Advanced Financial Management - July 2020 MTP

(a) First of all we shall calculate premium payable to bank as follows: P= 1  (1  i)  i  (1  i)t  X A or A PVAF(3.5%,4) Where P = Premium A = Principal Amount rp = Rate of Premium i = Fixed Rate of Interest t = Time 0.01 × £15,000,000 or 1 (1/ 0.035) - 0.035  1.0354  0.01 1  (28.5714) - 0.04016  × £15,000,000 or 0.01 × £15,000,000 (0.966 +…

If companyborrows in $ then outflow would be as follows: Let company borrows $ 100 $ 100.00 Add: Interest for 6 months @ 5.5% Amount Repayable after 6 months $ 102.75 Applicable 6 month forward rate 36.40 Amount of Cash outflow in Indian Rupees 2.75 Rs. 3,740.10 If company borrows equivalent amount in Indian Rupee, then outflow would be as follows: Equivalent Rs. amount Rs. 36.10 x 100 Rs. 3,610.00 Add: Interest @11.50% Rs. 207.58 Rs. 3817.58 Since cash outflow…

20% means COGS is 80% of Sales, then Sales = 75,00,000×100 = Rs. 93,75,000 80 Sales = 75,00,000×100 = Rs. 25,00,000 80 Statement of Profit X Ltd. 93,75,000 80,62,500 13,12,500 1,20,000 11,92,500 3,57,750 8,34,750 Y Ltd. 25,00,000 19,50,000 5,50,000 1,44,000 4,06,000 1,21,800 2,84,200 X Ltd. Y Ltd. 1,00,000 60,000 EPS (EAT/ No. of Shares) 8,34,750/1,00,000 = Rs. 8.34 2,84,200/60,000 = Rs. 4.74 Market Price Share (Market Capitalisation/ No. Shares) 75,00,000/ 1,00,000 = Rs. 75 90,00,000/ 60,000 = Rs. 150 75/…

4.80 crore + 25% i.e. Rs. 1.20 crore = Rs. 6.00 crore Rs. in Lacs Rs. in Lacs Advance to be given: Debtors Rs.6.00 crore x 90/360 150.00 Less: 10% withholding Less: Commission 2% 15.00 Net payment 135.00 3.00 132.00 Less: Interest @16% for 90 days on Rs.132 lacs 5.28 126.72 Calculation of Average Cost: Total Commission Rs.6.00 crore x 2% Total Interest Rs. 5.28 lacs x 360/90 12.00 21.12 33.12 Less: Admin. Cost 6.00 Saving in Bad Debts (Rs.600…

Duration of the bond is 6.862 years or 6.86 year Bond B P.V. @ 9% 1 2 11 11 0.917 0.842 10.087 9.262 0.091 0.083 0.091 0.166 3 11 0.772 8.492 0.076 0.228 4 11 0.708 7.788 0.070 0.280 5 6 11 11 0.650 0.596 7.150 6.556 0.064 0.059 0.320 0.354 7 8 11 111 0.547 0.502 6.017 55.772 0.054 0.502 0.378 4.016 111.224 1.000 5.833 Duration of the bond B is 5.833 years or 5.84 years Bond C Cash…

(a) Capital investment is the springboard for wealth creation. In a world of economic uncertainty, the investors want to maximize their wealth by selecting optimum investment and financial opportunities that will give them maximum expected returns at minimum risk. Since management is ultimately responsible to the investors, the objective of corporate financial management should implement investment and financing decisions which should satisfy the shareholders by placing them all in an equal, optimum financial position. The satisfaction of the interests of…

Modelling the project- The model shows the relationship of N.P.V. with parameters and exogenous variables. (Parameters are input variables specified by decision maker and held constant over all simulation runs. Exogenous variables are input variables, which are stochastic in nature and outside the control of the decision maker).