Finance Answers

Historically, only larger Banks had the strength of providing Treasury products & services. Now even smaller banks are into it in a strong way. Enumerate and describe at least 5 purposes for which a Bank Treasury exists 

Discuss the benefits and drawbacks of commercial papers as an investment vehicle

Common stock : The firm's common stock is selling at RM 60. The floatation cost is 3 percent of selling price. At present, the company's growth rate is 5 percent and the latest dividend paid was RM 0.90. Calculate the cost of each alternative if the company is in a 40 percent tax bracket

Assume today is 31 December 2021. Firm A, a commodity producer, is expected to adopt the following payout policy for the next 4 years: 

Year

 2022

2023

2024

2025

Dividends

($’ m)

9

12

5

0

The estimated net profit after tax is $50 million for the year 2025. The company has no preference share financing, and does not plan to do so for the next 4 years. The expected price-earnings ratio by the end of year 2025 is 15 times. Shareholders of Firm A require a return of 10 percent for shares in this risk class.

Required

a. Compute the intrinsic value of Firm A’s common shares.

 b. Critically evaluate the use of the Dividend Discount Model in valuing the shares of Firm A, and explain which alternative methods may be more appropriate

Mr. Akbar provides you with the following information-(all the transactions are separate and independent of each other)  Started business with cash Rs150000  Purchased goods for cash Rs 25000  Sold goods to C on credit Rs 20000  Paid salary for cash Rs15000  Deposited cash into the bank account Rs100000

a. Identify the accounts being affected in the monetary transaction and Identify the type of accounts identified - real, personal or nominal (5 Marks) b. Discuss the rule of passing the journal entry applicable here and pass the journal entry (Golden rule or transaction analysis, any of these rule/s can be taken as a base to justify the answer)

Calculate the return as per CAPM for following company's stock,Returns of T- Bill is 7%.

Stock ,Expected Return ,Beta

Tata 21% 1.7

Adani Power 16% 1.4

Ranbaxy 23% 1.1

PNB 19% 1.2

Sensex 18%

Explain the concept of “gearing” and its impact on a business. 

As an expert, advise on finance decision issues on equity and loan funds.

Explain the concept of “gearing” and its impact on a business. 

Suppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $5.10 you could buy a 5-month put option giving you the right to sell 1 share at a price of $90 per share. If you bought this option for $5.10 and Florio's stock price actually dropped to $60, what would your pre-tax net profit be?

The prevailing market rates are as follows.

INR/USD = Rs. 77.00

Interest rate for a 6 month loan in India = 12% per annum

Interest rate for a 6 month loan in USA = 6% per annum

a. Explain the concept of Interest Rate Parity. What will be the expected 6 -months

forward rate for US dollar in India?

b. Compute the Forward premium/discount of USD/INR in the Indian Forex Market?