Fundamentals of Corporate Finance
Subject Code: FIN-250
Year: IV Year/MGMT
Program: BBS 4 Year Program
Level: Bachelor
Year: 2076
Full Marks: 100
Time: 3 hrs.

| DOWNLOAD PDF | Bachelor Level | Fundamentals of Corporate Finance FIN-250 | Question Paper | 2076 | BBS 4 Years Program | IV Year MGMT| Tribhuvan University (TU)
Candidates are required to give their answers in their own words as far as practicable.
The figures in the margin indicate full marks.

Group "A"

Brief Answer Questions:

Attempt ALL the questions. [10x2=20]

1. How do you resolve the agency problem between shareholders and creditors?

2. Why should the financial manager work together with the other functional managers?

3. What do you mean by stock market efficiency?

4. Write short note on the importance of financial plan.

5. What does purchasing power parity show?
6. List out any four reasons for going global.

7. Delta Traders buys under terms of 2/10 net 30. Delta does not take discount and pays on 40th day. What is the annual percentage cost of stretching accounts payable? Assume 360 days in a year.

8. Mega Company has 4 million shares outstanding and the firm's charter provides for a cumulative voting procedure. The company has seven directors. What is the minimum number of shares needed to ensure the election of one director?

9. The stock of Alpha Company's sells for Rs. 150 a share, and the option has an exercise price of Rs. 120 a share. Calculate the theoretical value of the call option.

10. The spot rate between Nepal and India is Nepalese Rs. 1.6 per Indian Rupee, and the 6-month forward rate is Nepalese Rs. 1.8 per Indian Rupee. What is annualized forward premium to be paid to buy Indian Rupees?

Group 'B'

Short Answer Questions:

Attemt any FIVE questions. [5x10=50]

11. What are the features of term loan? Describe the major sources of term loan in Nepal. [4+6=10]

12. Describe the types of merger. Give the rationale behind mergers and acquisitions of Nepalese financial Institutions. [5+5=10]

13. Siddhartha Hotel Ltd. is negotiating one year loan with Kumari Bank for Rs/ 5,000,000. Kumari Bank has offered Siddhartha Hotel the following alternatives:

a. A 12 percent annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year.
b. A 10 percent annual rate on a simple interest loan, with a 20 percent compensating balance required and interest again due at the end of the year.
c. A 9 percent annual rate on a discounted loan with a 15 percent compensating balance.
Calculate the effective annual interest rate for each alternative. Which alternative would you suggest for Siddhartha Hotel? [3+3+3+1=10]

14. Firms Alpha and Beta are identical except for their leverage ratios and the interest rates they pay on debt.Each has Rs. 10 million in assets, has Rs. 2 million of EBIT, and is in the 40 percent tax bracket. Firm Alpha, however, has a debt ratio of 50 percent and pays 12 percent interest on its debt, whereas Beta has a 20 percent debt ratio and pays only 10 percent interest on its debt.

a. Calculate the rate of return on equity (ROE) for each firm.
b. Observing that Alpha has a higher ROE, Beta's treasurer is thinking of raising the debt ratio from 20 percent to 60 percent even though that wold increase Beta's interest rate on all debt to 15 percent. Calculate the new ROE for Beta. Is Beta's strategy of increasing debts worthwhile? [6+4=10]

15. Himalay Herbal Company's balance sheet is given below:

Balance Sheet as of December 31, 2018
Balance Sheet
Sales are expected to increase from Rs. 8,000,000 in 2018 to Rs. 12,000,000 in 2019. Firm's after-tax profit margin is forcasted to be 10 percent and its payout ratio will be 80 percent.

a. What is the firm's additional fund needed for the year 2019 if company is running at full capacity?
b. Prepare Himalaya Herbal Company's pro-forma balance sheet of as of December 31, 2019. [5+5=10]

16. Gopal set out to tour Singapore in January 2019. He had set aside NR 200,00 for his tour. On January 16, 2019, he went to Nepal Rastra Bank Baluwatar and exchanged NR 200,00 for Singapur dollar (SGD). On that very day, Nepal Rastra Bank's bid rate for one unit of SGD was NR 69.13 and its ask rate was NR 69.61 for one unit of SGD. Unluckily, on January 22, he had to cancel his trip to Singapore for next couple of months. So, he again exchanged SGD for NR at the same rate quoted on January 16.
a. How much SGD he received after exchanging NR 200,000 on January 16?
b. How much NR he received on January 22 after selling the SGD?
c. What is his gain or lose in buying and selling of SGD?
d. What percent did he gain or lose his money?
e. What is the bid/ask percentage spread? [5x2=10]

Group "C"

Analytical Answer Questions [2x15=30]

Attempt any TWO question.

17. Discuss major types of risks that a financial manager deals with. How can the financial manager manage these risks? Explain. [8+7=15]

18. It is now January 1, 2019. Inflation was about 3 percent, throughout 2018. The government took action to maintain inflation at this level. However, the economy is in a recovery, and reports indicate that inflation is expected to increase during the next 4 years. Assume that 4 percent will be the expected inflation rate for 2019, 5 percent for 2020, 6 percent for 2021, and thereafter inflation rate will stable at 6 percent.

a. What is the average expected inflation rate over the bext 4 years period 2019-2022?
b. What average nominal interest rate, over the 4-year period 2019-2022, would be expected to produce 3 percent real risk-free rate of return on 4-year Treasury securities?
c. Assume a real-risk-free rate of 3 percent and a maturity risk premium which starts at 0.05 percent on 1-year security and increases by 0.05 percent each year. Estimate the interest rate in January 2019 on the bonds that mature in 1,2,3,10 and 20 years.
d. Describe the general economic condition that could be expected to produce an upward sloping yield curve. [3+3+6+3=15]

19. The Himalaya Tea Company (HTC) has grown rapidly during the past five years. Recently, company has discovered some good investment opportunity. HTC plans to raise an additional rupee of 10 million through rights offering. Current market price of the company is Rs. 250. It has 200,000 shares outstanding. Stockholders are offered a new share at a price of Rs. 200 each:

a. How many new shares will have to be sold to raise required funds?
b. How many rights will be required to purchase a new share?
c. What will be the theoretical value of rights?
d. Calculate ex-rights price.
e. Mr. Kapil Thapa's total assets consist of 1,000 shares of HTC and Rs. 150,000 before rights offering. Prepare statements of Mr. Thapa's total assets before rights offerings.
f. Prepare statement showing Mr. Thaps's total assets after rights offerings for each of these course of action if
i. he sells all hi rights
ii. he exercises all his rights. [5x2+5=15]
Note :- If you need 2076/2019 Fundamentals of Corporate Finance (FIN-250) BBS IV Year Question paper in PDF File, please post your email address in "Comment Box" below. :)
View the question paper of Fundamentals of Corporate Finance (FIN-250) | BBS (Four Years Program) | IV Years | Bachelor Level | Tribhuvan University (TU)
Question Paper of Fundamentals Of Corporate Finance FIN-250 BBS IV Year 2076

Question Paper of Fundamentals Of Corporate Finance FIN-250 BBS IV Year 2076

Question Paper of Fundamentals Of Corporate Finance FIN-250 BBS IV Year 2076

Question Paper of Fundamentals Of Corporate Finance FIN-250 BBS IV Year 2076

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