Attempt all the problems.
Section-A
problem1) Describe the organization chart of finance function in the typical organization. What is the key function of each role/position? Describe the difference between treasury and controller function.
problem2) What are the different tools used in Financial Management. Describe five financial tools in details with suitable exs.
problem3) What are the various valuation approaches used to value an unlevered firm as well as a levered firm. Will the value of the company differ according to the different approaches? Describe with ex.
problem4) What is a capital investment decision? Which all decisions will be considered a capital investment decision? prepare brief notes on all of them.
Section-B
Case Study
You have joined Zurich Pvt. Ltd as a Finance manager. You are given the following information:
Zurich Pvt Ltd. is a diversified manufacturing firm dealing with electrical appliances. In 2012, the firm reported an operating income of Rs. 857.60 million and faced the tax rate of 35% on income. Firm had a book value of equity is Rs. 4068.3 million and book value of debt of Rs.1567.83 million at the end of 2011.Mmanagement of the firm is expecting a stable growth at a rate of 5% annually.
You are aware that risk free rate is 9% and the company operates in a risk premium of 7.5%. You have been informed that the beta for the company has averaged around 1.2. At the same time the after tax cost of debt is 11%.
Case problems:
On the basis of the above mentioned information you as the finance manager are asked to provide the following :
• Estimate the firms return on capital.
• What will be the reinvestment rate of firm?
• What is the cost of equity under which Zurich is operating?
• Compute the cost of capital?
• Estimate the expected free cash flow to the firm?
• Estimate the value of the operating assets of firm?