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Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year

Fundamental of Corporate Finance Question Paper 2079 | TU BBS 4th Year

Today, we are sharing you the Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year and you can check and view the TU BBS 4th Year fundamental of corporate finance exam question paper of the year 2079-2023 in PDF format. Please check and download pdf file Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year Nepal. The model question provided below – Fundamental of Corporate Finance question paper TU BBS 4th Year is from the board exam 2079 and onwards. And it is based on the latest TU Syllabus for 2079. We will be adding more exam question papers of Tribhuvan University (TU) BBS 4th Year later on. Also Download Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year in pdf format which is 267 kb in size. Enjoy!

Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year.

TRIBHUVAN UNIVERSITY
2079
B.B.S. (4 Yrs Program)/IV Year/MGMT
Fundamentals of Corporate Finance
FIN-250
Full Marks: 100
Time: 3 Hrs

Also Check:

Fundamentals of Corporate Finance (FIN-250) | IV Year | MGMT | Question Paper 2077 | BBS (4 Yrs. Prog.) | TU

Fundamentals of Corporate Finance (FIN-250) | Question Paper 2076 | BBS (4 Yrs. Prog.) | IV Year | TU

Candidates are required to give their answers in their own words as far as practicable. The figures in the margin indicate full marks.

Fundamental of Corporate Finance question paper 2079 TU BBS 4th Year.

Group “A”

Brief Answer Questions [10×2=20]

Attempt All Questions:

1. Why might conflicts arise between stock holders and debt holders?

2. Differentiate between primary markets and secondary markets.

3. Who are the key participants in the transactions of financial institutions?

4. Define the term financial leverage.

5. Assume that the interest rate on a 1-year T-bond is currently 7% and the rate on a 2-year bond is 9%. If the maturity risk premium is zero, what is a reasonable forecast of the rate on a 1-year bond next year?

6. A company’s sales, variable costs and fixed cost are Rs. 500,000, Rs. 300,000 and Rs. 100,000 respectively. It has borrowed Rs. 200,000 at 10 percent. Calculate the degree of financial leverage.

7. Under water Technology stock is currently trading at Rs. 300 a share. What is the value of call option if exercise price is Rs. 250.

8. What is the annual percentage cost of trade credit (based a 360-day basis) under the credit terms of 2/10, net 40?

9. Assume that today one Canadian dollor is worth 0.6667 U.S. dollar. How many Canadian dollors would you receive for one U.S. dollar?

10.  Suppose you want to buy a computer and a local bank will lend you Rs. 100,000. Then loan will be fully amortized over 5 years, and the nominal interest rate will be 12% per annum. What will be the annual installment?

Group “B”

Descriptive Answer Questions [5×10=50]

Attempt any FIVE Questions:

11. Define forward and future contracts. Differentiate between forward and future contracts? [4+6=10]

12. Why is preferred stock called hybrid security? Explain the key features of preferred stock. [4+6=10]

13. An analyst evaluating securities has obtained the following information. The real rate of interest is 2% and is expected to remain constant for the next three years. Inflation is expected to be 3 percent next year, 3.5 percent the following year, and 4 percent the third year. The maturity risk premium is estimated to be 0.1 x (t-1) %, where t=numbers of years to maturity. The liquidity premium on relevant 3-years securities is 0.25% and the default risk premium on relevant 3-years securities is 0.6%.

a) What is the yield on a 1-year T-bill?

b) What is the yield on a 3-years T-bond?

c) What is the yield on a 3-years corporate bond?

