Q1. (a) What is the adjusted present value (APV) approach? How does it differ from the conventional net present value approach of evaluating a target firm?

Q1. (b) What are the factors that determine the dividend policy of a company? Do you believe it will be justifiable for a company to obtain a short-term loan from a bank to allow payment of a dividend?

Q2. (a) Explain the organizational structure required for the implementation of effective credit administration and risk management systems of banks and FIs, within the framework of the RBI guidelines.

Q2. (b) Assuming that the daily volatility of the Nifty is 1.75 and trading happens on 256 days in a year compute the sigma figure used in the Black Scholes formula.

Q3. (a) What is the value of a call option on maturity? When the call option owner is said to be at break-even? Can the value of call option be negative?

Q3. (b) "The important aspect of exit stage of VC financing is the decision regarding the realizing/disinvestment alternatives which are related to the type of investment". Elaborate.

Q4. (a) Distinguish between import lease and cross-border lease. What are the advantages of the latter?

Q4. (b) Discuss the symbols and their implications used by (i) CRISIL (ii)ICRA,(iii)CARE and (iv)FITCH India for rating debentures.

Q5. (a) Explain the pre-emptive rights of the ordinary shareholders. How is their financial interest affected by the issue of rights shares?

Q5. (b) How can the effect of profitability on designing an appropriate capital structure be analyzed? Illustrate your answer with the help of EBIT-EPS analysis.

Q6. (a) Give a critical appraisal of the traditional Approach and (a) traditional approach and (b) the Modigliani-Miller Approach to the theory of capital structure.

Q6. (b) What is meant by the term leverage'? What are its types? With what type of risk is each leverage generally associated? Why is increasing leverage also indicative of increasing risk? State the situation when there is neither a financial risk nor business risk.