1) What do you understand by Fair Value of an equity share? Write down the various approaches for valuation of equity shares?
2) What do you understand by lease financing? Describe the procedure for evaluation of a lease agreement.
3) What do you understand by a logical dividend decision? Describe the views of Modigliani and Miller on the importance of dividend decision.
4) Compare and contrast NPV and IRR methods of capital budgeting. Which of the two is better and explain why?
5) Firm is considering reducing credit period from 45 days to 30 days. It at present sells total 18,00,000 units for Rs. 6 each. Average age of receivables is 40 days; bad debts are 1%; variable cost per unit is Rs. 4 and the average cost per unit is Rs 4.60. Change in credit period is expected to decrease sales to 16,00,000 units; bad debts will reduce to 1.5 % and average collection period to 35 days. Suppose the necessary return on investment is 15%. Should the firm perform the proposal?