14. Magee Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stores. Magee’s balance sheet as of December 31, 2018, is shown here (Rs millions):

Balance Sheet as of December 31, 2018
AssetsLiabilities and Owners’ equity
Current AssetsCurrent Liabilities
CashRs. 3.5Accounts PayableRs. 9.0
Accounts Notes PayableRs. 18.0
ReceivableRs. 26.0AccrualsRs. 8.5
InventoryRs. 58.0Total Current LiabilitiesRs. 35.5
Total Current assetsRs. 87.5Long Term DebtRs. 6.0
Fixed AssetsOwners’ Equity
Net plant and equipmentRs. 35.0Common stock and paid in surplusRs. 15.0
  Retained EarningsRs. 66.0
Total AssetsRs. 122.5Total Liabilities and Owners’ EquityRs. 122.5

Sales for 2018 were Rs. 350 million, where net income for the year was Rs. 10.5 million. Magee paid dividends of Rs. 4.2 million to common stock holders. Sales are projected to increase by Rs. 70 million or 20 % during 2019. The firm is operating of full capacity. Assume that the profit margin and dividend payout ratios remain constant.

a)  Using the equation, calculate the external funds needed for the next year.

b) Construct Magee’s pro forma balance sheet for December 31, 2019. Assume that all external capital requirements are met by bank loans and are reflected in notes payable. [5+5=10]

15. The Bowman, Inc., currently has 320,000 shares outstanding. The stock sells for Rs. 400 per share. To raise Rs. 20 million for a new particle accelerator, the firm is considering a right offering at Rs. 250 per share.

a) How many shares will have to be sold?

b) How many rights are required to purchase one new shares?

c) What is the value of a right?

d) A Share holder has 1,000 shares and Rs. 50,000 cash balance before the offering and after rights offering if all rights are exercised.

16. Rise Against Corporation is comparing two different capital structure an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 210,000 shares of stock outstanding. Under Plan II, there would be 150,000 shares of stock outstanding and Rs. 2.28 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes.

a) If EBIT is Rs. 500,000, which plan will result in the higher EPS?

b) If EBIT is Rs. 750,000, which plan will result in the higher EPS?

c) What is the break-even EBIT? [3+3+4=10]

Group “C”

Analytical Answer Questions [2×15=30]

Attempt any TWO questions:

17. Define merger and acquisitions. Describe the concepts of horizontal, vertical and conglomerate merger. Also explain the growing need of mergers and acquisition in bank and financial institution in Nepal. [4+6+5=15]

18. The Pawlowski Supply Company needs to increase its working capital by Rs. 4.4 million. The following three financial alternatives are available (assume a 365-day year):

i) Forgo cash discounts (granted on a basis of “3/10, net 30”) and pay on the final due date.

ii) Borrow Rs. 5 million from a bank at 15 percent interest, this alternative would necessitate maintaining a 12 percent compensating balance.

iii) Issue Rs. 4.7 million of six month commercial paper to net Rs. 4.4 million. Assume that the new paper would be issued every six months. Commercial paper has no stipulated interest rate. It is sold at a discount, and the amount of the discount determines the interest cost to the issuer.

Assuming that the firm would prefer the flexibility of bank financing, provided the additional cost of this flexibility was no more than 2 percent per annum.

a) Calculate the annual percentage cost for each alternative.

b) Which alternative should Pawlowski select? Why?

c) What additional qualitative factor should Pawlowski consider before reaching a decision? [4×3+1.5+1.5=15]

19. Given the following exchange rate for the 31 July 2020:

Open Market Exchange Rates
CurrencyUnitBuying/Rs.Selling/Rs.
U.S. Dollar1119.45120.05
European Euro1140.46141.16
UK Pound Sterling1155.49156.27
Swiss Franc1130.73131.39
Australian Dollar185.4285.85
Singapore Dollar186.8787.30

a) How many money would be realized by Nepalese explorer for U.S. Dollar 1,000?

b) How much money would be payable for European Euro 10,000?

c) You had Rs. 100,000 with you while travelling to USA. You had them converted into U.S. Dollar. However, your decision to travel cancelled. The U.S. Dollar you had now are required to be converted in Nepalese rupees. What is the profit or loss by this transaction?

d) The current spot exchange rate between U.S. Dollar and Nepalese Rupees is: NPR 120.05/US$ and the 1-year forward rate is: NPR 125.01/US$. The expected inflation rate in Nepal is 8.5 percent. What is the expected inflation rate in US? [3+3+4+5=15]

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