Advanced Financial Management - Jan 2026 RTP

More Ltd. an NBFC is in the need of funds and hence it sold its receivables to MAC Financial Corporation (MFC) for ` 100 million. MFC created a trust for this purpose called General Investment Trust (GIT) through which it issued securities carrying a different level of risk and return to the investors. Further, this structure also permits the GIT to reinvest surplus funds for short term as per their requirement. MFC also appointed a third party, Safeguard Pvt. Ltd.…

SS Company is considering the replacement of its existing machine with a new machine. The Purchase price of the new machine is ` 26 Lakhs and its expected Life is 8 years. The company follows straight-line method of depreciation on the original investment (scrap value is not considered for the purpose of depreciation). The other expenses to be incurred for the New Machine are as under: (i) Installation Charges ` 9,000 (ii) Fees paid to the consultant for his advice…

R Ltd. has surplus cash of ` 100 lakhs and wants to distribute 27% of it to the shareholders. The company decides to buy back shares. The Finance Manager of the company estimates that its share price after repurchase is likely to be 10% above the buyback price if the buyback route is taken. The number of shares outstanding at present is 10 lakhs and the current EPS is ` 3. You are required to suggest:

The price at which the shares can be re-purchased, if the market capitalization of the company should be ` 210 lakhs after buyback, (ii) The number of shares that can be re-purchased, and (iii) The impact of share re-purchase on the EPS, assuming that after buyback net income shall remain the same. A hypothetical company ABC Ltd. issued a 10% Debenture (Face Value of ` 1000) of the duration of 10 years is currently trading at ` 850 per debenture.…

STR Ltd.’s current financial year's income statement reported its net income after tax as ` 50 Crore. Following is the capital structure of STR Ltd. at the end of current financial year: Debt (Coupon rate = 11%) Equity (Share Capital + Reserves & Surplus) Invested Capital 80 Crore 250 Crore 330 Crore Following data is given to estimate cost of equity capital: Asset Beta of TSR Ltd. 1.11 Risk –free Rate of Return 8.5% Average market risk premium 9% The…

April 2015, Sunidhi was holding a portfolio of 10 securities whose value was ` 9,94,450, the weighted average of beta of 9 securities of the portfolio was 1.10. Since she was expecting a fall in the prices of the shares in near future to hedge her portfolio, she sold 5 contract of NIFTY Futures (Multiplier of 25) expiring in May 2015, which was trading at 8767.07 on 1 April. Required: 33 (1) Calculate the beta of the 10th security. (2)…

MPD Ltd. issues a ` 50 Million Floating Rate Loan on July 1, 2018 with resetting of coupon rate every 6 Months equal to LIBOR + 50 bps. MPD is interested in an Interest rate Collar Strategy of selling a Floor and buying a cap. MPD buys the 3 years cap and sell 3 years Floor as per the following details on July 1, 2018: Principal Amount ` 50 Million Strike Rate 5% for Floor & 8% for Cap Reference…

Mr. NK has categorized all the available stock in the market into the following types: (i) Small cap growth stocks (ii) Small cap value stocks (iii) Large cap growth stocks (iv) Large cap value stocks Mr. NK also estimated the weights of the above categories of stocks in the market index. Further, the sensitivity of returns on these categories of stocks to the three important factors are estimated to be: Category of Stocks Weight in the Market Index Factor I…