Solapur University Question Paper
M.Com. (Part – II) (Semester – IV) Examination, 2014
ADVANCED COSTING (Paper – III) (Group – b)
Day and Date : Thursday, 24-4-2014 Max. Marks : 50
Time : 3.00 p.m. to 5.00 p.m.
N. B. : 1) All questions are compulsory.
2) Figures to the right indicate full marks.
3) Use of calculator is allowed.
1. Choose correct alternative from given : 10
1) _________ leverage is the combination of operating leverage and financial
leverage.
A) Combined B) Operating
C) Financial D) Financial and operating
2) Under ___________ method the cash flow from the project are reduced to
their present value.
A) Net present value B) Return on investment
C) Profitability index D) Pay back
3) The period during which the total cost of the capital investment is recovered
is termed as the __________ period.
A) Accounting B) Pay back
C) Ranking D) Present value
4) Cost of capital affects the value of _____________ of the company.
A) Preference shares B) Debentures
C) Creditors D) Equity shares
5) Financial leverage is also known as ____________
A) Combined leverage B) Operating leverage
C) Trading on equity D) Contribution
6) I.R.R. stands for ______________
A) Investment Rate of Return B) Internal Rate of Return
C) Interest Rate of Return D) Internal Rate Ratio
SLR-N – 68 -2-
7) A project cost is Rs. 1,50,000 and it has cash inflows 1st year Rs. 40,000,
2nd year Rs. 50,000, 3rd year Rs. 1,20,000, 4th year Rs. 10,000, its pay back
period is _____________
A) 1½ years B) 3½ years
C) 4½ years D) 2½ years
8) Market price per share is computed by multiplying the price earning ratio by
_______________
A) EBT B) EAT
C) EBIT D) EPS
9) In India only ____________ dividend and stock dividend are declared and
paid.
A) Cash B) Property
C) Bond D) Scrip
10) Irrelevance of dividend theorem is developed by ___________
A) Prof. Miller and Modigliani
B) Prof. J. E. Walter
C) Mr. Myron Gordon
D) Mr. John Lintner
2. Write short notes on any two : 10
1) Factors influencing dividend policy
2) Pay back method
3) Kinds of leverage.
3. A) Compute the operating leverage of a firm from the following information :
Sales – 20,000 units at Rs. 10 per unit
Variable cost – Rs. 3 per unit
Fixed cost – Rs. 20,000. 5
B) Bharat Company raises preference share capital of Rs. 1,00,000 by issue of
10% preference shares of Rs. 10 each. Calculate cost of preference share
capital when they are issued at
a) 10% premium
b) 10% discount. 5
-3- SLR-N – 68
4. A company is considering to purchase a machine. Two machines each costing
Rs. 40,000 are available. Earning after taxation, but before charging depreciation
are
Year Machine A Machine B
Rs. Rs.
1 12,000 8,000
2 18,000 16,000
3 20,000 24,000
4 15,000 18,000
5 10,000 14,000
Evaluate two alternatives according to
1) The pay back method.
2) Return on investment method (Average earning on average investment).
3) Net present value method (cost of capital @ 10%) present value factor @
10% is 1st year = 0.909, 2nd year = 0.826, 3rd year = 0.751, 4th year = 0.683,
5th year = 0.621. 10
OR
Following is the financial data relates to the two companies :
Sachin Ltd. Sehwag Ltd.
Rs. Rs.
Sales 5,00,000 5,00,000
Variable cost 2,00,000 1,50,000
Fixed cost 1,50,000 2,00,000
Interest 50,000 50,000
You are require to ascertain the operating, financial and composite leverages for
the two companies. 10
SLR-N – 68 -4-
5. The Balance Sheet of Sunshine Ltd., as on 31st March 2013 is us under :
Balance Sheet
Liabilities Rs. Assets Rs.
Equity capital Fixed assets 1,50,000
(Rs. 10 each) 60,000 Current assets 50,000
Retained earnings 20,000
10% debt 80,000
Current liabilities 40,000
2,00,000 2,00,000
The companies total assets turnover ratio is 3.00, its fixed operating costs are
Rs. 1,00,000 and its variable operating cost ratio is 40%. The income tax rate is
30%. Calculate operating financial and composite leverage. 10
OR
A company has an opportunity to invest in any of the following. How will you
evaluate the proposals on the following criteria.
1) Pay back period
2) Return on investment
3) Present value method.
The cost of capital to the company is 10%.
Investment Cash out flow Cash inflow
Rs .1st year 2nd year
A 10,000 10,000 —
B 10,000 10,000 1,100
C 10,000 3,762 7,762
D 10,000 5,762 5,762
Discount value of Re. 1 at 10%.
