Paper14_Set1_Solution (done.pdf

Paper14_Set1_Solution (done.pdf - MTP_Final_Syllabus...

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MTP_Final_Syllabus 2016_December 2017_Paper 14_Set 1 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of parliament) Page 1 Paper – 14 – Strategic Financial Management
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MTP_Final_Syllabus 2016_December 2017_Paper 14_Set 1 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of parliament) Page 2 Paper – 14 – Strategic Financial Management Full Marks : 100 Time allowed: 3 hours Answer Question No. 1 which is compulsory and carries 20 marks and any five from Question No. 2 to 8. Section A [20 marks] 1. Choose the correct option among four alternative answer. (1 mark for correct choice, 1 mark for justification.) [10*2=20 marks] (i) Unlevered beta and effective tax rate of S Ltd is 0.8 and 35 percent respectively. The company intends to undertake a project with 60 percent debt financing. Assuming risk free rate of 7.5 % and market premium 8 %, calculate cost of equity (rounded up to two decimal points) (A) 13.90% (B) 20.14% (C) 16.40% (D) none of (A), (B) or (C) (ii) The spot and 6 months forward rates of US $ in relation to the rupee( ` /$) are ` 40.9542/41.1255 and ` 41.8550/9650 respectively. What will be the annualized forward margin(premium with respect to Bid Price)? (A) 4.10% (B) 4.40% (C) 4.50% (D) None of (A), (B) or (C) (iii) A mutual Fund had a Net Asset Value (NAV) of ` 72 at the beginning of the year. During the year, a sum of ` 6 was distributed as Dividend besides ` 4 as Capital Gain distributions. At the end of the year, NAV was ` 84. Total return for the year is : (A) 30.56% (B) 31.56% (C) 40.56% (D) 41.56% (iv) The standard deviation of Greaves Ltd. Stock is 24% and its correlation coefficient with market portfolio is 0.5. The expected return on market is 16% with the standard deviation of 20%. If the risk free return is 6%, what will be the required rate of return on Greaves Ltd. Script? (A)12% (B) 11% (C) 13% (D) 11.5%
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MTP_Final_Syllabus 2016_December 2017_Paper 14_Set 1 Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of parliament) Page 3 (v) Your customer requests you to book a sale forward exchange contract for US $ 2 million delivery 3 rd month. The quotes are: Spot US $ 1= ` 48.050/0.060 1month margin= 0.0850/.0900 2 month margin=0.2650/0.2700 3 month margin=0.5300/0.5350 You are required to make an exchange profit of 0.125%. Ignore telex charges and brokerage. (A) ` 120000 (B) ` 230000 (C) ` 75000 (D) ` 100000 (vi) The Sterling is trading at ` 1.6100 today. Inflation in UK is 4%and that in USA is 3%. What could be spot rate($/£) after 2 years? (A) 1.5792 (B) 1.5892 (C) 1.5992 (D) 1.5939 (vii) The capital structure of a company is as under: 300000 Equity shares of ` 10 each 32000, 12% Preference shares of ` 100 each General Reserve ` 1500000 Securities Premium Account ` 500000 25000, 14% Fully Secured Debentures of ` 100 each Term Loan of ` 1300000. Based on these, the leverage of the company is: (A) 60.22% (B) 58.33% (C) 55.21% (D) 62.10% (viii) Historically, when the market return changed 10%, the return on stock of Arihant Ltd changed by 16%. If variance of market is 257.81, what would be the systematic risk for Arihant Ltd?
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  • Fall '19
  • Forward contract, Institute of Cost Accountants of India, Academics Department

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