Sem 3

1

Seat No.: __________ Enrolment No._____________

GUJARAT TECHNOLOGICAL UNIVERSITY MBA Semester –III Examination Dec. - 2011

Subject code: 2830001 Date: 05/12/2011

Subject Name: Strategic Management

Time: 10.30 am – 01.30 pm Total Marks: 70 Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) Describe the contemporary competitive landscape. Explain the role of Technology

and Globalization on the nature of current competitive landscape.

07

(b) Discuss the four steps of external analysis process in detail. What does the firm intend

to follow this process?

07

Q.2 (a) Explain the terms – Market Commonality, Resource Similarity. How can be these

exploited to analyze the competitors?

07

(b) Distinguish between core competencies and competitive advantage. Does the success

of an organization is merely dependent on its competitive advantage? – justify your

answer with supportive arguments.

07

OR

(b) Does the higher proportion of resources to the competitors ensure the competitive

advantage for a firm? Why is it essential to develop capabilities for a success of the

firm?

07

Q.3 (a) How can the business-level strategies be used to position the firm relative to the five

forces of competition in a way that helps the firm to earn above-average returns?

07

(b) Discuss the potential motives for the firm’s decision to employ acquisition strategy

for achieving strategic competitiveness.

07

OR

Q.3 (a) Discuss various restructuring strategies for the corporate along with their short-term

and long-term outcomes.

07

(b) Evaluate each business level strategies in terms of their associated competitive risks. 07

Q.4 (a) Discuss the international corporate-level strategies. How do they differ from each

other?

07

(b) What is corporate governance? Briefly describe the internal and external governance

mechanisms used in modern corporations.

07

OR

Q.4 (a) Compare and contrast the operational controls and strategic controls. 07

(b) Describe the key strategic leadership actions required for the success of a strategic

management process.

07

Q.5 (a) “Ethics and social responsibilities are very crucial factors to consider while

formulating the corporate level strategies.” – explain in detail with your views.

07

(b) How the pattern of organizational structural growth and its strategies are interrelated?

Explain the reciprocal relationships between them.

07

OR

Q.5 (a) Discuss the effects of CEO succession and top management team composition on the

strategy of the organization.

07

(b) How can the Balance Scorecards framework be implemented to achieve the expected

performance?

07

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1


GUJARAT TECHNOLOGICAL UNIVERSITY MBA Semester –III Examination Dec. – 2011


Subject Name: Legal Aspects of Business (LAB)





Q.1 (a) What are the provisions of the Companies Act 1956 for the conversion?

(1) A private company into a public company.

(2) A public company to a private company.

07

(b) Describe the salient features of the Consumers Protection Act,

1986.Enumerate the aim and objectives of the act.

07

Q.2 (a) What is the importance and meaning of copyright? Enumerate the works

in which copyright subsists.

07

(b) Sunil agrees to sell a painting to Atul for Rs. 20,000. The painting needs a

new frame. Sunil tells Atul that the painting will be ready for him to

collect in a fortnight. However, when Atul came to collect and pay for the

painting, Sunil refuses to give it to him. Advise Atul.

07

OR

(b) Describe the characteristic features of negotiable instruments. Also

explain the presumptions, legally permitted in respect of negotiable

instruments.

07

Q.3 (a) What is breach of contract? What remedies are available to the non

breaching party in the event of breach of contract?

07

(b) “The Memorandum of Association is an unalterable character of a

company” comment. Also discuss contents of Memorandum of

Association.

07

OR

Q.3 (a) Who is authorized to issue a Digital Signature Certificate? What type of

representations is made by the certifying authority at the time of issue of a

Digital Signature Certificate?

07

(b) X is the Director of 21 companies, which includes directorship in respect

of a private company, which has recently become a public company under

Section 43(A). Comment.

07

Q.4 (a) What is an Indemnity? Bring out differences between a contract of

indemnity and contract of guarantee.

07

(b) What are the rules as given in the Sale of Goods Act, 1930, regarding

fixation of price?

07

OR

Q.4 (a) What do you understand by the term ‘Patent’? Describe the procedure for

obtaining a patent.

07

(b) What is Prospectus? Describe its contents. 07

2

Q.5 (a) What do you mean by discharge of a negotiable instrument? Discuss the

ways through, which an instrument may be discharge.

07

(b) What is Coercion? State its effect on the validity of a contract? 07

OR

Q.5 (a) What do you understand by the term Agency? How is an agency created? 07

(b) Write a note on overview of Environmental legislation in India 07

*************

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GUJARAT TECHNOLOGICAL UNIVERSITY MBA Semester –III Examination Dec. – 2011


Subject Name: Strategic Financial Management

Time: 10.30 am – 01.30 pm Total Marks: 70

Instructions:




Q.1 (a) Explain the role of Strategic Financial Management & its functions in business. 07

(b) What are the points to be given importance in project planning in the post

liberalization and global scenario?

07

Q.2 (a) Under what circumstances is the business valuation exercise undertaken by corporate

finance managers and investors?

07

(b) The following information pertains to XYZ Ltd.

Net Profit Rs. 60 lakh

Outstanding 12% preference Shares Rs.200 lakh

No. of outstanding equity shares 6 lakh

Return on Investment 20%

Equity capitalization rate 16%

Required:

i) What should be dividend payout ratio so as to keep the

share price at Rs. 41.25 by using Walter Model?

ii) What is the optimum dividend payout ratio according to

Walter Model?

07

OR

(b) Darshna Mills Ltd. is considering two mutually exclusive investment proposals for its

expansion program. Proposal A requires an initial investment of Rs. 7,50,000 and

yearly cash operating cost of Rs. 50,000. Proposal B requires an initial investment of

Rs. 5,00,000 and yearly cash operating cost of Rs. 1,00,000. The life of the

equipments used in both the proposals will be 12 years, with no salvage value;

depreciation is on straight line basis for tax purpose. The anticipated increase in

revenue is Rs. 1,50,000 per year in both the investment proposals. The firm’s tax rate

is 35 percent and its cost of capital is 15 percent. Which investment proposal should

be undertaken by the company?

07

Q.3 (a) Explain

i) Capital Budget under Inflation.

ii) Reasons of Project Failure.

07

(b) A company has the following estimates of the present values of the future cash flows

after taxes associated with the investment proposal, concerned with expanding the

plant capacity. It intends to use a decision tree approach to get a clear picture of the

possible outcomes of this investment. The plant expansion is expected to cost Rs.

3,00,000. The respective PVs of future CFAT and probabilities are as follows.

07

2

With Expansion Without Expansion Probabilities

3,00,000 2,00,000 0.2

5,00,000 2,00,000 0.4

9,00,000 3,50,000 0.4

Advice the company regarding the financial feasibility of the project

OR

Q.3 (a) Explain

i) Sensitivity Analysis in Capital budgeting.

ii) Implications of Corporate Restructuring.

07

(b) The market value of two companies Surya Ltd. and Chandra Ltd. are Rs. 175 lakh and

Rs. 75 lakh respectively. The share capital of Surya Ltd. consists of 3.5 lakh ordinary

shares of Rs. 10 each and that of Chandra Ltd. is 2.2 lakh ordinary shares of Rs. 10

each.

Surya Ltd. is proposing to take over Chandra Ltd. The pre-merger earnings are Rs. 19

lakh for Surya Ltd. and Rs. 10 Lakh for Chandra Ltd. The merger is expected to result

into a gain of Rs. 4 lakh in the form of post tax cost savings. The pre-merger P/E ratios

is 10 for Surya Ltd. and 8 for Chandra Ltd. The possible combined P/E ratios are 9 &

10.

You are required to calculate

a) Minimum Combined P/E ratio to justify the merger

b) Exchange ratio of shares if combined P/E ratio is 9.

c) Exchange ratio of shares if combined P/E ratio is 10.

07

Q.4 (a) What is financial restructuring? What are the key components of financial

restructuring scheme? Develop a financial restructuring scheme for a financially

troubled firm.

07

(b) A company employs certainty-equivalent approach in the evaluation of risky

investments. The capital budgeting department of the company has developed the

following information regarding a new project.

Year Expected

CFAT (Rs.

Thousands)

Certainty

Equivalent

Quotient

0 (200) 1.0

1 160 0.8

2 140 0.7

3 130 0.6

4 120 0.4

5 80 0.3

07

The firm’s cost of capital is 18 percent; its cost of debt is 9 percent and the riskless

rate of interest in the market on the government securities is 6 percent. Should the

project be accepted? OR

Q.4 (a) Ongoing restructuring is must for survival due to globalization, liberalization and

economic reforms. Discuss.

07

3

Q.4 (b) Calculate the Economic Value Added (EVA) with the help of the following

information of S Ltd.

Financial Leverage 1.4

Capital Structure Equity capital, Rs. 170 lakh

Reserves and surplus, Rs 130 lakh

10% debentures, Rs 400 lakh

Cost of Equity 17.50%

Income Tax Rate 30%

07

Q.5 (a) Explain the significance of operating and financial leverage analysis for a finance

manager in corporate profit and financial structure planning.

07

(b) A financial advisor of Krutika Industries Ltd. is confronted with two alternative

financing plans for raising Rs 10 lakh that is needed for plant expansion and

modernization. One choice is 12% Debt issue. The other is to issue 8,000 equity

shares at the current market price per share of Rs 125.

The modernization and expansion program is expected to increase the firm’s

operating profits (EBIT) by Rs. 2,00,000 annually. The firm’s condensed financial

statements for the current year are given below.

Balance Sheet as on March 31 current year

Amount Assets Amount

Current Liabilities 500000 Current Assets 1600000

10 % Long term Loan 1500000

Plant & Equipment

(Net) 3400000

Reserves and Surplus 1000000

Equity capital (Shares of

Rs. 100 each) 2000000

5000000 5000000

Income statement for the current year

Operating profits 800000

Less Interest Expenses (0.10 x Rs 15,00,000) 150000

Income before taxes 650000

Less Taxes (@0.35) 227500

Net Income 422500

Earnings per share 21.12

Dividend per share 10.56

However the finance advisor is concerned about the effect that issuing debt might have

on the firm. The average debt ratio for firm in industry is 45 percent. He believes that

if this ratio is exceeded, the P/E ratio will be 7 because of the potentially greater risk.

If the firm increases its equity capital, he expects the P/E ratio to increase to 8.5. He

also wonders as to what will happen to the dividend yield under each plan. The firm

follows a practice of paying dividends equal to 50 percent of net income.

07

a) Determine the debt ratio, under each plan, after the securities are issued.

b) Determine the expected net income in the next year, expected EPS and

expected market price of the equity shares.

c) Which form of financing should the company use to follow a policy of

maximizing market value of the shares?

OR

4

Q.5 (a) Enlist the key factors which govern the capital structure decisions and explain in detail

any three factors.

07

(b) The Evergreen company has a choice of raising an additional sum of Rs 50 lakh either

by the sale of 10 percent debentures or by issue of additional equity shares of Rs. 50

per share. The current capital structure of the company consists of 10 lakh ordinary

shares.

i) At what level of earnings before interest and tax (EBIT) after the new capital is

required, would earnings per share (EPS) be the same whether new funds are raised by

issuing ordinary shares or by issuing debentures?

ii) Also determine the level of EBIT at which uncommitted earnings per share (UEPS)

would be the same if sinking fund obligations amount to Rs. 5 lakhs per year. Assume

a 35 percent tax rate.

07

*************




Subject Name: Compensation Management (CM)


Instructions:




Q.1 (a) How a reward system operates and briefly explains any

five components of reward system and its interrelationship. 07

(b) What is the difference between incentives and rewards and

discuss the types of non-financial rewards. 07

Q.2 (a) Discuss the different types of non-cash recognition awards

and Explain Analytical job evaluation schemes 07

(b) Discuss the objectives and types of individual contingent

pay. 07

OR

(b) Write a note on rewarding manual workers in brief. 07

Q.3 (a) Explain provisions of finance and audit under the

employees state insurance act,1948. 07

(b) State the provisions of payment of minimum rate of wages

under the minimum wages act,1948. 07

OR

Q.3 (a) What do you understand by expression “salary” under the

Income tax act provisions with respect to salaried persons. 07

(b) Briefly explain the payment of gratuity act,1972. 07

Q.4 (a) Explain expatriate pay with four approaches to calculating

expatriate pay. 07

(b) Compare the two main types of occupational pension

schemes defined benefit and defined contribution. 07

OR

Q.4 (a) Explain The role of the reward professional in

implementing reward strategies, policies and processes. 07

(b) What are the reasons for evaluating reward systems and

what are the possible reasons for the lack of interest in

evaluation and what can be done about it?