Year 1st 2nd
Present value 0.909 0.826 10
_____________________
M.Com. (Part – II) (Semester – IV) Examination, 2014
ADVANCED COSTING (Paper – III) (Group – b)
Day and Date : Thursday, 24-4-2014 Max. Marks : 50
Time : 3.00 p.m. to 5.00 p.m.
N. B. : 1) All questions are compulsory.
2) Figures to the right indicate full marks.
3) Use of calculator is allowed.
1. Choose correct alternative from given : 10
1) _________ leverage is the combination of operating leverage and financial
leverage.
A) Combined B) Operating
C) Financial D) Financial and operating
2) Under ___________ method the cash flow from the project are reduced to
their present value.
A) Net present value B) Return on investment
C) Profitability index D) Pay back
3) The period during which the total cost of the capital investment is recovered
is termed as the __________ period.
A) Accounting B) Pay back
C) Ranking D) Present value
4) Cost of capital affects the value of _____________ of the company.
A) Preference shares B) Debentures
C) Creditors D) Equity shares
5) Financial leverage is also known as ____________
A) Combined leverage B) Operating leverage
C) Trading on equity D) Contribution
6) I.R.R. stands for ______________
A) Investment Rate of Return B) Internal Rate of Return
C) Interest Rate of Return D) Internal Rate Ratio
SLR-N – 68 -2-
7) A project cost is Rs. 1,50,000 and it has cash inflows 1st year Rs. 40,000,
2nd year Rs. 50,000, 3rd year Rs. 1,20,000, 4th year Rs. 10,000, its pay back
period is _____________
A) 1½ years B) 3½ years
C) 4½ years D) 2½ years
8) Market price per share is computed by multiplying the price earning ratio by
_______________
A) EBT B) EAT
C) EBIT D) EPS
9) In India only ____________ dividend and stock dividend are declared and
paid.
A) Cash B) Property
C) Bond D) Scrip
10) Irrelevance of dividend theorem is developed by ___________
A) Prof. Miller and Modigliani
B) Prof. J. E. Walter
C) Mr. Myron Gordon
D) Mr. John Lintner
2. Write short notes on any two : 10
1) Factors influencing dividend policy
2) Pay back method
3) Kinds of leverage.
3. A) Compute the operating leverage of a firm from the following information :
Sales – 20,000 units at Rs. 10 per unit
Variable cost – Rs. 3 per unit
Fixed cost – Rs. 20,000. 5
B) Bharat Company raises preference share capital of Rs. 1,00,000 by issue of
10% preference shares of Rs. 10 each. Calculate cost of preference share
capital when they are issued at
a) 10% premium
b) 10% discount. 5
-3- SLR-N – 68
4. A company is considering to purchase a machine. Two machines each costing
Rs. 40,000 are available. Earning after taxation, but before charging depreciation
are
Year Machine A Machine B
Rs. Rs.
1 12,000 8,000
2 18,000 16,000
3 20,000 24,000
4 15,000 18,000
5 10,000 14,000
Evaluate two alternatives according to
1) The pay back method.
2) Return on investment method (Average earning on average investment).
3) Net present value method (cost of capital @ 10%) present value factor @
10% is 1st year = 0.909, 2nd year = 0.826, 3rd year = 0.751, 4th year = 0.683,
5th year = 0.621. 10
OR
Following is the financial data relates to the two companies :
Sachin Ltd. Sehwag Ltd.
Rs. Rs.
Sales 5,00,000 5,00,000
Variable cost 2,00,000 1,50,000
Fixed cost 1,50,000 2,00,000
Interest 50,000 50,000
You are require to ascertain the operating, financial and composite leverages for
the two companies. 10
SLR-N – 68 -4-
5. The Balance Sheet of Sunshine Ltd., as on 31st March 2013 is us under :
Balance Sheet
Liabilities Rs. Assets Rs.
Equity capital Fixed assets 1,50,000
(Rs. 10 each) 60,000 Current assets 50,000
Retained earnings 20,000
10% debt 80,000
Current liabilities 40,000
2,00,000 2,00,000
The companies total assets turnover ratio is 3.00, its fixed operating costs are
Rs. 1,00,000 and its variable operating cost ratio is 40%. The income tax rate is
30%. Calculate operating financial and composite leverage. 10
OR
A company has an opportunity to invest in any of the following. How will you
evaluate the proposals on the following criteria.
1) Pay back period
2) Return on investment
3) Present value method.
The cost of capital to the company is 10%.
Investment Cash out flow Cash inflow
Rs .1st year 2nd year
A 10,000 10,000 —
B 10,000 10,000 1,100
C 10,000 3,762 7,762
D 10,000 5,762 5,762
Discount value of Re. 1 at 10%.
Year 1st 2nd
Present value 0.909 0.826 10
_____________________
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