Advanced Financial Management - May 2023

Growth Ltd. (HGL) was having an excellent growth over a number of years. The Board of Directors is considering a proposal to reward its shareholders by buying back 20% shares at a premium. The premium is to be paid by raising a loan from the Bank. The interest on loan is to be serviced by internal accruals as supported by the financials of HGL. The company has a market capitalization of * 15,000 crore and the current Earnings Per Share…

(a) Mr. Bull is a rational risk taker. He takes his position in a single stock for 4 days in a week. He does not take a position on Friday to avoid weekend effect and takes position only for four days in a week i.e. Monday to Thursday. He transfers the amount on Monday morning and withdraws the balance on Friday morning. He desires to make a maximum investment where Value At Risk (VAR) should not exceed the balance lying…

(a) IF an Indian firm has its subsidiary in Singapore and SF a Singapore firm has its subsidiary in India and face the following interest rates: Company IF SF INR Floating Rate | BPLR+0.5% BPLR+ 1.5% SGD (fixed rate) 3% 3.50% SF wishes to borrow Rupee loan at a floating rate and IF wishes to borrow SGD at a fixed rate. The amount of loan required by both the companies is same at the current exchange rate. A Bank arranges…

(a) An investor, in the beginning of 2022, has purchased substantial number of 8 year 7.50%, % 1000 bond with 5% premium on maturity at a required Yield to Maturity (YTM) of 8.50 %. However, due to the continuing war in Europe, the inflation is running very high in the economies of the countries. The yield on the bonds is decreasing. The risk averse investor wants to protect himself from further loss and decides to sell the bonds in 2023.…

M/S. Promising, an AMC, on 01.04.2018 has floated two schemes viz. Dividend Reinvestment Plan and Bonus Plan. Mr. X, an investor has invested in both the schemes. Mr. X, while submitting the tax papers, returned a capital loss on both the plans. Tax Officials, suspicious on the claim of Mr. X, decided to launch an investigation and were able Date Dividend (%) | Bonus NAV (2) Ratio Dividend Bonus Plan Reinvestment Plan 01.04.2018 ? ? 31.12.2019 1:5 58 70 31.03.2020…

Big Ltd. (BL), a listed company, is enjoying a price earnings ratio (PER) of 15 on an Earnings Per Share (EPS) of ₹5. The Total number of outstanding shares are 2,00,000. BL is proposing to acquire Small Pvt. Ltd. (SPL) an unlisted company by issuing shares in the ratio 4:5 i.e. for 5 shares of SPL 4 shares of BL will be issued. The outstanding shares of SPL are 50,000. SPL will be listed before the actual merger to discover…