07

Q.5 (a) What did you understand from mediclaim policy explain

with features. 07

(b) Explain provisions related to Maternity Benefit act,1981. 07

OR

Q.5 (a) Discuss payment of wages act 1936,for rules of deduction

and enforcement of the act. 07

(b) Read the case given below and answer the following

questions. 07

Fortune furtnitech is a state-of-the-art modular furniture manufacturer,

started with an initial ₨ 500 crore investment, by raising a term loan from

different financial institutions and about 65% contribution from the traditional

family business. The group has a traditional family history of woodcraft

manufacturing. Leveraging the family trend, the present owner Asim Singh and

his wife Ragini ventured into this business. Asim Singh has toured extensively

all over the world with his father, right from his childhood. According to Mr.

Singh, India has top quality berg woods in its North-eastern states, which are

imported by countries such as the US. However, Indians use them as firewood,

because of lack of awareness. The company launched an ambitious plan to

manufacture and sell hardwood furniture worldwide, as their study indicated

that the Indian market for furniture is still unorganized, and that the affluent

class used imported furniture made of concentrated wood dust or waste

products.

To achieve this goal , the company recruited the best designers, business

heads, and production people worldwide. Many designers were either Italian

born, or trained in Italy. The biggest challenge the company faced was in

designing managerial compensation.

Management compensation received attention primarily because of its

performance implications and strategic fit in Fortune Furnitech. The HR

manager claimed that it had a positive effect on the company’s financial

performance and recommended the appropriateness of different compensation

for specific strategic situations. However, he could not convince the top

management of the need to formulate an executive compensation package

accordingly.

Asim Singh only considered such alignment for executives on the board,

arguing that their achievement was traceable. The HR manager argued that

compensation cost in the company was the second largest expense category, the

first being the cost of raw materials and other implements (excepting

labour).Hence, it had to be managed strategically, aligning with the

performance of the organization and its fit with overall organizational strategy.

He supplied extensive literature to sell his argument. He complained that the

organization did not have a well-documented compensation philosophy, despite

this evidence. Some incentives were also counterproductive. He argued that it is

time to develop executive compensation, de-emphasizing the immediate

financial gains and tagging it with long-range strategy of the organization. After

listening to the HR head’s argument, the CEO directed him to develop a model

that may work in the organization.

[Que.:] Imagine you are the HR manager. Design the appropriate pay model for

executives of the organization.

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1

Seat No.: _____ Enrolment No.______

GUJARAT TECHNOLOGICAL UNIVERSITY MBA Sem-III Regular Examination January 2011

Subject code: 830201

Subject Name: Corporate Tax & Financial Planning (CT & FP)

Date : 12/01/2011 Time: 10:30am-1.00pm Total Marks: 70

Instructions: 1. Attempt all questions.



Q.1 (a) Discuss the relationship between residential status of tax payers and incidence

of tax

07

(b) Mrs.Madhu is offered an employment by PVR Ltd. at a basic salary of

Rs.1,25,000 per month. Other allowance offered by the company includes:

Dearness allowance: 15 percent of the basic pay (not forming part of salary for

calculating retirement benefits)

Bonus Pay: 2 Months basic salary

Project allowance: 5 percent of basic pay

The company gives her an option either to take a rent free unfurnished

accommodation at Indore for which the company would bear the rent of

Rs.45,000 per month or to accept a house rent allowance of Rs.45,000 per

month and she can find out her own accommodation. She wants to invest

Rs.60,000 in Public Provident Fund and Rs.35,000/- in Reliance Tax Saver

(ELSS) fund. As a Tax Consultant, determine which one is a better option for

Mrs.Madhu.

07

Q.2 (a) The following is the profit and loss account for the year ending 2009-10 of

Mr.Kabra who is a businessman.

Particulars Amt Particulars Amt

Sundry Charges 35,650 Gross Profit 4,81,660

Insurance 3,500 Commission 1,05,500

Salary 1,12,000 Interest on

Donation to Debenture(22,500) 25,000

Political Party 1,560 Short Term Gain 73,000

Income Tax 2,400

Depreciation 1,00,000

Advertisement 25656

Office Expenses 42,500

Advanced Tax 17,000

Net Profit 3,44,894

6,85,160 6,85,160

07

2

1. Depreciation as per income tax rule is only Rs.75,000

2. Bad debts of a business which was discontinued in earlier years has been

recovered during the year Rs.15000

3. The advertisement expenses include Rs.5000 which is paid for printing

of Souvenir.

4. Salary includes Rs.50,000 paid to his son who is rendering part time

services in his business

5. Sundry charges includes Rs.22,000 paid by bearer cheque

Compute the tax liability of Mr.Kabra if he invests Rs.50,000 in Public

Provident Fund and Rs.50,000 in ELSS mutual Funds Schemes?

(b) What are the provision for computing income on estimated basis under section

44 AE and 44 AF? Explain with suitable numerical examples.

07

OR

(b) Discuss how undisclosed income and investments are taxed 07

Q.3 (a) From the following information regarding certain transactions of Shrikant,, calculate

taxable amount of Capital Gain.

1. Jewelry purchased on 10-3-75 for Rs.109, 000 was sold on 2-5-2009 for Rs.12,

04,810/-. The fair market value of the Jewellary on 1-4-1981 was

Rs.1,10,000/-

2. He had to pay brokerage of Rs.2000/- on Purchase and Rs.4810/- on sales of

the said Jewellary.

3. On 1-11-2009 he purchased Bonds of NHAI of Rs.1,92,160/- which are

repayable after 3 years.

4. Cost Inflation Index of 1981-82 was 100 and that of 2009-10 632.

07

(b) Discuss the provisions of clubbing of income under the Income Tax Act, 1961 07

OR

Q.3 (a) IVRC Ltd. Sells the following assets:

Agriculture Bonus House

Land Share Property

Date of Sale 31/01/2010 7/11/2009 25/3/2010

Date of

Acquisition 9/5/1993 4/4/1983 6/6/1982

Sales

Consideration 9,00,000 4,50,000 6,50,000

Purchase

Consideration 70,000 Nil 1,00,000

The agriculture land is situated in an urban area and used for agriculture purpose

since 1993.

IVRC Ltd. invests in the following assets as on dated 2/4/2010

1. Rs.4,00,000 in the Bonds (Redeemable on June 5,2013) of National

Highway Authority

2. Rs.5,00,000 in the Bonds( Redeemable on May 10,2015) of Rural

Electrification Corporation

3. Rs.80,000 in Agriculture Land

07

3

Year Cost Inflation Index

2009-10:632, 1993-94:244, 1992-93:223, 1983-84:116, 1982-83:109, 1981-

82:100

Find out the Capital Gain chargeable to tax.

(b) Explain with examples set off and carry forward of losses and its exceptions 07

Q.4 (a) JK Ltd obtains a telecom license on 22/04/2009 for a period of 10 years which

ends on 31/03/2019 and paid Rs.27,00,000 as licence fee. Find out the amount

of deduction under section 35 ABB under following situations:

1. If the entire amount is paid on April 1,2010.

2. If the entire amount is paid in three instalments on

April 30, 2009, April 30, 2010 and April 30, 2011.

07

(b) “Tax Planning is crucial while deciding upon the nature of business.” Explain

with numerical examples.

07

OR

Q.4 (a) Discuss various tax incentives available while selecting a business location. 07

(b) Differentiate between Tax Avoidance and Tax Evasion 07

Q.5 (a) Supernova Ltd. is planning for an expansion of its business. It has to make a

choice between debt issue and equity issue for the expansion of business. The

current position of the company is as follows:

10% Debenture 8,00,000

Equity Share Capital(Rs.100 Per Share) 20,00,000

Reserve and Surpuls 12,00,000

Total Capital 40,00,000

Sales Turnover 12,00,000

Less: Total Cost 10,00,000

EBIT 2,00,000

Less: Interest @ 10% 80,000

EBT 1,20,000

Less: Tax @ 33.2175% 39,861

EAT 80,139

The expansion of business will cost Rs.20, 00,000. If this is financed through

the issue of 10% Debenture then the price- earnings ratio will be 5 times and if

financed through the new issue of equity shares then the price earnings ratio will

be 6 times. The expansion will generate additional sales of Rs.60, 00,000 with a

return of 10% on sales before interest and tax.

If the company wants to maximize the market value of the shares, then which

alternative should be adopted by the Supernova Ltd.?

07

07

(b) Evaluate the impact of budget 2010 with reference to an individual and

corporate point of view.

07

OR

4

Q.5 (a) Ivory Ltd. wants to raise capital of Rs.20,00,000 for a project where earning

before tax is 30% of the capital employed. The company can raise debenture @

12% p.a. suggest which of the three alternatives should be adopted by the

company:

1. Rs.20,00,000 to be raised by equity shares

2. Rs.15,00,000 by equity and 5,00,000 by debentures of 12 Percentage

3. Rs.5,00,000 by equity and Rs.15,00,000 by debentures of 12 Percentage

Assume that the corporate tax rate is 30%, education cess is 2 percent and

secondary and higher secondary education cess is 1 percent.

07

(b) Discuss tax planning aspects of “Make or Buy” decision 07

*************

1




Subject Name: Corporate Taxation & Financial Planning





Q.1 (a) Define the terms: (1) Assessment Year & Previous Year (2) Person (3) Gross

Total Income (4) Industrial Company (5) Agricultural Income (6) Surcharge

(7) Foreign Income

07

(b)

X, a foreign national, furnishes the following particulars of his income relevant

for the previous year 2010-11:

Profit on sale of plant at London (one-half received in India) – Rs. 1,46,000

Profit on sale of plant at Delhi (one-half received in London) – Rs. 1,02,000

Salary from an Indian company received in London (one-half paid for rendering

services in India) – Rs .60,000

Interest on U. K. Development Bonds (entire amount received in London) –

Rs.40,000

Income from property in London received there – Rs. 30,000

Income from agriculture in London received there – Rs. 25,000

Dividend received in London on May 6, 2010 from a company registered in

India but mainly operating in U. K. – Rs. 17,000

Profit from a business in Delhi managed from India – Rs. 49,000

Rental income from a property in Nepal – Rs. 12,000

Gift in foreign currency received on September 20, 2010 from a friend (one-

third of which is received in India and remaining amount received outside India

– Rs. 3,70,000

Determine gross total income of X for the A.Y. 2011-12 if he is a) Non-resident

and b)Resident and ordinarily resident

07

Q.2 (a) How the tax liability of a company will be calculated under Normal Provision

and under Minimum Alternate Tax show with imaginary figure? 07

(b) X and Y form a partnership firm on April 1, 2010 (profit sharing ratio 2:3) by

investing Rs. 10,00,000 and Rs. 15,00,000 respectively. The investment has

been financed from the following sources:

X (Rs.) Y (Rs.)

Gift from Mrs. X 6,60,000 ----

Gift from Mrs. Y ---- 8,00,000

Past savings from X and Y 3,40,000 7,00,000

For the year ending March 31, 2011, share of profit from the firm is as follows:

X (Rs.) Y (Rs.)

Interest on capital @ 12% 1,20,000 1,80,000

Salary as working partner 24,000 24,000

Share of Profit 1,08,000 1,62,000

Find out the income chargeable to tax in the hands of X and Mrs. X.

07

2

OR

(b) X, an employee of PQR Ltd., draws Rs. 2,00,000 as basic pay, Rs. 15,000 as

dearness allowance (not being part of salary) and Rs.20,000 as bonus. Besides

the company provides a rent-free unfurnished house in Goa. The house is not

owned by the company. Determine the taxable value of the perquisite for the

A.Y. 2011-12 if lease rent of the house is : a) Rs.20,000 p.a. b) Rs.48,000 p.a. c)

Rs.26,000 p.a.

