Master of Business Administration (MBA)

Semester : III

ELECTIVE :I 8th October, 2014

Unit Test :- II
Paper : I Subject : Advance Financial Management
Section A
Time: One Hour Max. Marks: 15

1. Short Answer Question (Attempt any five) (5)

A) What is operating Lease?
B) Write the advantages of lease?
C) What is Sale and Lease back?
D) What is decision tree analysis?
E) What scenario analysis?
F) What is certainty equivalent coefficient?

2. Long Answer Question (Attempt any one) (10)

1. ABC Co, Ltd. is faced with two options as under in respect of acquisition of an asset val-
ued Rs. 1,00,000-
a) to acquire the, asset directly by taking a Bank Loan of Rs. 1,00,000 repayable in 5
year-end installments at an interest of 15%
b) to lease the asset at rentals of Rs, 320 per Rs. 1,000 of the asset value for 5 years
payable at year end. The following additional information are available.
i) The Rate of depreciation of the asset is 15% W.D.V,
ii) The Company has an effective tax rate of 50%.
iii) The Company employs a discounting rate of 16%.
You are to indicate in your report which option is more preferable to the Company.
Restrict calculation over a period often years

OR
 Master of Business Administration (MBA)
Semester : III

ELECTIVE :I 8th October, 2014

Unit Test :- II
Paper : I Subject : Advance Financial Management
Section A
Time: One Hour Max. Marks: 15

2. Two Projects X and Y have the cash flow in the following table. Determine
the risk profile of the two projects and their net present value.

Particulars Project X (Rs) Project Y (Rs.)

Initial Investment 20,000 20,000
CFAT(Worst) 6,000 0
CFAT (Most Likely) 8,000 8,000
CFAT (Best) 10,000 16,000

Life of the Project is 10 years and the cost of capital 10%.