PG – 1035
*PG1035*
IV Semester M.B.A. (Evening) Degree Examination, June/July 2015 Management F-6 : PROJECT APPRAISAL AND FINANCE Time : 3 Hours
Max. Marks : 75
Instruction : Answer all the Sections. SECTION – A 1. Answer any six of the following sub-questions. Each question carries two marks.
(2×6=12)
a) Define Time Value of Money. b) What do you mean by financial feasibility of a product ? c) What do you mean by benefit cost ratio ? d) What do you mean by WACC ? e) Distinguish between PERT and CPM. f) What is CAPM ? g) What is Project Diary ? h) What is Sensitivity Analysis ? SECTION – B Answer any 3 of the following questions. Each question carries 8 marks.
(3×8=24)
2. Explain the different techniques of risk analysis. 3. Explain the procedure of project Implementation. 4. Explain different innovative techniques of financing projects. 5. KM Industries Ltd. has raised funds through issue of 10000 debenture of Rs. 200 each at a discount of 5% per debenture with 8 years maturity. The floatation cost is Rs. 3 per debenture. The debentures are redeemable with 15% premium. Calculate the cost of debenture. P.T.O.
PG – 1035
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*PG1035*
6. The time schedule for the different activities of a project is given below : Activity
Time (in Days)
1–2
4
1–3
5
1–4
4
2–3
5
2–6
8
3–5
9
4–5
9
4–6
7
5–6
5
5–7
6
5–8
3
Construct the PERT network and Compute : i) Critical path and its duration. ii) Total and free float for each activity. SECTION – C Answer any 2 of the following questions. Each question carries 12 marks.
(2×12=24)
7. Describe the different techniques of capital budgeting decision. Which one would be most relevant according to you and why ? 8. Explain in detail various issue and problems emerging from the financing the project from global sources. How an investor can overcome from those problems ?
*PG1035*
PG – 1035
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9. Y Ltd. is considering a project which requires a current outlay of Rs. 2,50,000. The expected value and standard deviation of cash flows are : Year
Expected value (Rs.) Standard deviation (Rs.)
1
1,20,000
50,000
2
1,00,000
60,000
3
90,000
50,000
4
80,000
60,000
The cash flows are perfectly correlated. Risk-free rate of return is 12%. i) Would you recommend the project ? ii) Measure the project’s risk by computing the standard deviation. SECTION – D Case Study (Compulsory) :
15
10. A company is considering two mutually exclusive projects X and Y. Project X cost Rs. 5,40,000. You have been given the net present value probability distribution for each project. Project X
Project Y
NPV estimate (Rs.) Probability
NPV estimate (Rs.)
Probability
45,000
0.1
45,000
0.2
90,000
0.4
90,000
0.3
1,80,000
0.4
1,80,000
0.3
2,25,000
0.1
2,25,000
0.2
i) Compute the expected NPV of Project X and Y. ii) Compute risk attached to each project i.e. standard deviation of each probability distribution. iii) Which project do you consider more risky and why ? iv) Compute the profitability index of each project. _______________________
