Answer the following problems.

problem 1) describe Financial Management. “The Financial Manager’s primary task is to acquire and use funds to maximise firms’ value”. Describe in detail.

problem 2) What is capital budgeting? Describe the steps in the process of capital budgeting.

problem 3) What is leverage? describe the impact of financial leverage on ROE. Demonstrate with the help of appropriate ex.

problem 4) What is stable dividend policy? Do you recommend a stable dividend policy? Describe your answer.

problem 5) Jyothi Ltd wants to install a new machine. It has short listed two options. Two models differ in cost, out put and revenue. The expected life of both machines is five years. There will be negligible salvage value at the end of fifth year. After tax cash flow details are as follows:

Machine      Cost           Year 1        Year 2             Year 3          Year 4          Year 5
A                20                -               05                   21                13               07
B                45                15             13                   15                16               09

Company’s cost of capital is 18% .You are required to make an appraisal of the two offers on the basis of:

• Payback Period, PI method and Net Present value