07

Q.3 (a) Discuss the provisions of Income Tax Act for computation of Cost of

Acquisition of Original and Bonus Shares as the part of sale considerations. 07

(b) X submits the following particulars of income/loss for the A.Y. 2011-12:

Profits of Business I carried on in India – Rs. 2,42,000

Loss of Business II carried on in India – Rs. (1,26,000)

Profits of Business III carried on in Germany (though income is earned and

received in Germany, business is controlled from Bombay) – Rs. 2,17,000

Loss of Business IV carried on in Germany (though income is earned and

received in Germany, business is partly controlled from Germany and partly

from Canada) – Rs. (1,56,000)

Unabsorbed depreciation of the A.Y. 2002-03:

Business I – Rs. (1,07,000)

Business III – Rs. (1,08,000)

Business IV – Rs. (2,15,000)

Income from property situated in India – Rs. 1,18,000

Income from property situated in Germany – Rs. 1,20,000

Determine the net income of X for the A.Y. 2011-12 on the assumption that he

is (i) resident and ordinarily resident in India (ii) resident but not ordinarily

resident in India

07

OR

Q.3 (a) Discuss in detail Sections 80IC and 80ID as the tax incentives under the Income

Tax Act for selection of Location of New Business. 07

(b) Mr. X is an entrepreneur. He provides you the following alternatives to select

the best form of organization in regards with the best tax planning.

Particulars Alt.-A Alt.-B Alt.-C No. of partners 3 4 8

Profit sharing ratio Equal Equal Equal

Capital in equal proportion 10,00,000 15,00,000 80,00,000

Profit P.Y.- 2010-11 6,00.000 12,00,000 60,00,000

Other income of each partner 60,000 50,000 60,000

LIC Prem. of each partner 80,000 50,000 90,000

Salary p.m. of each partner 10,500 14,625 32,437.50

Mr. X has two option either partnership firm as per above mentioned

alternatives or proprietary firm. Suggest which form of organization is better for

him.

07

Q.4 (a) Discuss provisions of Section 80JJAA-Deduction in respect of employment of

new workmen. 07

(b) X (age : 32 years), posted at Bombay, receives a salary of Rs. 36,000 per month

during 2010-11 from A Ltd. His employer contributes Rs. 53,000 towards

provident fund. His other allowances are: special allowance Rs. 2,28,000 and

medical allowance: Rs. 22,200 and 0.5 per cent commission on sales achieved

by him. During the year, turnover achieved by X is Rs. 9,60,000. Employer

provides a Maruti-800 car with a chauffer for his private and official purposes

w.e.f. April 1, 2010. The amount of interest credited to provident fund on May

10, 2010 @ 11% p.a. comes to Rs. 25,660.

07

3

Income of X from other sources is Rs. 7,54,000.

Payments/ Contributions:

Insurance premium paid on own life (sum assured : Rs. 22,500) – Rs. 6,500

Insurance premium paid on the life of Mrs. X (sum assured : Rs. 1,00,000) – Rs.

4,000

Insurance premium paid on the life of major son (sum assured : Rs. 20,000) –

Rs. 3,100

Contribution towards PPF – Rs. 1,000

Contribution towards employee’s provident fund – Rs. 50,000

Contribution made for participating in ULIP – Rs. 2,000

Repayment of loan taken from LIC for purchase of a house (whose construction

is completed on March 10, 1987 and used by him for his residence) – Rs.

22,000

Tuition fee of X’s son – Rs. 12,500

Investments in units of a notified Mutual Fund for financing infrastructure

facility – Rs. 2,000

Determine the amount of tax liability on the assumption that provident fund is

(i) Statutory (ii) Recognised (iii) Unrecognised. OR

Q.4 (a) What do you mean by Tax Planning? Distinguish: Tax Avoidance and Tax

Evasion.

07

(b) X, not being covered by the payment of Gratuity Act, 1972, retires on January

6, 2011 from PQR and receives Rs. 1,24,000 as gratuity after service of 29

years and 11 months. His average monthly salary during March 1, 2010 to

December 31, 2010 is Rs. 8,500. Determine the amount of: a) taxable gratuity

b) gratuity exempted from tax for the A. Y. 2011-12.

07

Q.5 (a) Discuss with comparison the tax benefits for various forms of organization:

Firm, LLP and Company with reference to new business. 07

(b) XYZ Ltd. is contemplating an expansion programme. It has to make a

choice between debt issue and equity issue for its expansion programme. Its

current position is as under:

Rs.(in Crore)

10% Debt 80

Equity share capital(Rs. 10 per share) 200

Reserves and Surplus 120

Total capitalization 400

Sales 1,200

Less: Total Cost 1,076

EBIT 124

Less: Interest 8

EBT 116

Less: Tax @ 33.2175% 38.53

EAT 74.47

The expansion programme is estimated to cost Rs. 200 crore. If this is financed

through debt, the new rate of debt will be 10% and the P/E Ratio will be 6

times. If the expansion programme is financed through equity, new shares can

be sold getting Rs. 25 per share and the P/E Ratio will be 7 times. The

expansion will generate additional sales of Rs. 600 crore with return of 10% on

sales before interest and tax. Suggest which form of financing should it choose?

07

OR

Q.5 (a) Explain meaning of Dividend as per Section 2(22)(a) to 2(22)(e). What is tax

treatment for them? 07

(b) Enlist Any Five permissible deductions u/s 80C to 80U. Explain Any Two of

them. 07

**********

1


GUJARAT TECHNOLOGICAL UNIVERSITY M.B.A. Sem. – III - Examination –June- 2011

Subject code :( 830201)

Subject Name: Corporate Taxation & Financial Planning Date:09/06/2011 Time: 02.30 pm – 05.30 pm

Total Marks: 70




Q.1 ABC Ltd., an Indian company, submits the following particulars relevant for

the assessment year 2010:

Particulars Rs. Particulars Rs.

Salary to Staff 5,24,000 Gross profit 23,52,000

Income tax 20,000

Expenses on issue of shares

for setting up a new show

room at Delhi

40,000

Expenses on raising a long

term loan for setting up a new

show room at Mumbai

60,000

Interest on public deposits 20,000

Capital expenditure for

promotion of family planning

among employees

8,000

Legal expenses for filing

income – tax appeals before

Delhi High Court

11,000

Reserve for losses 16,000

Reserve for payment of fines

and penalty

6,000

Reserve for bad and doubtful

debts

400

Maintenance expenses for car 12,000

Bad debts written off 3,600

Depreciation to be written off:

Plant and machinery

Car

42,000

6,000

Office expenses 8,000

Rent & repairs 28,000

Sundry expenses 2,43,000

Net profit 13,04,000

Total 23,52,000 23,52,000

14

2

Other information:

1. Car is partly used for official purposes and partly for personal purposes of

manager. In the past 50 percent of car expenditure is disallowed.

2. Sundry expenses include payment of an advertisement bill to a person

who has substantial interest in company. The payment is excessive to the

extent of Rs. 9,800.

3. Office expenses include an expenditure of Rs. 4,000 which is paid in

cash.

4. Sundry expenses include an expenditure of Rs. 40,100 which is paid by a

bearer cheque.

5. Depreciation on machinery as per income tax provisions is Rs.

18,000

6. On March 10, 2010, the company pays Rs. 1, 80,000 to National

Laboratory for carrying an approved scientific research programme in

natural science. The payment is not recorded in the above P & L Account.

7. Sundry expenses included royalty payment of Rs. 50,000 to a resident on

which tax is deducted at source on March 31, 2010 and paid to the

government on September 5, 2010 (i.e. after the time limit given under

section 200(1).

Determine the taxable income and tax liability of the company for the

assessment year 2010-11.

Q.2 (a) Distinguish between : (Any Two)

(i) Tax avoidance and Tax evasion

(ii) Tax planning and Tax management

(iii) Real ownership and Beneficial ownership

07

(b) X furnishes the following particulars of his income earned during the

previous year relevant to the assessment year 2010-11

Rs.

1. Income on German Development Bonds 72,000

(one-sixth is received in India)

2. Income from agriculture in Pakistan, received 6,82,000

there but later on Rs. 1,72,000 as remitted to

to India

3. Interest from property in USA received outside 6,80,000

India (Rs. 1,84,000 is used in Canada for

meeting the education expenses of X’s

son is in Canada and Rs. 4,96,000 is

later on remitted to India )

4. Income earned from business in Iran which 8,10,000

controlled from New Delhi (Rs. 1,40,000 is

received in India)

5. Dividend paid by an Indian company on May 10, 3,91,600

2009 but received out side India

6. Pasted untaxed profit of 2006-07 brought to 4,20,000

India in May,2009

7. Profit from the business in New Delhi and 1,84,000

managed from out side India (60 % of profit

is received out side India)

8. Profits on sale of building in India but received 37,48,000

in Nepal

9. Pension from a formal employer in India 4,30,000

received in Iran

07

3

10. Gift in foreign currency from a friend received 1,60,000

in India on September 6, 2009

Find out the gross total income of X if he is

(i) Resident and ordinarily resident in India

(ii) Resident but not ordinarily resident in India

(iii) Non- resident in India

For the assessment year 2010-11

OR

(b) X joined a company at Ajmer (population 24 lakh) on June 1,2009 and was

paid the following emoluments and allowed perquisites as under:

Emoluments :

Basic pay Rs. 25,000 per month

Dearness allowance Rs. 10,000 per month

Bonus Rs. 50,000 per month

Perquisites:

i. Furnished accommodation owned by the employer and provided free

of cost.

ii. Value of furniture therein Rs. 3,00,000

iii. Motor car owned by company (with engine cubic capacity less than

1.6 litres) along with chauffeur for official and personal use.

iv. Sweeper salary paid by company Rs. 1,500 per month.

v. Watchman salary paid by company

vi. Rs. 1,500 per month.

vii. Educational facility for two children provided free of cost. The

school owned and maintained by the company.

viii. Interest free loan of Rs. 5.00,000 given on October 1, 2009 for

purchase of a house repayable within five years. No repayment

was made during the year (SBI landing rate is 9.75%).

ix. Interest free loan of Rs.50, 000 for purchase of computer to be used

for education purpose given on January 1, 2010. No repayment

was made during the year (SBI landing rate is 11.75%)

x. Corporate membership of a club. The initial fee of Rs. 1, 00,000 was

paid by the company. X paid the bills for his use of club

facilities.

You are required to compute the income of X under the head

“salaries” in respect of assessment year 2010-11.

07

Q.3 (a) Mr. Jay furnish the following details for the year ending March 31, 2010 ,

assumed that figures given below are computed and arrived after

considering eligible deductions.

Particulars Rs.

Salary Income 4,50,000

Income(loss) from House property

House – 1 1,40,000

House – 2 (Self-occupied) (7,05,000)

House – 3 1,15,000

Profit or Gain from Business or Profession

Pharmaceutical business 5,00,000

Electronic business (7,50,000)

Speculation business 3,60,000

07

4

Capital Gains

Long - term capital gain 3,00,000

Short - term capital gain 1,90,000

Long - term capital loss (3,25,000)

Income from other sources

Loss on owning and maintaining race horses (1,50,000)

Interest on securities 2,90,000

Compute total taxable income of Jay.

(b) Explain the concept of Double Taxation Avoidance Agreement (DTAA). 07

OR

Q.3 (a) ABC Ltd. is in process of expansion of programme. It has to make choice

between debt issue and equity issue for its expansion programme. Its current

position is as under.

Particulars Rs. In Crore

Equity share capital 500

( Rs. 10 per share)

10 % loan 200

Reserve & Surplus 300

Total Capital Employed 1,000

Total sales 3,000

Less:

Total costs 2,690

310

Less:

Interest 20

(10 % on 200)

Profit Before Tax 290

Less:

Tax @ 33. 2175 % 96.;33

Profit After Tax 193.67

The expansion programme is estimated to cost Rs. 500 crore. If this is

financed through debt, the new rate of debt will be 10 percent and the price-

earning ratio will be 6 times. If the expansion programme is financed

through equity shares, new shares can be sold @ Rs. 25 per share and price-

earning ratio will be 7 times. The expansion will generate additional sales of

Rs. 1500 crore with return of 10 % on sales before interest and taxes. If

company wants to follow maximizing the market value of its shares, which

form of financing, should it choose?

07

(b) Explain advantages of Limited Liability Partnership (LLP) as compared to

company form of organization

07

Q.4

XYZ Ltd. is considering the purchase of a new machine costing Rs. 1,

20,000 with an expected life of 5 years with salvage value of Rs. 6,000, in

replacement of an old machine purchased 3 years ago for Rs. 30,000 with

expected life of 8 years. The present market value of this old machine is Rs.

70,000. Because of the purchase of new machinery, the annual profits before

depreciation are expected to increase by Rs. 24,000. The relevant

depreciation rate for the machine is 15 percent on written down value basis

14

5

and the tax rate is 33.2175 percent. Assume the after tax cost of capital

(discounting rate) to be 14 percent. Advice the company suitably.

