|Time Allowed : 3 Hours||Full Marks : 100|
|Answer Question No. 1 which is compulsory and any five from the rest.|
|1.||(a)||Choose the right Answer:||2x10=20|
|(i)|| X Ltd. has its income of Rs.13.5 million by utilizing capital base of Rs.100 million. If the Average Cost of Capital is 10%, then EVA turns up to ______ |
|(ii)|| Beta represents ______ |
|(iii)|| Which of the following is not correct? |
|(iv)|| Required rate of return of a project can be calculated as ______ |
|(v)|| LIBROR stand for______ |
|(vi)|| Acid test ratio cam be expressed as ______ |
|(vii)|| Under the CPP Method of Price Level Accounting, which of the following is not considered as monetary asset? |
|(viii)|| According to IAS 17, which of the following is not truw in case of finafcial lease? |
|(ix)|| Payment to the creditors will result in --- |
|(x)|| IRR of a project is that rate where NPV tends to. |
|2.|| Nomad Travels is a travel agent and tour operator in India, engaged in two activities, viz, domestic ticketing and inbound tours. In the inbound tour operation, foreign tourists visit India on package tours Nomad Travels arranges for their travel as well as board and lodging other facilities required for a comfortable stay. |
The budget for the calendar year 2003 was prepared in December 2002.
Nomad Travels was expecting an inbound revenue of $1 million for the year 2002. ticketing commissions in the domestic industry were expected to be Rs.50 lakhs. Dollar rate for this purpose was assumed at Rs.50.
On the expense side Nomad Travel’s operating expenses were budgeted at Rs. 10 lakhs per month. On the inbound tour packages, Nomad Travels would typically spend 70% of the revenue on various costs including hotel, vehicle hire, domestic travel and miscellaneous items. Hotels would comprise half of this cost, vehicles 20%., domestic travel 20% and miscellaneous items 10%.
The first half year was expected to generate 25% of the revenue and the second half the balance (on the inbound tour activity). Domestic ticketing was expected to be uniform through out the year.
Nomad Travels pays income tax in four equal installments at 30% of their profit after considering export benefits. For the purpose of the tax working, profits would be considered as per latest actual data for each year and the latest budget available at that time.
Nomad Travels was considering buying an office for Rs.45 lakhs of which Rs.30 lakhs would be funded through a bank loan. This was to be effected on 1st July 2003. this loan would attract interest at 10% per annum and is payable quarterly. Repayment of this principal would be required to be effected every quarter end over a 5–year period.
Nomad Travel’s regular banking limits are Rs.100lakhs, carrying interest at 12%p.a. debited at the end of each quarter. Limits are generally utilized fully.
In the first half of the year, inbound traffic was down 20% and dollar rate was Rs.48. hotels reduced their rates by 10% due to low customer occupancy and Nomad Travels benefited to some extent. Other tour costs remained at budgeted levels. Operating costs, in fact, increased by 2%, due to understanding in December 2002. domestic air traffic activity remained at 3% above budget.
For the second half year, Nomad Travels is conservative about its projections now. It believes that revenue achievement on inbound traffic will be 80% of the original budget and domestic traffic will remain 3% above budget. Dollar rate would rise to Rs.49
Operating costs would increase by 3% over the original budget. Hotels would offer discounts of 10% of their earlier quoted levels, while other inbound costs would remain at budgeted levels.
|3.|| Raman Engineers is an engineering company engaged in designing and manufacturing machinery. The company manufactures customized machines. |
The gross profit margins in the customized machine sector are excellent at 60% of sales but orders are erratic, causing several working capital shortages. Operating costs were Rs.300 lakhs in half year I, but have been increasing at 5% per half year thereafter. These costs do not include bank interest.
Clients are expected to pay 5% upfront along with the order, 50% on inspection of the machinery (on completion of manufacture), 30% o installation (commissioning at the client’s premises) and the balance 15% after 1 year on successful operation of the machine. The time taken from negotiating the order to receiving the order is around 6 months, for manufacturing and inspection in 6 months, and for successful installation and commissioning is 6 months. Invoices are raised accordingly, based on work completed at each stage.
However, most clients do not adhere to the agreed schedules. While half of the customers pay in the same year as agreed, the other half typically delay it to the next half year. In 10% of the cases, the last promised 15% is lost as bad debts.
In case of delay, damageed at 5% of the selling price in case of manufacturing and 5% of selling price in case of installation will be charged by customers. The damagees will be based on the selling price of that stage of the activity.
Direct costs are incurred as 80% on manufacturing and 20% on inspection activities.
Delay Note 1 — Manufacturing delayed — Invoice Value Rs.40 lakhs.
|4.|| X .Ltd acquired a machine for R.3,00,000 having its life for about 10 years. Five years have gone so far with this machine which ha its book value Rs.1,50,000 now. Management can continue with this machine for the remaining life time. However a new machine worth Rs.5,00,000 is also available for consideration. Comment on the suitability of replacement of the old machine. |
Following information is furnished in this regards:
|5.||Explain the nature of ‘˜Intangible Assets’. Under what circumstances would an intangible asset be recognized? Answer with reference to AS 26||8+8=16||(0)|
|6.||(a)||“Strategic Financial Planning is subject to the various macro and micro environmental factors”. Elucidate?||8||(0)|
|(b)||“Cost of Capital is used by a company as a minimum benchmark for its yield”. comment.||8||(0)|
|7.||The ‘SEBI code of Corporate Governance’ requires listed companies to include a separate section on ‘Corporate Governance’ in their annual reports. Make out a list of the items to be included in such report.||16||(0)|
|8.||Write short notes on the following:||4x4=16|
|(a)||Common – size Financial Statements||(0)|
|(b)||Valuation of Options||(0)|
|(c)||Capital Asset Pricing Model||(0)|
|(d)||Related Party Disclosures.||(0)|