F-14(AFM) Revised Syllabus |
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Time Allowed : 3 Hours | Full Marks : 100 | ||
The figures in the margin on the right side indicate full marks | |||
Answer Question No. 1 which is compulsory and any five from the rest. | |||
Please answer all the bits of a question at one place. | |||
Working Notes should form part of the answer. | |||
PART A Attempt all the questions | |||
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1. | (a) | In each of the cases given below one out of four answers is correct. Indicate the correct answer and give your working/reasons briefly. | 2x7=14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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F-14(AFM) Revised syllabus |
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(b) | From the following, choose the most appropriate answer [only indicate (A), (B), (C), (D) as you think correct]: | 6x1=6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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F-14(AFM) Revised syllabus |
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PART B Attempt any five questions | |||||||||||||||||||||||||||||||||||||||||||
2. | (a) | An investor purchased Reliance November Futures (600 shares Tick size) at Rs. 1,150 and write a Rs. 1,190 November call option at a premium of Rs. 10 (600 shares Tick size). As on November 25, Spot price rises and so the Futures price and the call premium. Futures price rises to Rs. 1,180 and Call premium rises to Rs. 16. Brokerage is 0.045% for the transaction value of Futures and Strike price net of Call premium for option.
Find out the profit/(Loss) of the investor, if he/she settles the transaction on that date and at stated prices. (Assuming no transaction taxes and Service taxes exist). |
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(b) | Poineer Technology Ltd. is foreseeing a growth rate of 12% per annum in the text 2 years. The growth rate is likely to fall to 10% for the third year and fourth year. After that the growth rate is expected to stabilize at 8% per annum. If the last dividend paid was Rs. 1.50 per share and the investor' required rate of return is 16%, what would be the intrinsic value per equity share of Poineer Technology Ltd. as of date?
Note: You may use the following table:
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3. | (a) | Briefly explain the salient features of non-recourse project financing. | 5 | ||||||||||||||||||||||||||||||||||||||||
(b) | Distinguish between:
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4. | (a) | GGC Ltd. is considering investment in a new equipment costing $ 30 lakh. The equipment is likely to provide a cash flow after taxes of $ 10 lakh per years. The unlevered cost of equity capital of the company is 16 percent. The company intends to finance the project with 60 per cent debt, which will bear an interest rate of 12 per cent. The loan will be repaid in equal annual principal payments at the end of each of the 6 years. Flotation costs on financing will be $ 1 lakh and the company is in a 30 per cent tax bracket. What is the adjusted present value of the project? Is the project acceptable?
Note: Extracted from the TABLE of PV of Re. 1.
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(b) | In 2000 AT & T acquired NCR after a hotly contested takeover for approximately $ 110 per share. The free cash flows of the two firms-before and after merger-were projected as following: ($ million)
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Cost of equity and debt of the individual firms and the combined firm (after merger) were estimated as given under:
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At the time of merger deal NCR had 70.6 million outstanding shares and $537 million worth of outstanding debt.
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5. | (a) | Given the following information:
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Assuming no transaction cost or taxes exist, what operation would be carried out to take the possible arbitrage gain?
Assume Rs. 10 million/$ 10 million borrowings (as case may be ) to explain your answer. |
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(b) | NBA Bank Ltd. transacted on August 19, 2006 the following:
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On October 19, 2006, both the customers approached the Bank. Alpha Manufacturing Co. wants the forward contract to be cancelled while Beta Trading Co wants the contract to be extended by one month. The following exchange rates prevailed on that day:
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Based on the above information (ignore interest etc.,) you are required to
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6. | (a) | Briefly explain the objectives of "Portfolio Management". | 4 | ||||||
(b) | You are running a portfolio management business and have assembled the following portfolio for Client-B.
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Client-B insists that the portfolio should comprise the above 5 scrips alone and that each scrip should be at least 10% of the total portfolio value. You project the Sensex which is currently 11400 to move to 11800 by the end of 3 months and to 12200 by the end of 6 months.
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(c) | The annual turnover of VIBGYOR Limited is Rs. 12 million of which 80% is on credit. Debtors re allowed one month to clear off the dues. ALLBANK Factors Ltd. (a factor company) is willing to advance 90% of the bill raise on credit for a fee of 2% a month plus a commission of 3% on the total amount of debts. vibgyor Ltd. as a result of this arrangement, is likely to save Rs. 43,200 annually in management cost and avoid bad debts at 1% on the credit sales. A scheduled bank has come forward to make an advance equal to 90% of the debts at an interest rate of 12 per cent p.a. However its processing fee will be at 2 per cent on the debts. Should the company avail of the factoring service or the offer of the bank? Give reasons. | 6 | |||||||
7. | (a) | MULTISOFT LIMITED is expected to grow at a higher rate of 4 years; thereafter the growth rate will fall and stabilize at a lower level. The following information has been assembled:
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Requirements:
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(b) | Explain what is meant by Free Cash Flow. | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8. | MULTIPLEX LIMITED is considering a capital investment for which the following detailed information is available:
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