IGNOU MCO-07 December 2021 Previous Year Question Paper

Q1.(a) In what ways is the wealt h maximisation objective superior to the profit maximisation objective ? Explain. 10

(b) Why is the consideration of time important in financial decision-making ? How can time be adjusted ? Illustrate your answer.

Q2.(a) What are the requirements of a good method of capital budgeting decisions ? 10

(b) What is Net Present Value (NPV) method and how does NPV change by variation in discount rates ?

Q3.(a) Define Cost of Capital. Explain its significance in financial decision-making. 10

(b) Suppose the current market price of a company’s share is < 90 and the expected dividend per share next year is < 4·50. If the dividends are expected to grow at a constant rate of 8 percent, calculate the cost of equity.

Q4.Discuss the importance of working capital for a manufacturing fi rm. What will happen if the firm has

(a) paucity of working capital , and

(b) excess of working capital ? 10+5+5

Q5.(a) What are the advantages of cash management ? How does cash budget help in management of a firm’s cash flows ? 6+6

(b) Define Economic Order Quantity (EOQ). How is it calculated ?

Q6.What is project finance ? Distinguish it from corporate finance.

Q7.(a) Discuss the features of an appropriate capital structure. 10

(b) Describe the rationale for buyback of shares ?

Q8.Two firm s ‘A’ and ‘B’ have the following information : Sales (< Lakhs) Variable Cost (< Lakhs) Fixed Cost (< Lakhs) Firm A 1,800 450 900 Firm B 1,500 750 375 You are required to calculate

(a) profit to sales ratio, and

(b) the deg ree of operating leverage for both the firms.

Q9.Write explanatory notes on any two of the following : 10+10

(a) Types of risks

(b) Primary and Secondary capital market

(c) Securitisation

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