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You want to purchase the French Government Bond OAT. You are looking for a maturity between 5-10 years. The initial margin requirement in this maturity range is 10% of market value. The bond you select is trading at 115.00 with a face value of EUR 1000. You wish to invest EUR 1000. How many bonds can you purchase, given the margin requirement?
a)5
b)8
c)9
d)10
You want to purchase the French Government Bond OAT. You are looking for a maturity between 5-10 years. The initial margin requirement in this maturity range is 10% of market value. The bond you select is trading at 115.00 with a face value of EUR 1000. You wish to invest EUR 1000. What is your resulting total exposure and actual margin requirement?
a)EUR 10,000 for a margin of EUR 1000
b)EUR 8,000 for a margin of EUR 800
c)EUR 9,200 for a margin of EUR 920
Thank you :)
An investor invests $10000 in stocks trading at $100. If the price for these shares goes up by 30% and ignoring dividends, what would be the investor’s expected rate of return? Assuming the investor borrows another $10000 from a broker and invests in the same stocks to buy more of the same shares and the margin loan interest is 9% per year, what will his rate of return be now if the stocks goes up by 30%, ignoring dividends, again ? Suppose the investor only borrows $5000 at the same interest rate of 9% per year, what will the rate of return be if the share price goes up by 30%? If it goes down by 30%, and if it remains unchanged?
. An Engineering Company is considering an investment proposal to install new milling controls. The project cost is `. 50,000. The facility has life of 5 years and no salvage value. The company’s tax rate is 55 %. The estimated cash flows before tax (CFBT) from the proposed investment proposal are as follows: 4
YearCFBT (`)
110,000
211,000
314,000
415,000
525,000
Compute the following:
i) Pay- Back Period
ii) Average rate of return
iii) Net present value at 10% discount rate
iv) Profitability index at 10% discount rate
1 Empire Ltd. needs Rs 1,000,000 to build a new factory which will yield EBIT of Rs .150,000 per year. The company has to choose between two alternative financing plans: 75 per cent equity and 25 per cent debt or 50 per cent equity and 50 per cent debt. Under the first plan shares can be sold for Rs 40 per share and the interest rate on debt will be 16 per cent. Determine the EPS
You are planning to retire in twenty years. You'll live ten years after retirement. You want to be able to draw out of your savings at the rate of $10,000 per year. How much would you have to pay in equal annual deposits until retirement to meet your objectives? Assume interest remains at 9%
The By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (MIA) mentions five fundamental principles which the MIA members must comply with. Which among those five that in your view could have made the audit firm Parker Randall fail to be the right candidate for the position of company auditor for the 1MDB? Explain your answer.
PARCO is considering a new project that complements its existing business. The machine required for the project costs $3.9 million. The marketing department predicts that sales related to the project will be $2.35 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. PARCO also needs to add net working capital of $150,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 30 percent. The required rate of return for PARCO is 13 percent. Should PARCO proceed with the project?
tal budgeting [7 marks] 3. PARCO is considering a new project that complements its existing business. The machine required for the project costs $3.9 million. The marketing department predicts that sales related to the project will be $2.35 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. PARCO also needs to add net working capital of $150,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 30 percent. The required rate of return for PARCO is 13 percent. Should PARCO proceed with the project?
As an analyst in the valuation team your job is to perform significant financial modeling and analysis. Your company is seeing a new sales strategy that require your input. The strategy will be effective for the upcoming 4 Years. If the company adopts the new strategy, sales will grow at the rate of 15% per year for three years. Other ratios such as: Asset turnover, gross margin, the capital structure and income tax will remain unchanged. However, depreciation would be applicable at 8% of net fixed assets at the starting of the year. Moreover, the target rate of return for the company is 12%. Additional financial information for current year is mentioned below:
Income Statement
Sales
50,000
Gross Margin (15%)
7,500
Admin., selling and Distribution expenses (7%)
3,500
Profit before tax
10,000
Tax (35%)
3,500
Profit After Taxes
6,500
Balance Sheet
Fixed Assets
17,000
Current Assets
12,000
Equity
25,000
C) Provide detailed comments should the company proceeds with this new strategy or Not? (3 Marks)
: As an analyst in the valuation team your job is to perform significant financial modeling and analysis. Your company is seeing a new sales strategy that require your input. The strategy will be effective for the upcoming 4 Years. If the company adopts the new strategy, sales will grow at the rate of 15% per year for three years. Other ratios such as: Asset turnover, gross margin, the capital structure and income tax will remain unchanged. However, depreciation would be applicable at 8% of net fixed assets at the starting of the year. Moreover, the target rate of return for the company is 12%. Additional financial information for current year is mentioned below:
Income Statement
Sales
50,000
Gross Margin (15%)
7,500
Admin., selling and Distribution expenses (7%)
3,500
Profit before tax
10,000
Tax (35%)
3,500
Profit After Taxes
6,500
Balance Sheet
Fixed Assets
17,000
Current Assets
12,000
Equity
25,000
A) Determine value of business before adoption of new strategy?
What will be the incremental value and value of business after adoption of this new strategy?