OR

Q.4 (a) R Ltd., is engaged in the business of carriage of goods. On April 1, 2009 it

owns 10 trucks (6 out of which are “heavy goods vehicle”). On May, 16,

2009, one of the heavy goods vehicles is sold by R. Ltd. to purchase a light

goods vehicle on May 25, 2009, which is put to use only from August, 1

2009. Find out the net income of R Ltd. for the assessment year 2010-11

taking in to consideration the following data:

Particulars Rs.

Freight collected 7,75,000

Less:

Operating expenses 5,25,000

Depreciation as per section 32 1,40,000

Other office expenses 65,000

Net Profit 45,000

Other Business Income 55,000

07

(b) Explain Methods of Accounting under income-tax Act 1961. 07

Q.5 (a) XY & Co., a partnership firm, transfers a piece of land situated in Thane

district on August 17, 2009 for Rs.50 lakh. The land purchased on March 6,

1980 for Rs. 1 lakh got registered on April 3, 1983 on payment of stamp

duty of Rs. 20,000.Expenses on land development and construction of

boundary wall incurred in August 1983 where of Rs. 1, 50,000. The charges

for transfer of land paid to the broker where 2.5% of the sale consideration.

Fair market value of the land as on April 1, 1981 was Rs. 1, 50,000.The firm

invested Rs. 30 lakh on December 1, 2009 in the bonds issued by a National

Highways Authority of India redeemable after a period of 48 months.

Compute the amount of capital gain chargeable to tax and amount of

exemption U/S 54EC for the assessment year 2010-11. Cost Inflation Index

for 1981-82 and for 2009-10 is 100 and 632 respectively.

07

(b) Explain implications of Direct Tax Code on Steel Sector. 07

OR

Q.5 (a) Write provisions relating to deduction of tax at source from Salary. 07

(b) X Ltd., is engaged in business of growing and manufacturing tea in India.

During previous year 2008-09, it deposits Rs. 100 lakh in the “special

account” and claim the same as deduction under section 33AB (i.e. 40 % of

the business profit: Rs. 250 lakh). During 2009-10, the company withdraws

Rs. 35 lakh from the “special account” which is utilized as follows :

a. Rs. 25 lakh on December 31, 2009 for the purpose of scheme framed by

the Tea Board ; and

b. Rs. 4 lakh for the other purpose on January 27, 2010.

c. 6 lakh is not utilized up to March 31, 2010.

Find out the amount chargeable to tax for the assessment year 2010-11.

07

*************

Page 1 of 6

Seat No.: ________ Enrolment No.______________

GUJARAT TECHNOLOGICAL UNIVERSITY M.B.A -III

nd SEMESTER–EXAMINATION – MAY/JUNE- 2012


Subject Name: Corporate Taxation & Financial Planning (CT&FP)

Time: 02:30 pm – 05:30 pm Total Marks: 70

Instructions:




Q.1 (a) XYZ Ltd. An Indian company furnishes following

particulars for the Assessment Year 2010-2011 compute

Total Income.

Net Profit as per P&L A/c:- Rs.4, 00,000

Additional Information

1. Income Tax debited to P&L A/c Rs.6, 000, out of it

Rs.1, 200 is excessive.

2. During the previous year 2009-2010, the following

payments are made not debited to P&L A/c.

• Rs.7, 000 paid on 5th

May-2009 on A/c of

outstanding custom duty of the previous

year 2008-2009.

• Rs.5, 000 paid on 3rd

January-2010 on A/c.

of outstanding Sales Tax of the previous

year 2008-2009.

3. Copyright of Rs.30, 000 debited to P&L A/c. was

acquired and put to use on 10th

March-2010.

4. Opening stock & Closing stock was respectively

Rs.3, 60, 000 & Rs.4, 50, 000 as per books, it was

found that it has been consistently valued 10%

below cost.

5. Goods of Rs.50, 000 purchased by bearer cheque

from Y Ltd. debited as purchase in P&L A/c.

6. Contribution to a national laboratory for carrying

out approved scientific research qualified for

weighted deduction U/s.35 (2AA) Rs.1, 06, 000

debited to P&L A/c.

7. During the previous year 2009-2010 company pays

Rs.10, 00,000 not debited to P&L A/c. as

compensation to employees on voluntary retirement

under VRS scheme.

07

Page 2 of 6

(b) Find out the Total Income in the cases of X & Y for the

assessment year 2010-2011 both are resident retail traders

at Ahmedabad.

X Y

Sales Turnover 40, 00,000 60, 00,000

Less: Expense

Cost of Goods Sold 35, 00,000 50, 00,000

Depreciation 20,000 30,000

Other Expenses 3, 80,000 8, 20,000

Business Income 1, 00,000 1, 50,000

Other Income 2, 20,000 2, 30,000

PPF Contribution 40,000 50,000

LIC - 60,000

07

Q.2 (a) As on 31-3-2009 the regular workers employed by an

industrial undertaking were 120. During the previous year

following workers were employed

Causal workman on 5-4-09 10

Workman employed

through contract labor

from 10-5-09

20

Workman employed by

company

• w.e.f 1-5-09

• w.e.f 1-6-09

• w.e.f 15-7-09

• w.e.f 15-10-09

15

5

15

5

Compute the deduction under section 80JJAA if the salary

of each new workman is Rs.2000P.M.

07

(b) Explain Tax planning, Tax avoidance and Tax evasion with

one example of each.

07

OR

(b) State meaning of “Amalgamation” under the Income Tax

Act and conditions for a merger to qualify as

“Amalgamation” for the purpose of Income Tax Act.

07

Q.3 (a) What is regarded as “income” under The Income Tax

Act(any seven points)

07

Page 3 of 6

(b) Find out Gross Total Income of X for assessment year

2010-2011 if he is

• Resident & ordinary resident

• Resident & not ordinary resident

• Non resident

Rs.

Interest on USA

development bonds(two

fifth is received in India)

60, 000

Income from Agriculture

in Australia(Activity is

controlled in Australia)

1, 00,000

Income from business in

Uganda(controlled from

Delhi)

50, 000

Pension from a former

employer in India received

in Bangladesh

30, 000

Profit on sale of building in

India but received in Sri

Lanka

1, 00,000

Gift in foreign currency

from a friend received in

India on 20th

January-2010

80, 000

07

OR

Q.3 (a) State any 7 incomes which do not form part of Total

Income (Tax free incomes).

07

(b) A company wants to appoint marketing manager Mr. X

aged 40 years , it has two options

1. Monthly Salary Rs.30, 000

2. (i) Monthly Salary Rs.15,000

(ii) Employers contribution to RPF Rs.1, 800 P.M.

(iii) Education allowance for 2 children Rs.200

P.M.

(iv) Academic research allowance Rs.2, 000 P.M.

(50% use for conducting research)

(v) Uniform allowance Rs.3000 P.M.(utilize for

purchasing & maintaining uniform for official use)

(vi) Rent free house in Delhi company pays rent at

Rs.5, 000 P.M.

(vii) Medical reimbursement Rs.12, 000 P.A.

(viii) Telephone at residence of employee Rs.9000

P.A.

(ix) Bonus Rs.15, 000 P.A.

Compute tax liability under both option for Assessment

Year 2010-2011 and state which option will be beneficial

to X.

07

Page 4 of 6

Q.4 (a) A & B are minor sons of Mr. X and Mrs. X. Business

income of Mr. X is Rs.3, 50,000 and Mrs. X Rs.5, 00,000.

Income of A & B from stage acting is Rs.60, 000 and

Rs.70, 000 respectively besides interest on company

deposits of A & B (deposit was made out of Income from

acting) is Rs.30, 000 and Rs.1, 000 respectively. A & B

have received following birthday gifts, on 20th

May-2009

gift received by B from his grand father Rs.80,000 and on

14th

September-2009 gift received by A Rs.60, 000 from X

friend and Rs.35, 000 from a relative. Find out the income

of Mr. X, Mrs. X, A and B for Assessment Year 2010-

2011.

07

(b) X purchases a property on 1st April-1976 for Rs.1, 00,000.

He enters into an agreement of the property to A on 1st

November-1983 and receives Rs.10, 000 in advance. A

could not however keep his promise & advance of

Rs.10, 000 given by him is forfeited by X. Later on he gifts

the property to his friend Y on 15th

May-1985. The

following expenses are incurred by X & Y for renewal of

the property.

Cost Rs.

Addition of two Rooms by X during

1978-1979

25, 000

Addition of first floor by X during

1983-1984

40, 000

Addition of second floor by Y during

1990-1991

1, 15,000

Fair Market Value of the property on 1st April-1981 is

Rs1, 20,000.

Y enters into agreement of sale the property for

Rs.8, 50,000 to B on 1st April-1993 after receiving an

advance of Rs.50, 000. B could not pay the balance within

and Y forfeits the advance. Y ultimately finds a buyer C to

whom the property is transferred for Rs.10, 75,000 on

1stDecember-2009. Compute the capital gain chargeable to

tax in the hands of Y for Assessment Year 2010-2011.

Previous Year Cost Inflation Index

1981-82 100

1983-84 116

1985-86 133

1990-91 182

2009-10 632

07

OR

Page 5 of 6

Q.4 (a) X a business man of Delhi furnishes the following

information for the Assessment Year 2010-2011.

Rs.

Income from house

property(computed)

2, 50,000

Business Profit (before

claiming following

deduction)

2, 40,000

Current Year depreciation

allowance

1,10,000

Unabsorbed depreciation

allowance of previous

years

• 2003-2004

• 1993-1994

15, 000

5, 000

Unabsorbed Business

losses of the previous years

• 2003-2004

• 1993-1994

10, 000

6, 000

Current Scientific research

expenditure

1, 05,000

Determine his total income for Assessment 2010-2011

07

Q.4 (b) Mr. X aged 45 years has Gross Total Income of Rs.4,

00,000. Compute his total income and tax payable by him

for Assessment year 2010-2011 considering below

payments, investments or deposits.

1. LIC premium on life of his married daughter

Rs.6,000(Sum assured Rs.20, 000)

2. LIC premium on his own life Rs.2, 700(sum

assured Rs.60, 000) due on 31st march-2010 but

paid on 4th

April-2010.

3. LIC premium on life of dependent sister Rs.9, 000

(sum assured Rs.1, 00,000)

4. LIC premium on life of his Major son Rs.3,

100(sum assured Rs.20, 000)

5. Medical Insurance premium of own & spouse

Rs.12, 000.

6. Tuition fee of his son Rs.15,000

7. Repayment of housing loan installment to LIC

Rs.10, 000.

07

Q.5 (a) State the amendments brought in by the Finance Act 2010

for Assessment year 2011-2012 with respect to below

provisions

1. Limit of turnover or gross receipts for the purpose

of audit of accounts.[Sec.44AB]

2. Limit of turnover for the purpose of presumptive

taxation. [Sec.44AD]

3. Normal rates of income tax in case of individual

being a resident in India who is of the age 65 years

or more at any time during previous year.

07

Page 6 of 6

(b) A company wants to raise capital of Rs.20, 00,000 for a

project where earning before interest and tax shall be 30%

of the capital employed. The company can raise debt fund

at 11% P.A. Suggest which of the following three

alternatives should it opt for

A. Rs.20, 00,000 to be raised by equity capital.

B. Rs.15, 00,000 by equity and Rs.5, 00,000 by loans.

C. Rs.5, 00,000 by equity and Rs.15,00,000 by loans

Assume the company shall distribute the entire amount of

profit as dividend. Assume effective Tax rate for company

at 30.90% and effective dividend Tax rate 16.995%

07

OR

Q.5 (a) Discuss the implications of Direct Tax code on various

Indian Sectors in brief.

07

(b) Decide which one is a better alternative lease or buy in

following situation

Tax rate 30.90%

Cost of capital 14%

Depreciation Rate(Income Tax) 15%

Lease Cost Rs.34, 000 P.A for 5 Years(per Rs.1, 00,000)

Present Value of Rs1 discounted at 14% is as follow

Year 1 2 3 4 5

0.877 0.769 0.675 0.592 0.519

Assume cost of asset Rs.1, 00,000 with salvage value of

Rs.1, 000 and there is no capital gain Income Tax liability.

07

*************

1




Subject Name: Legal Aspects of Business Date:18/06/2011 Time: 02.30 pm – 05.30 pm

Total Marks: 70

Instructions:




Q.1 (a) “Contract is an agreement enforceable by law”. Discuss the statement and

describe the essentials of a valid contract.

