Advanced Financial Management - November 2018

(a) Tangent Ltd. is considering calling % 3 crores of 30 years, % 1,000 8 bond issued 5 years ago with a coupon interest rate of 14 per cent. The bonds have a call price of % 1,150 and had initially collected proceeds of % 2.91 crores since a discount of % 30 per bond was offered. The initial floating cost was % 3,90,000. The Company intends to sell % 3 crores of 12 per cent coupon rate, 25 years…

Shares of Volga Ltd. are being quoted at a price-earning ratio of 8 8 times. The company retains 50% of its Earnings Per Share. The Company’s EPS is % 10. You are required to determine : (1) _ the cost of equity to the company if the market expects a growth rate of 15% p.a. (2) the indicative market price with the same cost of capital and if the anticipated growth rate is 16% p.a. (3) _ the market price…

6. (a) The following data are available for three bonds A, B and C. These 12 bonds are used by a bond portfolio manager to fund an outflow scheduled in 6 years. Current yield is 9%. All bonds have face value of % 100 each and will be redeemed at par. Interest is payable annually. Bond | Maturity (Years) | Coupon rate A 10 10% B 8 11% c 5 9% (i) Calculate the duration of each bond. (ii) The…