Suggested CA final ( November-2018)

Kshitij Academy Answers SFM (Old Syllabus)

Q. 1

 Similar question _ Ch. Security analysis Q. 44 old PM

Forward Rate of interest
Y-1: 12x Y-2: 11.25% Y-3: 10.75%

Present Values of Cash Flaws:

80 80 1080
1.12 (1.12) (1.1125) (1.12) (1.1125) (1.1075)

• Intrinsic Value of Bond = 918.27

 Expected Value of Bond = 918.27 1.02
= 936.64
Q. 1 E-Mail: ka.adipur@gmail.com

Answer
a. MKT capitalization 1500 crore
(no. of ES × MPS)
b. MPS 1500
c. No. of ES (a/b) 1 crore
d. No. of shares to be bought back 1× 20% = 0.20 crore
e. Funds required for buy back 0.20 × 1650 = 330 crore
f. Interest cost (net of tax) 330 × 16% × 70% = 36.96
Post - buy back EPS:
Post buy back earnings / post buy back no. of ES
200 – 36.96 = 163.04 / 1 0.20 = 0.80
= 203.80
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Q. 1

Answer
Rate of Discount:
Forward – spot / spot × 100 × 365 / 60
75.20 – 75.60 / 75.60 × 100 × 365/60
= -3.21%
- Probable loss of operating profit
E. R on date of consignment 75.50
Forward rate (75.20)
Loss 0.30 Rs. / $
× 500000 $
Loss 150000
Q. 1 E-Mail: ka.adipur@gmail.com

Answer
Opening units: X
No. of Additional units: 3x / 23.75
X + 3x /23.75 = 26750
26.75 x = 635312
X = 23750

Closing NAV: 23.75

Opening NAV: 23.75
118.75% = 20

Value of investment: 23750 units × 20: 475000

(+) entry load: 1187
476187.50
Q. 3 E-Mail: ka.adipur@gmail.com
Answer E-Mail: ka.adipur@gmail.com
Q. 3 E-Mail: ka.adipur@gmail.com
Q. 4 E-Mail: ka.adipur@gmail.com
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Similar question _ Ch. Indian capital market Q. 53 old PM

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Q. 4 E-Mail: ka.adipur@gmail.com
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Similar question _ Ch. Mutual fund ill. 04 old SM

Answer
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Q. 5 E-Mail: ka.adipur@gmail.com
Answer E-Mail: ka.adipur@gmail.com
Option I: Invest in Japan (Equity)

201.3336 m £

Option II: Invest in US

201.3336 m £
Q. 5 E-Mail: ka.adipur@gmail.com

Answer
Rs./$: 68.50
$ Premium: 3% (6 month)
6 month forward: 69.5275 Rs./$
Interest rate differential: 5%
Arbitrage process:
0 mth
1. Borrow 3 m $ @ 4% for 6 mths
2. Sell $ against Rs. @ spot rate
3m$
× 68.50 Rs. /$
205.50 m Rs.
 E-Mail: ka.adipur@gmail.com
3. Invest 205.50 m Rs. @ 9% for 6 months
4. take forward COV to buy $ @ 69.5275 Rs./ $
After 6 months
1. Realize investment in Rs.
205.50 m Rs. + = 214.7475 m Rs.
2. Sell Rs and buy $ under forward COV
214.7475 m Rs.
69.5275 Rs. /$
3.088669 m $
3. Repay $ borrowing: 3 m $ + = 3.06 m $
4. Net gain: 3.08869 – 3.06
= 0.028669 m $
= 28669 $
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Q. 6
Answer E-Mail: ka.adipur@gmail.com
Maximum exchange ratio (from C ltd’s perspective)
- Post merger MPS
post – merger M.V. of company / post – merger No. of ES
(96 + 30) × 7 : 882 / : 20 + 14x = 38.40
x = 0.2120
Or
synergy:
- Post – merger M.V. 882
- (-) pre – merger M.V. of both
(96 × 8) + (30 × 7) 978
Synergy loss 96

- M. V. available to S.W.
210
(-) loss (96)
114
÷ MPS UF
P. W. 38.40
2.96875
E. R = 2.96875 / 14 = 0.2120
Minimum exchange ratio: (from D ltd’s perspective) E-Mail: ka.adipur@gmail.com
- synergy: post – merger MPS
Post – merger M.V. current MPS 38.40
(96 + 30) × 9 1134 (+) 7.80
Pre- merger M.V. of both 46.20

Gain 978/156
Gain / su: 156/20 = 7.80
Post – merger MPS:
Post merger M.V. / post – merger No. of Es
1134 / 20 + 14x = 46.20
X = 0.3248
Or
M.V. available to S.W. / post – merger MPS
210 / 46.20 = 4.54545 ES
E. R. = 4.54545 / 14
= 0.3247
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Q. 6

Answer:
Theoretical Ex – right price
M. V. of Co before right issue + proceeds from right issue /
No. of ES before right + no. of ES issued under right issue
(75000 × 36) + (18750 × 24) / 75000 + 18750
= 33.60 /
Or
(36 × ) + (24 × 1) / 5
= 33.60/
Value of right:
Theoretical EX – right price 33.60
Issue price under right 24
9.60