07

(b) “A company is an artificial person created by law, having a separate entity

with a perpetual succession and a common seal.” Discuss the above

statement and explain the characteristics of a company.

07

Q.2 (a) What do you mean by contract of guarantee? In which circumstances a

surety may be discharged from his liability.

07

(b) Discuss in brief the remedies available to an aggrieved party in case of

breach of the contract.

07

OR

(b) Define Agency. What are the various ways in which the relation of agency

arises?

07

Q.3 (a) Briefly state the provisions of the Companies Act, 1956 regarding the

mode of appointment of the directors of a company.

07

(b) What is a negotiable instrument? Describe the different types of

negotiable instruments in brief

07

OR

Q.3 (a) “A contract without consideration is void”. Comment on the statement and

give its exceptions.

07

(b) What are the penalties prescribed in the Negotiable Instruments Act in case

of dishonor of cheque for insufficiency of funds in the account of the

person issuing the cheque?

07

Q.4 (a) Distinguish between condition and warranty. State the circumstances under

which a condition can be waived and treated as warranty.

07

(b) Where and how can a complaint be made by consumer? State the

jurisdiction of the various redressal agencies in this regard.

07

OR

Q.4 (a) When is a seller of goods deemed to be an unpaid seller? What are his

rights against (I) the goods, and (II) the buyer personally?

07

(b) How is Controller or Certifying Authority appointed? What are his

functions under Information Technology Act, 2000?

07

Q.5 (a) Define Intellectual Property. Explain the major types of protections

provided by Intellectual Property Rights.

07

(b) Explain the rules made by Central Government for save the Environment. 07

OR

Q.5 (a) What are the acts which are not infringement of copyright? 07

(b) “Environment Protection Act is an Umbrella Law for Environment

Protection.” justify the Statement.

07

*************

1




Subject Name: Legal Aspects of Business


Instructions:




Q.1 (a) What are essentials of a valid acceptance? 07

(b) What is free consent? Under what circumstances is consent said to be

free?

07

Q.2 (a) How is a contract discharged? 07

(b) Explain the essentials of the contract of guarantee. 07

OR

(b) What is Indemnity? What are the essentials and rights of an indemnity

holder?

07

Q.3 (a) What are the rights of an Agent? 07

(b) Distinguish between Sale and Agreement to sell. 07

OR

Q.3 (a) Under the Consumer Protection Act, explain who is not a

Consumer?

07

(b) What are the essential elements of 'Bill of Exchange'? 07

Q.4 (a) What are the rights of a 'Holder in Due Course'? 07

(b) What are the rights of a member or shareholder of a company? 07 OR

Q.4 (a) What are the rules to be observed before allotting shares? 07

(b) Discuss the types of Meetings. 07

Q.5 (a) Under the Environment Protection Act, discuss the powers of the central

government.

07

(b) A battery-operated travel lamp was being sold by a shop. It was claimed that the battery would last for 10 hours. The claim was valid, but the light of the

bulb appeared harsh and piercing to the eyes. The buyer wants to return the

bulb to the shop and claim his money back. Decide.

07

OR

Q.5 (a) Under the IT Act, who is a Certifying Authority and how is it regulated? 07

(b) Ashish bought an electric iron from a shop. His wife, Varsha was using the iron, when in the first use itself, the coil melted and gave her a shock. Varsha

had to be hospitalized. Can Ashish return back the iron and claim his money

back? Can Varsha demand compensation for injury? Can Ashish demand

compensation for his wife?

07

*************

1


GUJARAT TECHNOLOGICAL UNIVERSITY MBA. Sem-III Regular Examination January 2011


Subject Name: Legal Aspects of Business Date: 04 / 01 /2011 Time: 10.30 am – 01.00 pm

Total Marks: 70




Q.1 (a) A contract is not voidable merely because it was caused by one of the parties to it

being under a mistake as to a matter of fact.- Explain the statement giving

illustrations

07

(b) All contracts are agreements but all agreements are not contracts – Explain 07

Q.2 (a) Explain who is an unpaid seller. State his rights 07

(b) State what is the real test for agency. Also state the provisions relating to sub

agents

07

OR

(b) Explain briefly the provisions relating the prevention of deterioration of quality of

air under the Air (protection) Act.

07

Q.3 (a) A contracted to pay B Rs. 1 lakh on a specified day through a promissory note in

lieu of the goods sold to him. A did not pay the money on the appointed day. B in

consequence of not receiving the money on that day is unable to pay his debts and

is totally ruined. What damages if any would you award

07

(b) Define Managing Director, and state the statutory provisions regarding his

appointment and remuneration

07

OR

Q.3 (a) A draws a cheque in favour of B. A’s clerk forges B’s endorsement and negotiates

the cheque to C, who takes it in good faith and for value. C receives payment on

the cheque. Discuss the rights of A and C.

07

(b) Explain who can become a Certifying Authority under the Information Technology

Act 2000. What is the scope of activities of the same?

07

Q.4 (a) Explain the scope of different consumer dispute redressal agencies 07

(b) “Copyright is protection in Form and not in Idea” – Discuss 07

OR

Q.4 (a) Explain the criteria for patentability set under the Indian Patents Act 07

(b) You are a banker. A new customer has asked you to explain the effect of the

following crossing on cheques: (a) two parallel lines across the cheques with words

’&co.’, (b) the same as in (a) with the addition of the words ‘not negotiable’. Give

him a clear explaination

07

Q.5 (a) X co. Ltd., wants to make a contract with a partnership Firm. Four of the five

directors of the company are partners of such partnership. Can the contract be

executed? If yes then how?

07

2

(b) A, B and C as sureties for D enter into three several bonds, each in a different

penalty of A Rs.1000, B in that of Rs. 2000 and C in that of Rs.4000 conditioned

for D’s duly accounting to E. D makes a default to the extent of Rs. 4000. State

the liability of A, B and C

07

OR

Q.5 (a) The shareholders at an annual general meeting passed a resolution for the payment

of dividend at a rate higher than that recommended by the Board of Directors.

Examine the validity of the resolution

07

(b) A person saw a Plasma Television in the showcase of a shop. A label below the

television mentioned the price as Rs.45000. He had been looking for that model of

television for a long time. He approached the shop to one such television.

However he was told that the shop did not have that model in stock. The

shopkeeper also said that he could not promise him one later either, as the

manufacturing company of that television was facing financial difficulties and it

was being closed down. The person insisted that he had a right to buy the one kept

in the showcase. - comment

07

*************

1





Subject Name: Legal Aspects of Business (LAB)


Instructions:




Q.1 (a) Define Contract. What are the essential elements of a Valid Contract? 07

(b) What are the various modes to create an Agency? 07

Q.2 (a) What are the provisions of companies act, 1956 for conversion of;

1. A private company into public company and

2. A public company into private company.

07

(b) Differentiate Sales and Agreement to sale. 07

OR

(b) Describe the salient features of the Consumer Protection Act, 1986.

Explain its objectives.

07

Q.3 (a) What do you mean by Consent? Thoroughly discuss the elements

influencing free consent of the parties.

07

(b) Who is surety? What are the rights of surety? 07

OR

Q.3 (a) Define Discharge of Contract. In what circumstances the contract can

be concluded or Discharged?

07

(b) What are the remedies available on breach of contract? 07

Q.4 (a) What are the salient features of a negotiable instrument? 07

(b) Define unpaid seller. What are the rights of unpaid seller? 07

OR

Q.4 (a) What is Prospectus? Describe its contents. 07

(b) What are the objectives of IT Act 2000? 07

Q.5 (a) What is revocation of patent? Which are the grounds for revocation of a

patent?

07

(b) The Environment Act is enacted with what objectives? 07

OR

Q.5 (a) Define Patent. Explain the procedure for registration of patent. 07

(b) What are the powers of central government to protect and improve the

Environment?

07

*************

1




Subject Name: Management of Financial Services





Q.1 (a) Describe the functions of Indian Financial System. 07

(b) How the role of money market is different from capital market? 07

Q.2 (a) Name the different types of financial institutions prevailing in the

Indian financial market and explain their roles.

07

(b) Describe the Role of Reserve Bank of India in the development of

Banking and Non Banking Financial Institutions.

07

OR

(b) What are the challenges before Indian Financial System in Globalised

Economy?

07

Q.3 (a) Demonstrate the functions of Merchant Banker related to issue

management.

07

(b) What are the advantages and disadvantages of Leasing? 07

OR

Q.3 (a) Describe the characteristics of venture capital financing? 07

(b) What is bill discounting and how it is different from bills purchasing? 07

Q.4 (a) What is credit rating and how it is useful for credit organizations? 07

(b) Define Depository and explain its functions. 07 OR

Q.4 (a) What are the prescribed code of conducts for Stock Brokers? 07

(b) How the factoring is different from forfeiting? 07

Q.5 (a) What is the role of Mutual Funds in Stock Market? 07

(b) Give details about the important features of Hire Purchase Agreement

and also explain how it is different from Lease?

07

OR

Q.5 (a) Commodities Market in India is not developed in comparison to

financial market – Comment on the statement.

07

(b) Describe the Role of IRDA in the development of Insurance Services

in India.

07

*************

1




Subject Name: Management of Financial Services Date: 07 /01 /2011 Time: 10.30 am – 01.00 pm

Total Marks: 70




Q.1 (a) Discuss the Indian Financial System, giving the various components of the

Financial System.

07

(b) Throw some light on the history of banking in India, giving an overview of the

banking structure in India.

07

Q.2 (a) Explain Hire-Purchase finance giving its characteristics. How is it different

from installment payment and lease financing?

07

(b) Explain the Income-Tax considerations which have a bearing on lease

transactions for the lessor and for the lessee.

07

OR

(b) What is leasing? Discuss the various types of lease. 07

Q.3 (a) Discuss the phases of growth of Mutual Fund in India and the benefits of

investing in a Mutual Fund.

07

(b) “With the help of international factoring an exporter can explore new markets”.

– Discuss the statement giving the benefits of international factoring. Also,

describe with the help of a flowchart an international factoring transaction.

07

OR

Q.3 (a) Discuss the process of securitization and the obstacles in the development of

securitization in India.

07

(b) “Intermediaries are a vital link between the insurer and the insured”. Mention

the various intermediaries in the insurance industry and the role played by them.

07

Q.4 (a) “Merchant bankers play a very important role in issue management activity”.-

Give the major obligations & responsibilities of a merchant banker.

07

(b) Discuss the stipulations with regard to the pricing of issues. 07 OR

Q.4 (a) What is Book-building? Explain the briefly the process of issue of shares

through book-building method.

07

(b) Mention the major features of an issue advertisement. 07

Q.5 (a) Explain the term Depositories. Give the reasons for setting up depository in

India. Discuss the services and benefits provided by the depository system.

07

(b) Describe the credit rating methodology generally used by the credit rating

agency.

07

OR

Q.5 (a) Discuss the functions and services provided by National Securities Depositories

Ltd (NSDL)

07

(b) Write a note on Credit Rating Information Services of India Ltd (CRISIL). 07 *************

1

Seat No. ___________ Enrolment No. ________

GUJARAT TECHNOLOGICAL UNIVERSITY

M.B.A. Sem. – III - Examination –June- 2011

Subject Code : 830202

Subject Name : Management of Financial Services Date:11/06/2011 Time: 02.30 pm – 05.30 pm Total Marks: 70

Instructions :




Q.1 (a) Discuss post Narsinhman Committee (One) reforms taken place in financial

markets in India.

(b) Discuss the main functions and role of Reserve Bank of India.

Q.2 (a) A has total sales of Rs. 3.20 crores and its average collection period is 90 days.

Past experience indicates that bad debt losses are 1.5% on sales. The expenditure

incurred by the firm in administering its receivables collection efforts are Rs.

5,00,000. A factor is prepared to buy the firms receivables by charging 2%

commission. The factor will pay advance on receivables to the firm after with

holding interest @ 18% p.a. and 10% on reserve.

Calculate effective cost of factoring to the firm. (Assume number of days in year

as 360. Also assume that bad debts will be borne by factor)

(b) Explain ‘Repos’ and ‘Reserve Repos’.

OR

(b) Explain eligibility norms of SEBI for bringing IPO (Initial Public Offer)

Q.3 (a) Briefly discuss the various functions performed by merchant banker.

(b) Discuss advantages of lease to the lessee.

OR

Q.3 (a) Define commercial bills. Briefly discuss advantages of bill discounting.

