Sec 2 . Solve any 3(3*10=30)

 

Q 3. Kutub Minar Ltd. acquired a machine on 1.4.2007 costing US $ 2,00,000. The suppliers agreed to the following terms of payment

Date

Terms of payment

1.4.2007

Down Payment 40%

1.4.2008

30%

1.4.2009

30%

The company depreciates machinery @ 10% on the Straight Line Method. The rate of exchange is steady at US $ 1 = Rs.47 upto 30.9.2008. On 1.10.2008, due to an official revaluation of rates, the exchange rate is adjusted to US $ 1 = Rs.57. Show the extracts of the relevant entries in the Profit and Loss Account for the year ending 31st March, 2009 and the Balance Sheet as on that date, showing such workings as necessary as per AS-11.

Q4. A. Foxtrot Ltd. issued shares of Rs. 50 each amounting to Rs. 500 lakhs. The company appointed a merchant banker as book-runner who collected information from various investors to book-building purpose. The quote prices of various investors are:

A quoted price for each share @ Rs. 47.50 for Rs. 50 Lakhs

B quoted price for each share @ Rs. 49.00 for Rs. 250 Lakhs

C quoted price for each share @ Rs. 50.50 for Rs. 50 Lakhs

D quoted price for each share @ Rs. 50.00 for Rs. 100 Lakhs

E quoted price for each share @ Rs. 49.50 for Rs. 50 Lakhs

Based on the above information and data, compute the weighted average issue price as would be calculated by the merchant banker for book-building purposes.      

B. Hammer Ltd. furnishes the following data regarding its six segments for the year ended 31st March, 2010:       (Rs. in Lakhs)

Segments

P

Q

R

S

T

U

Total

Segment Assets

1500

3100

400

300

400

300

6000

Segment Results

250

(950)

50

50

(50)

150

(500)

Segment Revenue

200

400

150

100

100

50

1000

Identify the reportable segments and advise the management of Hammer Ltd. keeping in view the provisions of Accounting Standard 17 on Segment Reporting as issued by the ICAI

Q5. Explain the book building process in detail

Q6. Explain the advantages and disadvantages of Mutual funds.

 

 

For any queries, feel free to contact Prof. Vipin Saboo at 9820779873

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Education Qualification: BMS- N M College (University Rank Holder) PGDBM- Sydenham College M Com- College topper Mr Vipin Saboo has been associated with the following institutes as a visiting faculty Lords college, Malad Patkar College, Goregoan Saraf college, Malad Dalmia college, Malad St Andrews College, Bandra Wilson College, Grant Road Thakur college, Kandivili L N College, Kandivili N K College, Malad Dhanukar College, Vile Parle St Xaviers College, Marine Lines Shroff College, Kandivili KES College, Khar Mr.Vipin Saboo also has more than 5 years of industry expertise with corporate like CRISIL, Motilal Oswal Investment Banking and Yes Bank. Mr. Saboo has also published a text book on Logistics and Supply Chain Management for TYBMS Students.

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Education Qualification: BMS- N M College (University Rank Holder) PGDBM- Sydenham College M Com- College topper Mr Vipin Saboo has been associated with the following institutes as a visiting faculty Lords college, Malad Patkar College, Goregoan Saraf college, Malad Dalmia college, Malad St Andrews College, Bandra Wilson College, Grant Road Thakur college, Kandivili L N College, Kandivili N K College, Malad Dhanukar College, Vile Parle St Xaviers College, Marine Lines Shroff College, Kandivili KES College, Khar Mr.Vipin Saboo also has more than 5 years of industry expertise with corporate like CRISIL, Motilal Oswal Investment Banking and Yes Bank. Mr. Saboo has also published a text book on Logistics and Supply Chain Management for TYBMS Students.

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