**19**answerable questions with

**0**answered.

Roll No……… | |

Total No. of Questions — 7] | [Total No. of Printed Pages — 7 |

Time Allowed : 3 Hours | Maximum Marks : 100 |

Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, his answers in Hindi will not be valued. |

Q.No. 1 is compulsory. |

Attempt any five questions from the remaining six questions. |

Working notes should part of the answer. |

Marks |

1. | (a) | Amal Ltd. has been maintaining a growth rate of 12% in dividends. The company has paid dividend @ Rs.3 per share. The rate of return on market portfolio is 15% and the risk–free rate of return in the market has been observed as 10%. The beta co–efficient of the company’s share is 1.2. You are required to calculate the expected rate of return–on the company’s shares as per CAPM model and the equilibrium price per share by dividend growth model. | 5 | (0) | ||||||||||||||||||

(b) | From the following particulars, calculate the effective rate of interest p.a. as well as the total cost of funds to Bhaskar Ltd., which is planning a CP issue :
| 5 | (0) | |||||||||||||||||||

(c) | Equity share of PQR Ltd. is presently quoted at Rs.320. The Market Price of the share after 6 months has the following probability distribution :
A put option with a strike price of Rs.300 can be written. You are required to find out expected value of option at maturity (i.e. 6 months) | 5 | (0) | |||||||||||||||||||

(d) | Calculate Market Price of:
| 5 | (0) | |||||||||||||||||||

2. | (a) | Derivative Bank entered into a plain vanilla swap through an OIS (Overnight Index Swap) on a principal of Rs.10 crores and agreed to receive MIBOR overnight floating rate for a fixed payment on the principal. The swap was entered into on Monday, 2^{nd} August, 2010 and was to commence on 3^{rd} August, 2010 and run for a period of 7 days. Respective MIBOR rates for Tuesday to Monday were : 7.75%, 8.15%, 8.12%, 7.95%, 7.98%, 8.15% If Derivative Bank received Rs.317 net on settlement, calculate Fixed rate and interest under both legs.
| 8 | (0) | ||||||||||||||||||

(b) | MK Ltd. is considering acquiring NN Ltd.. The following information is available:
Exchange of equity shares for acquisition is based on current market value as above. There is no synergy advantage available.
| 8 | (0) | |||||||||||||||||||

3. | (a) | Delta Ltd.’s current financial year’s income statement reports its net income as Rs.15,00,000. Delta’s marginal tax rate is 40% and its interest expense for the year was Rs.15,00,000. The company has Rs.1,00,00,000 of invested capital, of which 60% is debt. In addition, Delta Ltd. tries to maintain a Weighted Average Cost of Capital (WACC) of 12.6%.
| 8 | (0) | ||||||||||||||||||

(b) | A dealer quotes “All–in–Cost” for a generic swap at 8% against six months libor flat. If the notional principal amount of swap is Rs.6,00,000, –
| 8 | (0) | |||||||||||||||||||

4. | (a) | A valuation done of an established company by a well-known analyst has estimated a value of Rs.500 lakhs, based on the expected free cash flow for next year of Rs.20 lakhs and an expected growth rate of 5%. While going through the valuation procedure, you found that the analyst has made the mistake of using the book values of debt and equity in his calculation. While you do not know the book value weights he used, you have been provided with the following information :
You are required to estimate the correct value of the company. | 8 | (0) | ||||||||||||||||||

(b) | Rahul Ltd. has surplus cash of Rs.100 lakhs and wants to distribute 27% of it to the shareholders. The company decides to buyback shares. The Finance Manager of the company estimates that its share price after re–purchase 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 Rs.3. You are required to determine :
| 8 | (0) | |||||||||||||||||||

5. | (a) | Consider the following information on two stocks X and Y :
You are required to determine :
| 8 | (0) | ||||||||||||||||||

(b) | Shashi Co. Ltd. has projected the following cash flows from a project under evaluation:
The above cash flows have been made at expected prices after recognizing inflation. The firm’s cost of capital is 10%. The expected annual rate of inflation is 5%. Show how the viability of the project is to be evaluated. PVF at 10% for 1 – 3 years are 0.909, 0.826 and 0.751. | 8 | (0) | |||||||||||||||||||

6. | (a) | Given the following information:
What operations would be carried out to earn the possible arbitrage gains ? | 8 | (0) | ||||||||||||||||||

(b) | The following information relates to Maya Ltd. :
| 8 | (0) | |||||||||||||||||||

7. | Answer any four from the following : | |||||||||||||||||||||

(a) |
| 4 | (0) | |||||||||||||||||||

(b) | Explain the concept ‘Zero date of a Project’ in project management. | 4 | (0) | |||||||||||||||||||

(c) | Give the meaning of ‘Caps, Floors and Collars’ options. | 4 | (0) | |||||||||||||||||||

(d) | Distinguish between Open–ended and Close–ended Schemes. | 4 | (0) | |||||||||||||||||||

(e) | Explain CAMEL model in credit rating. | 4 | (0) |