(b) What are the benefits of credit rating to Investors.

Q.4 (a) Explain in detail commercial paper alongwith regulatory guidelines.

(b) Briefly state the advantages of investing through mutual funds to the investors.

OR

(07)

(07)

(07)

(07)

(07)

(07)

(07)

(07)

(07)

(07)

(07)

2

(a) Briefly explain code of conduct for brokers as specified by SEBI.

(b) Explain basic features of short selling and securities lending and borrowing

scheme.

Q.5 (a) Explain the concept of ‘Reverse Mortgage’.

(b) Explain the provisions of SEBI for exercising ‘Green shoe option’.

OR

(a) Explain the stages of venture capital financing including Due Diligence and

Exist routes.

(b) Briefly explain ‘Reverse Book Building’.

**********

(07)

(07)

(07)

(07)

(07)

(07)

1





Subject Name: Management of Financial Services (MFS)


Instructions:




Q.1 (a) “The organization of the Indian Financial System in the post 1991

period has undergone drastic and dramatic transformation” – Express

your views on this statement.

07

(b) Explain briefly role and functions of Reserve Bank of India. 07

Q.2 (a) “Merchant Bankers are considered as sponsor of capital issues” –

Justify this statement considering the role of merchant bankers in new

issue management.

07

(b) Define Venture Capital Finance. Also discuss the various stages of

venture capital financing.

07

OR

(b) State and explain various types of mutual fund schemes with their

innovative features.

07

Q.3 (a) Define Lease Finance? Briefly discuss types of lease. 07

(b) Write a short note on importance of Money Market. 07

OR

Q.3 (a) Define Factoring and Forfeiting. Explain types of factoring. 07

(b) Discuss features of Hire Purchase Finance. Compare Lease Finance

and Hire Purchase Finance.

07

Q.4 (a) Define Letter of Credit. Explain various types of letter of credit. 07

(b) “Credit rating has emerged as one of the very beneficial service for the

prospective investors and the issuers as well” – Give your comments.

07

OR

Q.4 (a) Define Plastic Money. Discuss merits and demerits of Plastic Money. 07

(b) Discuss role and functions of SEBI. 07

Q.5 (a) “Financial service supervision is very crucial aspect to ensure healthy

and orderly growth of financial system in India” – Give your

comments.

07

(b) Write a note on Bills Discounting. 07

OR

Q.5 (a) What do you understand by Book Building? Explain process of Book

Building.

07

(b) Explain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio

(SLR) prescribed by RBI for all commercial banks as a part of

financial service supervision.

07

*************

1





Subject Name: Management of Financial Services (MFS)


Instructions:


2. Make suitable assumptions & give suitable examples wherever necessary.


Q.1 (a) What is factoring? Which are the types of factoring services available in India? 07

(b) Explain NSDL and CDSL. What is the process and benefits of depositary

system? 07

Q.2 (a) Write a detailed note on Harshad Mehta and Ketan Parekh scam. 07

(b) Highlight the major roles of a central bank in financial system. Also explain

how does the monetary policy of RBI helps in it. 07

OR

(b) Explain the functions of NHB. What guidelines the HFI needs to follow? 07

Q.3 (a) Explain the clearing and settlement procedure of NSE. 07

(b) What are the restrictions on accepting of deposits from public by the Non

Banking Financial Institutions? 07

OR

Q.3 (a) Explain about the money market instruments that traded in the Indian money

market? 07

(b) What is the role of debt market in the capital market? Who are the participants

in the debt market? 07

Q.4 (a) Explain the operations, participants and different schemes under Mutual

Funds. 07

(b) How Bill discounting help as a short term instrument of financing? Which are

the different types of bills? 07

OR

Q.4 (a) What is book building process? Write about the Green Shoe Option. What is

full, partial and reverse green shoe? 07

(b) Which are the different stages of finance available under Venture Financing

option? 07

Q.5 (a) Write in brief on following:

- IRDA

- NABARD

07

(b) Which are the major credit rating agencies in India? Explain in brief. 07

OR

Q.5 (a) Explain different methodology to calculate index with an appropriate example. 07

(b) How to price the IPO? Write about fixed and free price regime of IPO. 07

*************

Page 1 of 3





Subject Name: Security Analysis and Portfolio Management (SAPM)


Instructions:




Q.1 (a) Explain following Terms:

Margin Trading, Stop-loss order, Preference Share, Mutual Fund, Circuit Breaker,

Short Sell, Rolling Settlement

07

(b) The returns of two assets under four possible states of economy are given below:

State of Economy Probability Return on Asset 1 Return on Asset 2

1 0.20 -5% 10%

2 0.30 15% 12%

3 0.40 18% 14%

4 0.10 22% 18%

07

i) Find the standard deviation of the return on asset 1 and asset 2.

ii) Find the covariance between the returns on assets 1 and asset 2.

iii) Find the coefficient of correlation between the returns on both the assets.

Q.2 (a) Reliance Industries earned the following returns over a five year period: R1 = 0.20,

R2 = -0.10, R3 = 0.18, R4 = 0.12 and R5 = 0.20.

Calculate: (a) arithmetic mean return (b) geometric mean return (c) cumulative

wealth index (d) standard deviation of returns

07

(b) What is risk? Explain different kind of risk associated with investments in detail. 07

OR

(b) Discuss following theories: Expectations Theory, Liquidity Preference Theory,

Preferred Habitat Theory

07

Q.3 (a) Explain Efficient Market Hypothesis in detail. 07

(b) Complete the balance sheet and sales data using the financial data given below:

Acid-test ratio = 1.2

Debt/Equity ratio = 0.6

Days’ sales outstanding in accounts receivable = 40 days (360 days per year)

Total Assets turnover ratio = 1.5

Gross Profit Margin = 20%

Inventory turnover ratio = 5

Balance Sheet

Equity Capital 50,000 Plant & Equipment ?

Retained Earnings 60,000 Inventories ?

Debt ? Accounts Receivables ?

- - Cash ?

Total ? Total ?

Sales ?

Cost of Goods Sold ?

07

Page 2 of 3

OR

Q.3 (a) Select an industry of your choice and do the industry analysis in present economic

scenario.

07

(b) Define Technical Analysis. What is the difference between technical analysis and

fundamental analysis? Explain different continuation and reversal patterns.

07

Q.4 (a) Given below is the expected returns on two stocks for particular market returns:

Market Return Aggressive Stock Defensive Stock

5% -5% 10%

25% 40% 18%

i) What are the betas of two stocks?

ii) What is the expected return on each stock if the market return is equally

likely to be 5% and 25%?

iii) What is SML if the risk free rate is 10%

iv) Find alpha for both the stocks.

07

(b) Explain Arbitrage Pricing Model. Compare it with CAPM. 07 OR

Q.4 (a) The following information is available:

Expected return for the market = 14%

Standard deviation of market return = 20%

Risk free rate = 6%

Correlation coefficient between stock A and the market = 0.7

Correlation coefficient between stock B and the market = 0.8

Standard Deviation for stock A = 24%

Standard Deviation for stock B = 32%

i) Calculate beta for both the stocks.

ii) Calculate required rate of return for each stock.

07

(b) Explain Security Market Line using CAPM theory. Also, explain assumptions of

CAPM.

07

Q.5 (a) Following bond has been considered by you as a part of your fixed income

portfolio:

Coupon Rate: 10%

Yield to Maturity: 10%

Maturity: 10 years

i) Find duration of the bond.

ii) Why the duration of bond is less than its maturity?

iii) What will be the effect of the following changes on the duration of bond:

(1) Coupon rate is 7% rather than 10%

(2) YTM is 13% rather than 10%

(3) Maturity period 8 years rather than 10 years

Consider one change at a time.

07

(b) Discuss key points of active and passive portfolio strategies. Describe portfolio

rebalancing and portfolio upgrading in the context of portfolio revision.

07

OR

Q.5 (a) Rs.1000 par value bond with annual coupon of 10% has a remaining maturity of

4 years. The bond is presently selling for Rs.1020. The reinvestment rate

applicable to the future cash inflows of the bond is 9% p.a. What will be the

realised YTM?

07

Page 3 of 3

(b) Consider the following information for three mutual funds A, B and C and the

market.

Mean Return (%) Standard Deviation (%) Beta

A 15 20 0.90

B 17 24 1.10

C 19 27 1.20

Market 16 20 1.00

The mean risk free rate = 10%

Calculate Sharpe measure, Jensen measure and Treynor measure for the three

mutual funds and the market index.

07

*************

1




Subject Name: Security Analysis and Portfolio Management (SAPM)


Instructions:




Q.1 (a) Explain the Elliott Wave theory. 07

(b) "No Investment Decisions are made without calculating risk." Do

you agree? As an Investment Manager of a firm, discuss the various

investment avenues available for investment with risk involved in

each of them.

07

Q.2 (a) How is Markowitz model useful in portfolio selection? 07

(b) A stock costing Rs.120 pays no dividends. The possible prices that

the stock might sell for at the end of the year and the probability of

each are:

(a) What is the expected return?

(b) What is the standard deviation of the returns?

Possible

Prices (Rs)

Probability

115

120

125

130

135

140

0.1

0.1

0.2

0.3

0.2

0.1

07

OR

(b) Following data are available for two security portfolio, find the

minimum variance portfolio. Also calculate the return of the

portfolio.

Security Return Standard

deviation

Correlation between C and

D

C

D

26.9

17.5

22.3

51.0

- 0.12

07

Q.3 (a) Zero coupons bonds are excellent vehicles for immunizing a

portfolio. Do you agree or disagree? Why?

07

(b) Face value of a bond is Rs.1000, YTM = 6%, and coupon rate is

3.5%. What is its present value if its maturity period is 10 years?

07

OR

Q.3 (a) Differentiate between call and put options. What are rights and

obligations of the holders of long and short positions in them?

07

2

(b) You are given two bonds to choose from namely Zero Coupon Bond

(ZCB) of 5 years and 20 years and your target

Duration is 10 years. How much do you allocate to each Bond to

achieve your target duration?

07

Q.4 (a) The stock of Taksha Ltd. is expected to pay cash dividend for three

years from now and it will be at 25% of its earnings. The company’s

cost of equity is 16% and its ending P/E is 18. Its current earnings

per share is Rs.3 and its earning is expected to grow at rate of 10%

per year. What should be the value of stock that he is willing to pay

for this stock, if he is willing to hold the stock for 4 years? No

dividend will be paid in the first two years.

07

(b) Compare and contrast Capital Market Line (CML) and Security

Market Line (SML).

07

OR

Q.4 (a) Define investment. What are the characteristics of investment? 07

(b) The Mansi corporation has a required rate of return of 16% and its

current dividend is Rs 3 per share. If the current price of Mansi’s

stock is Rs 55 per share, what is the growth rate of its dividends?

07

Q.5 (a) What do you mean by Asset Management Company? As an investor

which points you take care of while choosing the Mutual Fund?

07

(b) Two portfolios are having the following characteristics:

Observed returns Beta Residual variance

Portfolio A 0.18 2.0 0.03

Portfolio B 0.12 1.5 0.00

07

The risk-free rate is 0.07. The return on the market portfolio is 0.15.

The standard deviation of the market is 0.06. Compute Sharpe Index

and Treynor Index for the portfolio A and B.

OR

Q.5 (a) Critically examine the basic assumptions of formula plans and

comment on their validity in the Indian Context.

07

(b) With a risk-free rate of 12% and with the market portfolio having an

expected return of 22% with a standard deviation of 10%. What is

the sharp Index for portfolio X, with a mean of 16% and a standard

deviation of 20%? For portfolio Y, having a return of 22% and a

standard deviation of 18%? Would you rather be in the market

portfolio or one of the other two portfolios?

07

*************

1




Subject Name: Security Analysis and Portfolio Management Date: 08 /01 /2011 Time: 10.30 am – 01.00 pm

Total Marks: 70




Q.1 (a) What is risk? What are the various types of risk involved in investment decision? 07

(b) What is Technical Analysis? Explain various continuation and reversal patterns

for technical analysis.

07

Q.2 (a) Explain the CAPM with the concept of systematic risk and also state its

underlying assumptions.

07

(b) The following data are available for Infosys and HLL

Infosys HLL

Standard deviation 16.68% 33.21%

Expected return 13.90% 21.54%

Correlation coefficient 0.43

Find out the minimum variance portfolio weight for Infosys and HLL. Also find out the

expected return and variance of portfolio.

