Advanced Financial Management - May 2019

2. (a) Given is the following information : 8 Day Ltd. | Night Ltd. Net Earnings ZS crores | 73.50 crores No. of Equity Shares 10,00,000 | 7,00,000 The shares of Day Ltd. and Night Ltd. trade at 20 and 15 times their respective P/E ratios. Day Ltd. considers taking over Night Ltd. by paying @ 55 crores considering that the market price of Night Ltd. reflects its true value, It is considering both the following options : (i) Takeover…

3. (a) Following are the details of a Portfolio Consisting of 3 shares Portfolio Expected Total Shares Beta Weight Return(%) Variance X Ltd. 0.3 0.50 15 0.020 Y Ltd. 0.5 0.60 16 0.010 Z Ltd. 0.2 1.20 20 0.120 | u L Standard Deviation of Market Portfolio Return = You are required to calculate the following : (i) The Portfolio Beta, (ii) Residual Variance of each of the three shares, (iii) Portfolio Variance using Sharpe Index Model, YP) Mr. John…

A Rice Trader has planned to sell 22000 kg of Rice after 3 months from now. The spot price of the Rice is ₹ 60 per kg and 3 months future on the same is trading at % 59 per kg. Size of the contract is 1000 kg. The price is expected to fall as low as % 56 per kg, 3 months hence. What the trader can do to mitigate its risk of reduced profit ? If he decides…

Sun Limited, an Indian company will need $ 5,00,000 in 90 days. In this connection, following information is given below : Spot Rate - $1 =%71 90 days forward rate of $1 as of today = % 73 Interest Rates are as follows : Particulars US India 90 days Deposit Rate 2.50% | 4.00% 90 days Borrowing Rate | 4.00% 4 6.00% A call option on § that expires in 90 days has an exercise price of % 74 and…