II YEAR - ANUCDE

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5. Mittal Ltd., purchased a retail store and commenced business on April 1. From the followinginformation. You are required to prepare in as much details as possible, a trading and profitand loss account for the current year ended March 31 and a balance sheet as a the date.Rs.Capital introduced on April 1 47,000Drawings during the year 5,000Working capital (current assets lesscurrent liabilities) at March 31 23,000Depreciation of fixed assets during the yearbased on a rate of 20% per annum on cost 3,000Ratio of annual sales to year-end values offixed assets plus working capital 2 : 1Ratio of current assets to current liabilitiesat the year end 2 : 1Ratio of liquid assets (cash plus debtors)to current liabilities on March 31 5 : 4Debtors at the year end as percent ofannual sales 12General expense (excluding depreciation)as percent of annual sales 20The current assets consist of stocks (which are unchanged throughout the year), debtors andcash. Stock are turned over four times during the year. The current liabilities consists only ofcreditors.6. The sales and profit of a company during two periods were as follows :Period Sales ProfitI 1,00,000 10,000<strong>II</strong> 1,50,000 20,000(a)Find out the break-even point.(b) What amount of sales will generate a profit of Rs. 40,000?(c) What will be the profit if the sales are Rs. 1,20,000?7. Assuming the existence of the corporate income taxes, describe M-M’s position on the issue ofan optimum capital structure.2(DBUS 21 (NR))
SECTION C — (15 marks)(Compulsory)8. A company has on its books the following amounts and specific costs of each type of capital.Type of capitalBookvalueMarketvalueSpecificcosts %Rs.Rs.Debt 4,00,000 3,80,000 5Preference 1,00,000 1,10,000 8Equity 6,00,000 15Retained earnings 2,00,000 12,00,000 1313,00,000 16,90,000Determine the weighted average cost of capital using (a) book value weights and (b) marketvalue weights. How are they different? Can you think of a situation where the weightedaverage cost of capital would be same using either of the weights?———————3(DBUS 21 (NR))
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II YEAR - ANUCDE

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