07

OR

(b) Your portfolio consist of three stocks A, B, and C with the weight of 25%, 32%

and 43% respectively with expected return of 18% and S.D. of 28%. The T-bill

rate is 8%. Your clients choose to invest 70% of his portfolio in your portfolio

fund and 30% in T-bill. What is the expected return and SD of your client’s

portfolio? What are the investment proportions of your client’s overall portfolio

(A, B, C stocks and T-bill)? What is the reward to variability ratio (slope) of your

portfolio and your client’s portfolio?

07

Q.3 (a) The YTM on 1 year Zero Coupon Bond is currently 7%; the YTM on 2 year zeros is

8%. The treasury plans to issue a 2-year maturity coupon bond, paying coupons once

per year with a coupon rate of 9%. The face value of the bond is 100.

1) At what price will the bond sell?

2) What will the YTM on the bond be?

3) If the expectations theory of the yield curve is correct, what is the market

expectation of the price that the bond will sell for next year?

4) Recalculate your above answer if you believe in the liquidity preference theory and

you believe that the liquidity premium is 1%

07

(b) What is Duration? Explain the eight rules of Duration. 07

OR

Q.3 (a) Find the duration of a 6% coupon bond making annual coupon payments if it has 3 years until maturity and has a YTM of 6%. What is the duration if the YTM is 10%?

07

(b) What is Options? Explain the different types of options with their pay off profiles. 07

2

Q.4 (a) An analyst wants to evaluate portfolio X, consisting entirely of equity shares, using both Treynor and Sharpe measures of portfolio performance. The following table provides

the annual average rate of return for portfolio X and market portfolio (BSE) and T-bill

during the past eight years

Rate of Return Standard Deviation Beta

Portfolio X 10% 18% 0.60

BSE 12% 13% 1.00

T-Bills 06% N/A N/A

a. Calculate the Treynor and Sharpe measures for both portfolio X and BSE. Briefly

explain whether portfolio X underperformed, equal or outperformed BSE on a risk

adjusted basis using both the Treynor and Sharpe measures.

b. Based on the performance of the portfolio X relative to the BSE calculated as above,

briefly explain the reasons for conflicting measures when using the Treynor versus

Sharpe measures

07

(b) Explain the various forms of efficient market using random walk theory 07 OR

Q.4 (a) The following information is available for Alpha and Beta.

Alpha Beta

Expected ROE 14% 12%

Estimated EPS 2.00 1.65

Estimated DPS 1.00 1.00

Current Market Price 27.00 25.00

Market capitalization rate 10% 10%

Answer the following questions:

1. What is the expected dividend pay-out ratio?

2. What are the expected growth rates of each?

3. What is the intrinsic value of each share?

4. In which, if either, of the two shares would you choose to invest?

07

(b) What is Mutual Fund? What is Asset Management Company? Discuss the different

types of mutual funds schemes in India 07

Q.5 (a) Choose an Industry and identify the factors that will determine its performance in next

three years 07

(b) What is an Investment? Discuss the various marketable and non marketable

investment avenues available to investors.

07

OR

Q.5 (a) The current market price of share of XYZ Ltd. is Rs. 10. The expected EPS is Rs. 2. The company has dividend payout ratio of 50%. The remaining is invested in projects that

earns 20% rate of return per year. This situation is expected to continue forever.

a) Assuming the current market price reflects the intrinsic value as computed using

the constant growth DDM, what is the expected rate of return by investors.

b) By how much does its value exceed what it would be if all earning were paid as

dividends and nothing were reinvested.

c) If company cuts its payout ratio to 25%, what would happen to its share price?

07

(b) The following information is available for one company. (Rs. in Lakh)

Particulars 2009 2010 Particulars 2009 2010

Revenue 542 979 Fixed Assets 41 70

Operating Income 38 76 Total Assets 245 291

Depreciation 3 9 Working Capital 123 157

Interest 3 0 Debt 16 0

Income Tax 13 37 Equity 159 220

Calculate each of the following components of ROE as per Du Pont for 2009 and 2010.

1. Operating Margin 2. Asset Turnover 3. Interest Burden 4. Financial Leverage and

5. Income Tax Rate

Briefly discuss the change in asset turnover and financial leverage on the change in

ROE from 2009 to 2010

07

*************

1




Subject Name: Security Analysis and Portfolio Management Date:14/06/2011 Time: 02.30 pm – 05.30 pm

Total Marks: 70




Q.1 (a) Define Investment. Explain different Investment Alternatives. 07

(b) Discuss why international diversification reduces portfolio risk.

Specifically, why would you expect low correlation in the rates of return

for domestic and foreign securities?

07

Q.2 (a) Briefly Explain types of Market order. 07

(b) The following are the monthly rates of return for Rally Software Corp. and

for Carry Electric during a six-month period.

Month Rally Software Carry Electric

1 -0.04 0.07

2 0.06 -0.02

3 -0.07 -0.10

4 0.12 0.15

5 -0.02 -0.06

6 0.05 0.02

Compute the following:

a. Expected monthly rate of return [E(Ri)] for each stock

b. Standard deviation of returns for each stock

c. The covariance between the rates of return

d. The correlation coefficient between the rates of return

What level of correlation did you expect? How did your expectations

compare with the computed correlation? Would these two stocks offer a

good chance for diversification? Why or why not?

07

OR

(b) Explain the shape of the efficient frontier. 07

Q.3 (a) You are considering two assets with the following characteristics:

E(R1) = 0.15 σ1 = 0.10 W1 = 0.5

E(R2) = 0.20 σ2 = 0.20 W2 = 0.5

Compute the mean and standard deviation of two portfolios if r1,2 = 0.40

and –0.60, respectively. Plot the two portfolios on a risk-return graph and

briefly explain the results.

07

(b) The capital asset pricing model (CAPM) contends that there is systematic

and unsystematic risk for an individual security. Which is the relevant risk

variable and why is it relevant? Why is the other risk variable not relevant?

07

2

OR

Q.3 (a) General Can Company’s (GCC) latest annual dividend of Rs. 1.25 a share

was paid yesterday and maintained its historic 7 percent annual rate of

growth. You plan to purchase the stock today because you believe that the

dividend growth rate will increase to 8 percent for the next three years and

the selling price of the stock will be Rs. 40 per share at the end of that

time.

a. How much should you be willing to pay for the GCC stock if you

require a 12 percent return?

b. What is the maximum price you should be willing to pay for the

GCC stock if you believe that the 8 percent growth rate can be

maintained indefinitely and you require a 12 percent return?

c. If the 8 percent rate of growth is achieved, what will the price be at

the end of Year 3, assuming the conditions in Part b?

07

(b) Explain the EIC Framework and its implications. 07

Q.4 (a) Explain the difference between Forward and Future Contracts. 07

(b) Why would you expect a relationship between economic activity and

stock price movements?

07

OR

Q.4 (a) You strongly believe that the price of Bright Corp. stock will rise

substantially from its current level of Rs.137, and you are considering

buying shares in the company. You currently have Rs. 13,700 to invest. As

an alternative to purchasing the stock itself, you are also considering

buying call options on Bright’s stock that expire in three months and have

an exercise price of Rs. 140. These call options cost Rs. 10 each.

a. Compare and contrast the size of the potential payoff and the risk

involved in each of these alternatives.

b. Calculate the three-month rate of return on both strategies assuming

that at the option expiration date Bright’s stock price has (1) increased to

Rs. 155 or (2) decreased to Rs. 135.

c. At what stock price level will the person who sells you the Bright

Corp. call option break even? Can you determine the maximum loss that

the call option seller may suffer, assuming that he does not already own

Bright Corp. stock?

07

(b) What do you mean by Efficient Market Hypothesis, Also Explain the

forms of Market Efficiency.

07

Q.5 (a) An analyst wants to evaluate Portfolio X, consisting entirely of Indian

common stocks, using both the Treynor and Sharpe measures of portfolio

performance. The following table provides the average annual rate of

return for Portfolio X, the market portfolio (as measured by the BSE

Sensex), and Indian Treasury bills (T-bills) during the past eight years.

Particulars

Annual Average

Rate of Return

Standard Deviation of

Return Beta

Portfolio X 10% 18% 0.6

BSE Sensex 12% 13% 1

T-bills 6% n/a n/a

n/a = not applicable

07

3

a. Calculate both the Treynor measure and the Sharpe measure for both

Portfolio X and the Sensex. Briefly explain whether Portfolio X

underperformed, equaled, or outperformed the Sensex on a risk-adjusted

basis using both the Treynor measure and the Sharpe measure.

b. Based on the performance of Portfolio X relative to the Sensex

calculated in Part a, briefly explain the reason for the conflicting results

when using the Treynor measure versus the Sharpe measure.

(b) Technical Analysts believe that one can use past price changes to predict

future price changes. How do they justify this belief?

07

OR

Q.5 (a) Describe the Dow Theory and its three components. Which component is

most important? What is the reason for an intermediate reversal?

07

(b) The following portfolios are being considered for investment. During the

period under consideration, RFR = 0.07.

Portfolio Return Beta σi

P 0.15 1 0.05

Q 0.2 1.5 0.1

R 0.1 0.6 0.03

S 0.17 1.1 0.06

Market 0.13 1 0.04

a. Compute the Sharpe measure for each portfolio and the market

portfolio.

b. Compute the Treynor measure for each portfolio and the market

portfolio.

c. Rank the portfolios using each measure, explaining the cause for any

differences you find in the rankings.

07

*************

1





Subject Name: Security Analysis & Portfolio Management (SAPM)


Instructions:




Q.1 (a) A security analyst is responsible for making recommendations to clients about

buying and selling stocks and making other investment decisions. What are the

factors that should be taken into account while evaluating investment

worthiness of a company? Discuss them briefly.

07

(b) The Efficient Market Hypothesis states that no one can earn above normal

returns consistently by using Technical Analysis or Fundamental Analysis. If

this is true then Security Analysis is a fruitless attempt. What are your views

on this? Discuss.

07

Q.2 (a) As a rational investor what factors you would consider while taking

investment decisions.

07

(b) Calculate the expected return and the standard deviation of returns for a stock

having the following probability distribution of returns.

POSSIBLE RETURNS (IN %) PROBABILITY OF

OCCURRENCE

-25 0.05

-10 0.10

0 0.10

15 0.15

20 0.25

30 0.20

35 0.15

07

OR

(b) Explain the following terms:

1. Support and Resistance

2. MACD

3. ROC

4. Short Selling

07

Q.3 (a) Consider two bonds A and B. They have following characteristics.

Bond-A Bond-B

Face Value Rs.100 Rs.100

Coupon Rate 14% 14%

Term to maturity 4 years 7 years

Current market price Rs.100 Rs.100

Coupon payments Annually Annually

(i). What is YTM of Bonds A and B. If the market interest rates fall by 1

percentage, what would be the new market price of the bonds?

(ii). What is the percentage change in the price of two bonds? What did

you notice regarding the percentage price change in case of bonds A

and B identical in all respects except term to maturity?

07

2

(b) Call Options are said to be “At the money”, “In the money” and “Out of

money” depending on whether the exercise price is equal to, less than or

greater than the current market price of the stock. In case of put options the

opposite of this is true. Explain when a trader realizes profits in case of call as

well as a put option with the help of examples. Ignore transaction costs

07

OR

Q.3 (a) Calculate duration of the following bond

Face value : Rs. 1000

Coupon rate : 10% p.a.

Maturity period : 5 years

Market YTM : 11%

07

(b) A stock is currently selling for Rs. 60. The call option on the stock exercisable

a year from now is available at an exercise price of Rs. 55. The stock can rise

by 35%, and it can fall by 30%. The risk free rate of interest is 12 percent.

What is the value of the call option?

07

Q.4 (a) Given the following variance-covariance matrix for three securities, as well as

the percentage of the portfolio that each security comprises. You are required

to calculate the portfolio’s standard deviation.

Security A B C Proportion of

investment

A 425 -190 120 0.35

B -190 320 205 0.25

C 120 205 175 0.40

07

(b) Describe the procedure developed by Markowitz for choosing the optimal

portfolio of risky assets. What are the problems encountered while using

Markowitz model?

07

OR

Q.4 (a) Explain Capital Asset Pricing Model with its assumptions. 07

(b) Describe the anatomy of Sharpe’s single index model 07

Q.5 (a) Calculate Sharpe Ratio, Treynor Ratio and Jensen Ratio from the following

information pertaining to three mutual fund portfolios:

Mutual fund portfolios

Particulars X Y Z

Beta 1.10 0.80 1.80

Return (%) 14.50 11.25 19.75

Standard deviation (%) 20 17.50 26.30

Assume that the risk free rate of return on govt. security is 6 percent and the

market return is 12 percent.

