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    Final Total Marks 60 Time: 2.5 Hours: Short Questions

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    Shafiqul Islam Sowrov 1921344630
    The document contains instructions for a 2.5 hour exam worth 60 total marks. It includes two short answer questions worth 10 marks total, a problem solving section with two questions worth 20 marks total, and an analytical question section with two questions worth 30 marks total. The first problem solving question involves calculating the maximum price to pay for a stock given its dividend growth rates and required rate of return. The second question involves calculating expected returns, variances, standard deviations, and coefficients of variance for two investment projects and determining which to select. The first analytical question involves calculating the cost of capital for a company using different financing sources. The second question involves comparing two projects using net present value, payback period, and

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    Final Total Marks 60 Time: 2.5 Hours: Short Questions

    Uploaded by

    Shafiqul Islam Sowrov 1921344630
    38 views3 pages
    The document contains instructions for a 2.5 hour exam worth 60 total marks. It includes two short answer questions worth 10 marks total, a problem solving section with two questions worth 20 marks total, and an analytical question section with two questions worth 30 marks total. The first problem solving question involves calculating the maximum price to pay for a stock given its dividend growth rates and required rate of return. The second question involves calculating expected returns, variances, standard deviations, and coefficients of variance for two investment projects and determining which to select. The first analytical question involves calculating the cost of capital for a company using different financing sources. The second question involves comparing two projects using net present value, payback period, and

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    exam-on-24th

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    FINAL-FIN

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    The document contains instructions for a 2.5 hour exam worth 60 total marks. It includes two short answer questions worth 10 marks total, a problem solving section with two questions worth 20 marks total, and an analytical question section with two questions worth 30 marks total. The first problem solving question involves calculating the maximum price to pay for a stock given its dividend growth rates and required rate of return. The second question involves calculating expected returns, variances, standard deviations, and coefficients of variance for two investment projects and determining which to select. The first analytical question involves calculating the cost of capital for a company using different financing sources. The second question involves comparing two projects using net present value, payback period, and

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    38 views3 pages

    Final Total Marks 60 Time: 2.5 Hours: Short Questions

    Uploaded by

    Shafiqul Islam Sowrov 1921344630
    The document contains instructions for a 2.5 hour exam worth 60 total marks. It includes two short answer questions worth 10 marks total, a problem solving section with two questions worth 20 marks total, and an analytical question section with two questions worth 30 marks total. The first problem solving question involves calculating the maximum price to pay for a stock given its dividend growth rates and required rate of return. The second question involves calculating expected returns, variances, standard deviations, and coefficients of variance for two investment projects and determining which to select. The first analytical question involves calculating the cost of capital for a company using different financing sources. The second question involves comparing two projects using net present value, payback period, and

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    FINAL

    TOTAL MARKS 60
    TIME: 2.5 HOURS
    Short Questions:
    2*5= 10 Marks

    1. What is Risk? What is Return? There are three types of investors -risk seekers, risk indifferent
    and risk averse. Under which category you fall ? explain with example
    2. When YTM<coupon rate the buyer will buy the bond at a PREMIUM price. Justify this by giving
    your own example.

    Problem solving
    Total 20 marks
    1. The Bay Company last paid their dividend of $2.7 to the stockholders. For the first 4
    years the dividend will grow at a 5% and then the rate of growth changes to 4% percent
    for the foreseeable future. The required rate of return is 11 percent. If you want to buy
    the stock maximum how much you should pay for it? Marks 10
    2. There are two projects, X and Y. the following probability distribution for the projects are
    given below

    PROJECT X PROJECT Y
    Return Prob. Return Prob.
    ______ _____ ______ ____
    Pessimistic 9% 0.25 10% 0.35
    Most Likely 16 0.50 17 0.45
    Optimistic 22 0.25 25 0.20

    a. Compute expected rate of return for each project.


    b. Compute variance and standard deviation of rate of return for each project.
    c. compute the coefficient of variance.
    c. Which project should you take?why?
    Marks 10
    Analytical question:
    Total marks 30

    1. The capital structure of Matalan is below


    Source Target market
    proportions
    ___________________________________
    Long-term debt 45%
    Preferred stock 15
    Common stock equity 40

    PREFERRED STOCK: The firm has determined it can issue preferred stock at $62 per
    share par value. The stock will pay an $6.00 annual dividend. The cost of issuing
    and selling the stock is $2.9 per share.
    DEBT: The firm can sell a 15 year, $1,000 par value, 11 percent bond for $900. A
    flotation cost of 2.5 percent of the face value.
    COMMON STOCK: The dividend expected to be paid at the end of the coming year is
    $5.07 and selling price is $49. Its dividend payments have been growing at a
    constant rate for the last 6 years. Six years ago, the dividend was $2.45. the cost
    of issuing the stock was $2.5.
    the firm's marginal tax rate is 30 percent. What is the cost of capital of the firm? If you
    are a finance manager of the company and your task is to reduce the cost of
    capital .In this situation how you can minimize the cost. Explain 15

    2. Projects X and Y have the following expected net cash flows:


    (7)

    Project X Project Y
    Year Cash Flow Cash Flow
    0 -$600,000 -$600,000
    1 350,000 350,000
    2 350,000 350,000
    3 350,000 300,000
    4 150,000 200,000
    5 150,000

    Both the projects are of the same company, cosmo Pharma. Cost of capital is 17%
    Assume you are a finance manager of the company. Which project you should Choose
    based on NPV? Would your decision change if payback method was used? Or
    Discounted Pay back period?
    Which method you think is the best to find out the solution and why? Why you are not
    choosing the other two methods? Total 15

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