Advanced Financial Management - May 2015 MTP

(a) The NAV of per unit of XYZ Mutual Fund (a Close Ended Funds) on 1.1.2014 was Rs. 28. The value on 31.12.2014 comes to Rs. 28.80. On the same date unit was trading in market at a premium of 3% though on 1.1.2014 same was trading at a discount at 5%. On 31.12.2014, XYZ distributed a sum of Rs. 2.80 as incomes and capital gains. You are required to compute rate of return to the investor during the year.…

(a) Ramesh owns a plot of land on which he intends to construct apartment units for sale. No. of apartment units to be constructed may be either 10 or 15. Total construction costs for these alternatives are estimated to be Rs. 600 lakhs or Rs. 1025 lakhs respectively. Current market price for each apartment unit is Rs. lakhs. The market price after a year for apartment units will depend upon the conditions of market. If the market is buoyant, each…

(a) Sundaram Ltd. discounts its cash flows at 16% and is in the tax bracket of 35%. For the acquisition of a machinery worth Rs.10,00,000, it has two options – either to acquire the asset by taking a bank loan @ 15% p.a. repayable in 5 yearly installments of Rs.2,00,000 each plus interest or to lease the asset at yearly rentals of Rs.3,34,000 for five (5) years. In both the cases, the instalment is payable at the end of the…

(a) Your bank’s London office has surplus funds to the extent of £ 5,00,000/- for a period of 3 months. The cost of the funds to the bank is 4% p.a. It proposes to invest these funds in London, New York or Frankfurt and obtain the best yield, without any exchange risk to the bank. The following rates of interest are available at the three centres for investment of domestic funds there at for a period of 3 months. London…

(a) RST Ltd.’s current financial year's income statement reported its net income as Rs. 25,00,000. The applicable corporate income tax rate is 30%. Following is the capital structure of RST Ltd. at the end of current financial year: Rs. Debt (Coupon rate = 11%) 40 lakhs Equity (Share Capital + Reserves & Surplus) Invested Capital 125 lakhs 165 lakhs Following data is given to estimate cost of equity capital: Rs. Beta of RST Ltd. 1.36 Risk –free rate i.e. current…

Division of Distress Ltd., a computer hardware manufacturing company has started facing financial difficulties for the last 2 to 3 years. The management of the division headed by Mr. Smith who is interested in a buyout on 1 April 2013. However, to make this buy-out successful there is an urgent need to attract substantial funds from venture capitalists. VenCap, a European venture capitalist firm has shown its interest in the proposed buy-out. Distress Ltd. is interested to sell the division…

(a) The following information is extracted from Steady Mutual Fund’s Scheme: - Asset Value at the beginning of the month - Rs. 65.78 - Annualised return -15 % - Distributions made in the nature of Income - Rs. 0.50 and Rs. 0.32 & Capital gain (per unit respectively). You are required to: (1) Calculate the month end net asset value of the mutual fund scheme (limit your answers to two decimals). (2) Provide a brief comment on the month end…