Advanced Financial Management - November 2018 MTP

(a) From the following data for Government securities, calculate the forward rates: Face value (Rs.) Interest rate Maturity (Year) Current price (Rs.) 1,00,000 1,00,000 0% 10% 1 2 91,500 98,500 1,00,000 10.5% 3 99,000 (5 Marks) (b) ABC Ltd. of UK has exported goods worth Can $ 5,00,000 receivable in 6 months. The exporter wants to hedge the receipt in the forward market. The following information is available: Spot Exchange Rate Can $ 2.5/£ Interest Rate in UK 12% Interest…

ABC Ltd. has 50,000 outstanding shares. The current market price per share is Rs. 100 each. It hopes to make a net income of Rs. 5,00,000 at the end of current year. The Company’s Board is considering a dividend of Rs. 5 per share at the end of current financial year. The company needs to raise Rs. 10,00,000 for an approved investment expenditure. The company belongs to a risk class for which the capitalization rate is 10%. Show, how the…

(a) XYZ Ltd., a company based in India, manufactures very high quality modem furniture and sells to a small number of retail outlets in India and Nepal. It is facing tough competition. Recent studies on marketability of products have clearly indicated that the customer is now more interested in variety and choice rather than exclusivity and exceptional quality. Since the cost of quality wood in India is very high, the company is reviewing the proposal for import of woods in…

(a) The following data is related to 8.5% Fully Convertible (into Equity shares) Debentures issued by JAC Ltd. at Rs. 1000. Market Price of Debenture Conversion Ratio Rs. 900 30 Straight Value of Debenture Market Price of Equity share on the date of Conversion Rs. 700 Rs. 25 Expected Dividend Per Share Rs. 1 You are required to calculate: (a) Conversion Value of Debenture (b) Market Conversion Price (c) Conversion Premium per share (d) Ratio of Conversion Premium (e) Premium…

(a) A company is considering engaging a factor, the following information is available: (i) The current average collection period for the Company’s debtors is 80 days and ½% of debtors default. The factor has agreed to pay money due after 60 days and will take the responsibility of any loss on account of bad debts. (ii) The annual charge for the factoring is 2% of turnover payable annually in arrears. Administration cost saving is likely to be Rs. 1,00,000 per…

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 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. Ven Cap, a European venture capitalist firm has shown its interest to finance the proposed buy out. Distress Ltd. is interested to sell…

(a) Following information is provided relating to the acquiring company Mani Ltd. and the target company Ratnam Ltd: Mani Ltd. Ratnam Ltd. 2,000 4,000 No. of shares outstanding (lakhs) 200 1,000 P/E ratio (No. of times) 10 5 Earnings after tax (Rs. lakhs) Required: (i) What is the swap ratio based on current market prices? (ii) What is the EPS of Mani Ltd. after the acquisition? (iii) What is the expected market price per share of Mani Ltd. after the…