BA5208 Strategic Finance

Spring Semester 2014

Individual Assignment
These assignment constitutes 20% of the course assessment
(The soft copy will be submitted to Turnitin as MS Word document by 12am (midnight), on each assignments due date)
Word limit: maximum 1500 words (excluding original questions)
IMPORTANT NOTICE:
The assignment must be typewritten in MS Word only, double-spaced, and saved as an MS
word file in the following manner: Student Surname_Student Name_Reg. No., i.e.
Khan_Adil_110811. A copy should always be kept by the student and this is the students
responsibility. An assignment Cover Sheet is to be attached to the hard copy of your assignment
with:

your name
your student number
your lecturers name
the course
word count
the topic clearly marked on it
a statement that your assignment is your own.

INDIVIDUAL ASSIGNMENT

QUESTION # 1

PG. 2

5 MARKS

ASSIGNMENT ON TIME VALUE OF MONEY

Select a bank and take a data of (atleast) last 10 years.
Requirement:

What is the criteria of a bank to giving an interest to their depositors (Annually, semi,
quarterly, monthly, daily, continuous).
Calculate the APR and EAR
How much the interest level changes if a depositor goes from PLS account to 1 year, 3
year, 5 year, 7 year to 10 year fixed deposits.
Will there be any change in an interest rate if a depositor have more money in an
account? (e.g. 1 lac, 5 lac, 10 lac, 50 lac deposits, the interest rate will remain the same or
it varies, if varies, how much).

Due date:
21st of March, 2014
QUESTION # 2

5 MARKS

ASSIGNMENT ON VALUATION OF TVM

Your instructor will assign you a stocks name. You are required to calculate the following:

The stock price movement in the last three (3) years (Monthly basis)
Time to announce the dividend
Calculate the dividend
Highest dividend paid in the last 3 years and when
Dividends Growth

(Note: You can show the movement in a graphical form and explain it.
Due date:
4th of April, 2014

INDIVIDUAL ASSIGNMENT

QUESTION # 3

PG. 3

10 MARKS

ASSIGNMENT ON CAPITAL STRUCTURE AND WACC

1.
2.
3.
4.

Collect 5 years data for the assigned companies.

Find the company's beta in the last 5 years on monthly share prices data
Find the annual market return for KSE 100, and average it
Deduct the yearly t-bills rate from the market return to find average market risk premium
(i.e. Rm -Rf)
5. Find the cost of equity with CAPM equation
6. Find the company's financial expenses and divide it on the interest-paying liabilities (i.e.
exclude accounts payable, wages payable etc). This will give you the cost of debt
7. Find the tax rate (divide tax expense on net income before taxes)
8. Find the cost of debt after taxes (1-Tax)*cost of debt
9. Assume that interest rates increase by 5% with every 10% increase in debt. Your starting
point should be the cost of debt which you have calculated in step 6 above
10. Find the average net income and assume that this net income will remain constant
forever.
Required:
i.
ii.
iii.
iv.

Find the optimal capital structure where value of the firm is maximized.
Find the value of debt at this level
Should the company increase debt-level or reduce debt-level
What will be the share price after your proposed capital structure

Due date:
29th of April, 2014