07

(b) Discuss the role of different entities in a mutual fund operation. 07

OR

Q.5 (a) Write a detailed note on Fama’s Net Selectivity Measure. 07

(b) What is an exchange traded fund? How is it constructed? 07

*************

Page 1 of 3





Subject Name: Strategic Financial Management (SFM)


Instructions:




Q.1 (a) ‘Strategic Financial Planning is subject to the various macro

and micro environmental factors’. Elucidate.

07

(b) Konark Ltd. has to make a choice between debt issue and equity

issue for its expansion programme. Its current position is as

follows:

Particulars Rs.

5% Debt 2,00,000

Equity Share Capital(Rs. 10 per

share) 5,00,000

Reserves & Surplus 3,00,000

Total Capitalisation 10,00,000

Sales 30,00,000

Total Cost 26,90,000

EBIT 3,10,000

Interest 10,000

EBT 3,00,000

Income Tax @ 35% 1,05,000

07

The expansion programme is estimated to cost Rs. 5,00,000. If

it is financed through debt, the rate of interest on the new debt

will be 7% and the price-earnings ratio will be 6. If the

expansion programme is through equity, new shares can be sold

@ Rs. 12.50 per share and the price-earning ratio will be 7.the

expansion will generate additional sales of Rs. 15,00,000 with a

return of 10% on sales before interest and taxes.

If the company is to follow a policy of maximising the market

value of the shares, which form of financing should it choose?

Q.2 (a) Explain the significance of operating and financial leverage

analysis for a financial executive in corporate profit and

financial structure planning.

07

(b) Raj Ltd. is having shares in branded portion as well as

unbranded portion. From the following data calculate brand

value of the company:

Branded Revenue Rs. 500 per unit

07

Page 2 of 3

Unbranded Revenue Rs. 120 per unit

Branded Cost Rs. 350 per unit

Unbranded Cost Rs. 100 per unit

Research & Development Rs. 20,00,000

Branded Products 1,00,000 units

Unbranded Products 40,000 units

Tax Rate 39.55%

Capitalization factor 18% OR

(b) Define the terms: ‘Risk’ and ‘Uncertainty’. What is Risk

Management? Discuss the steps for application of Risk

Management in Project Management.

07

Q.3 (a) What does it mean by Corporate Restructuring? Discuss the

techniques adopted in corporate restructuring.

07

(b) Nigam Ltd. Produces a product in bulk of 40,000 units and

incurs a loss of Rs. 40,000. The variable cost is Rs. 32 and

fixed cost is Rs. 1,20,000. The company has estimated its

demand as follows:

Demand (Rs.) 40,000 48,000 56,000 64,000 72,000

Probability 0.10 0.15 0.20 0.30 0.25

What is the probability that company will incur loss?

What is the probability that company will make profit of Rs.

24.000?

07

OR

Q.3 (a) Write a note on: Project Management Information System. 07

(b) Define ‘Financial Forecasting’. Briefly discuss the techniques

of financial forecasting.

07

Q.4 (a) Define ‘Sick Industrial Company’. Discuss Univariate Model

and Multiple Discriminant Analysis for prediction of industrial

sickness?

07

(b) HPL Ltd. is a levered company with a single project i.e.

Project-P in hand. The equity has a beta 1.2 and debt has a beta

0.9. The project cost is Rs. 1,20,00,000 financed by a

combination of Rs. 72,00,000 debt and Rs. 48,00,000 equity.

The risk free rate of return is 10% and expected market rate of

return is 18%. You are required to calculate beta of the

company in situations: (1) No tax world and (2) In tax world,

assuming corporate tax is 40%.

07

OR

Q.4 (a) ‘An analysis of the magnitude and stability of cash flows

relative to fixed charges and it is extremely important in

determining an appropriate capital structure.’ Comment

07

(b) How do you ascertain the value of share under Capital Asset

Pricing Model?

07

Q.5 (a) Discuss the impact of liberalization and globalization on

project planning.

07

(b) Discuss Decision Tree Analysis and Simulation Modelling as 07

Page 3 of 3

risk evaluation technique in capital budgeting.

OR

Q.5 (a) Baghban Ltd. provides you the following detail, you are

requested to find the value of the company:

2,000, 9% Preference Share of Rs. 100 each Rs. 2,00,000

50,000 Equity Share of Rs. 10 each,

Rs. 8 per share paid up Rs. 4,00,000

Expected profit p.a. before tax Rs. 2,18,000

Rate of tax 40%

Transfer to General Reserve every year 20% of profit

Normal Rate of earning 15%

07

(b) Distinguish: Gordon’s Growth Valuation Model and Walter’s

Valuation Model.

07

*************

1




Subject Name: Strategic Management





Q.1 (a) Differentiate between vision, mission and purpose with suitable

examples. 07

(b) In the current scenario, which model is more relevant for generating

above average returns, The I/O model or the resource-based model or

both? Why?

07

Q.2 (a) Differentiate between resources, capabilities and core competencies with

examples. Also discuss the four criteria of sustainable competitive

advantage.

07

(b) Discuss the prominent applications of the internet in the value chain. 07

OR

(b) What is the challenge of analyzing the internal environment? Which

conditions affect managerial decisions about resources, capabilities and

core competencies?

07

Q.3 (a) Discuss different types of business-level strategies with suitable

examples. 07

(b) Why do organizations diversify? Which is better, low-levels, moderate or

high-levels of diversification? Give examples to substantiate your

arguments.

07

OR

Q.3 (a) Differentiate between mergers, acquisitions and takeovers. Also discuss

reasons and problems for acquisitions. 07

(b) What are the different modes of global market entry? Give suitable

examples. 07

Q.4 (a) Write short notes on:

1. Transnational strategy

2. Strategic network

3. Leveraged buyouts

4. Balanced scorecard

07

(b) Discuss key strategic leadership actions with suitable examples. 07 OR

Q.4 (a) What is the relationship between strategy and structure? In what scenario

is a multidivisional structure appropriate? 07

(b) What is organizational culture? How can strategic leaders manage an

effective organization culture? Give examples. 07

Q.5 (a) What are organizational controls? Why are strategic controls and

financial controls important aspects of the strategic management process? 07

(b) Write short notes on: 07

2

1. Corporate governance

2. Ethics in organizations

3. Corporate social responsibility

4. Incremental innovation

OR

Q.5 (a) Discuss the nature of corporate governance in emerging economies like

India with suitable example/s. 07

(b) How can corporate governance foster ethical strategic decisions and

behaviours on part of managers as agents? 07

*************



Subject code: 830001 Subject Name: Strategic Management Date: 03 /01 /2011 Time: 10.30 am – 01.00 pm

Total Marks: 70




Q.1 (a) Define Vision, Mission and Purpose, and discuss their importance in Strategic

Management Process.

07

(b) “Ethics are the foundation stone of building an organization”. Explain citing an

example of a successful national or multi-national organization like TATAs,

Siemens, L & T etc.

07

Q.2 (a) Explain Porter’s Five Force Model with application in an organization of your

choice.

07

(b) Company ‘A’ targets to achieve Above Average Returns, and their top

management is in dilemma to select either Input-Output Model or Resource-

based Model. As a Manager, which Model would you recommend Company ‘A’

and Why?

07

OR

(b) What are the tangible and intangible resources? Why as a decision maker, it is

important to understand the differences between both?

07

Q.3 (a) What are capabilities of a firm? What must firms do to create capabilities? 07

(b) What are the four criteria used to determine which of a firm’s capabilities are

‘core competencies’? Explain with the help of a Table.

07

OR

Q.3 (a) Explain the ‘Value Chain Analysis’ and its application in a large Retail business

like Big Bazaar, Wall Mart, D-Mart etc.

07

(b) “SWOT Analysis is equally vital for Owners, Directors and Managers”. Explain

in detail giving an example of a company or your choice.

07

Q.4 (a) Explain Business Level Strategies in brief. 07

(b) Define in brief various strategies namely Diversification, Strategic Alliance, Joint

Ventures, Mergers and Acquisitions.

07

OR

Q.4 (a) Why are acquisition strategies popular amongst CEOs of many large Indian

companies as well as SMEs?

07

(b) Explain International Business / Corporate Level Strategies. 07

Q.5 (a) What is the effect of Strategic Leadership on determining firm’s strategic

direction?

07

(b) You wish to implement ‘Balance Score Card’ in your new organization to have

better financial controls and achieve 50% higher performance in the year 2011-12.

Explain this concept.

07

OR

Q.5 (a) “Corporate Governance is essential to manage the relationship among

stakeholders and to control the performance of an organization”. Discuss giving an

example of a company of your choice.

07

(b) “No successful company can grow without fulfilling its Corporate Social

Responsibility”. Discuss giving an example of Dell, Boeing, TATA, Reliance,

ESSAR or any listed Indian company.

07

*************

1




Subject Name: Strategic Management Date:03/06/2011 Time: 02.30 pm – 05.30 pm

Total Marks: 70




Q.1 (a) i.) Who are various stakeholders in a company ? How stakeholders’

relationship could be source of competitive advantage for a company ?

Explain.

04

ii) Explain the concept of ‘ value ‘and ‘value activities’ in brief 03

(b) AXIS Bank started its operations with corporate assets being the main

focus area . But , AXIS Bank brought shift in strategy in FY 99 . From the

case study of AXIS Bank , answer the following questions in detail .

i. Why the bank did bring shift in strategy ?

ii. What was the strategic shift AXIS Bank brought about ?

iii. What were various constituent sub-strategies of broad differentiation

that the Bank followed ?

07

Q.2 (a) Varina Nissen joined Manpower Australia and New Zealand as Managing

Director in 2003 . When Nissan joined Manpower , the company was facing

a number of significant challenges . Nissan undertook several initiatives in

strategy formulation and its execution . Based on the case study of

Manpower – Australia , answer the following questions :

( i) What are strategic themes identified and strategic initiatives proposed ?

(ii) Why Balance Score Card tool was chosen by Nissan as the strategy

implementation tool ?

(iii) State the measures under the theme of “ Customer Perspective “of

Manpower Australia’s Recruiting & Staffing Solution (R & SS ) Score Card

2004

07

(b) .i. Explain brief various components of external environment of business . 03

ii) What do you understand by ‘ Core Competence “ ? Explain the criteria for

‘ Core Competence ‘ . Illustrate it with reference to ‘ consumer goods ‘

sector

04

OR

(b) What do you understand by ‘ business ethics ‘ ? Explain brief the concepts

related to ethics under schools of ‘ ethical universalism ‘ and ‘ ethical

relativism ‘ . Cite examples .

07

Q.3 (a) i) Explain the concept of I/O Model and assumptions of I/O Model . 03

ii) “ Competitive scope can have a powerful effect on competitive advantage ,

because it shapes the configuration and economies of the value chain “ Critically

examine

04

(b) What do you understand by ‘ cost leadership strategy ‘ ? How it is

implemented through each of five forces ? What are competitive risks of

cost leadership strategy ? Explain in brief citing examples

07

OR

2

Q.3 (a) What are various components of action agenda for implementing a strategy

by a corporate ? Explain detail . 07

(b) Discuss in detail of guidelines to be followed in designing proper incentive

compensation system . 07

Q.4 (a) What are vision and mission ? What is their value for the strategic

management process ? Illustrate your answer with reference to Mc Donald

and Ford Motor company

07

(b) What is the criteria of sustainable competitive advantage ? How companies

like HUL or Tata Steel or Hero Honda could achieve sustainable advantage

? Explain

07

OR

Q.4 (a) What are various levels of diversification ? What are various reasons for

diversification ? 07

(b) What is a company’s social responsibility strategy ? Why the exercise of

social responsibility is good business ? Give at least 3 Indian corporate

examples as exemplary corporate citizens of India .

07

Q.5 (a) Explain in detail of five forces of Michael Porter with suitable examples 07

(b) What do you understand by ‘ Cost Effectiveness ‘ ? What are critical success

factors that change over time ? Explain in brief 07

OR

Q.5 (a) Define ‘ strategic leadership ‘ and explain the role of top level managers . 07

(b) “ Tata Steel is one of the most socially responsible corporates in India .

“ . Justify with facts and figures . 07

*************

Sem 3

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gujarat technological

sbi landing

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