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FM12 Financial Management Assignment No.I Assignment Code: 2011FM12A1 Last Date of Submission: 31st March 2011 Maximum Marks:100 Attempt all the questions. All the questions are compulsory and carry equal marks. Section-A Ques. 1 A firm’s sales, variable costs and fixed cost mount to Rs.70,00,000, Rs.42,00,000 and Rs.6,00,000 respectively. It has borrowed Rs.45,00,000 at 9 percent and its equity capital totals Rs.55,00,000. a)What is the firm’s ROI? b)Does it have favourable financial leverage? c)If the firm belongs to an industry whose average asset turnover is 3, does it have a high or low asset leverage? d)What are the operating, financial and combined leverages of the firm? e)If the sales drop to…show more content…
In Lakhs) | |Equity Capital (10 lakhs shares at par value) |100 | |12% Preference Share (10,000 shares at par value) |10 | |Retained Earnings |120 | |14% Non convertible Debentures |70 | |(70,000 debenture at par value) | | |14% term loan from APSFC |100 | | TOTAL |400 | The market Price per Equity Share is Rs. 25. The next expected dividend per share (DPS) is Rs. 2.00 and the DPS is expected to grow at a constant rate of 8%. The preference shares are redeemable after 7 years at par and are currently quoted at Rs. 75 per share in the stock exchange. The debentures of face value of rs 100/- each are redeemable after 6 years at par and their current market quotation is Rs. 90 each. The tax rate applicable to the firm is 50%. Calculate the weighted average cost of capital. FM12 Financial Management Assignment No.II Assignment Code: 2011FM12A2

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