Recent questions in Corporate Finance

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stock and bond valuation

Given a required return of 6%, how much you would be willing to pay for a semi-annual-pay bond with an 8% pa coupon rate, a $1,000 face value, and 15 years remaining to maturity? The next coupon is due six months from now.
0

evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an installment basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the installment will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  8. The housing loan is offered on a fixed interest basis and EMI will not change.
  9. Assume the individual apartments are of equal value.
QUESTION
  1. Calculate the two EMI options and choose the best one.
0
anushay-avatar
almost 7 years ago

Evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an EAV basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the EAV will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7.  Assume a 6% accrual on the deductions taken from the employee under either option with quarterly compounding.
  8. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  9. The housing loan is offered on a fixed interest basis and EAV will not change.
  10. Assume the individual apartments are of equal value.
PVIFA 18, 9=    8.76                           PVIFA 15, 8 = 8.56 You are called upon to do the following:
  1. Calculate the two EAV options and choose the best one.
  2. Calculate monthly deduction of each employee under the two options
  3. Calculate the accumulated maturity value per year inclusive of compounded quarterly interest.
  4. Calculate the EAV differential borne by the company a. on annual basis b. over the tenor.
Hints for developing the solution A. Develop loan amortization tables for 1 person for both loan options B. Deduct the appropriate employer contribution in annual value- (eav )and divide by 12 to get monthly emi C. Calculate effective rate of interest for quarterly compounding of emi deducted D. Calculate annual realization of investment (multiplied) by 4 and compare with best option EAV
0
Tam1212-avatar
about 7 years ago

adevnced corporate finance

Firm A is a multinational automobile manufacturer. Firm B is a motorcycle producer in India. Firm A is going to acquire firm B. Before the acquisition, the equity value of firm A is $ 240 million and that of firm B is $ 30 million. The debt to equity ratio for firm A and firm B is 0.2 and 0.4, respectively. The equity beta of firm B is 1.8, which is twice as high as that of firm A. Now the CFO of firm A is considering how to finance the acquisition. He faces two following two options (we assume that firm A assumes firm B’s debt completely in both cases and the tax rate for both firms is 36%).
  1. To finance the acquisition by new equity (i.e., to use its own equity to buy the equity of firm B).
  2. To finance the acquisition by both equity and debt. More specifically, firm A plans to borrow $ 10 million and fund the rest with new equity.Please calculate the new equity beta of firm A in both cases, and explain how the acquisition may affect the risk faced by the equity holders of firm A.
0
Tam1212-avatar
about 7 years ago

Advanced corporate fiance

Assume you invest all your wealth ($ 500, 000) in the S&P 500 index fund. You expect the annual return of the fund to be 8% and the standard deviation in returns to be 20%. Now you are considering to add treasury bill to your portfolio.a) Estimate the expected return and standard deviation of your portfolio, if you decide to shift $ 200, 000 from the S&P 500 index fund to T-bill. The T-bill rate is 3%.b) Estimate the expected return and standard deviation of your portfolio, if you want to minimize your portfolio’s risk.c) Calculate the proportion of the wealth you would invest in the S&P 500 index and T-bill, if you prefer a portfolio with a standard deviation of 10%.
0

stock and bond valuation

Which of the following statements is correct regarding bonds and bond ratings? A. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be higher than the yield to maturity of a bond with a speculative grade rating (BB and lower) B. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be equal to the yield to maturity of a bond with a speculative grade rating (BB and lower) C. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be lower than the yield to maturity of a bond with a speculative grade rating (BB and lower) D. Bonds with investment grade ratings (credit rating: AAA to BBB) are considered more risky than bonds with a speculative grade rating (BB and lower)
1

stock and bond valuation

Given a required return of 6%, how much you would be willing to pay for a semi-annual-pay bond with an 8% pa coupon rate, a $1,000 face value, and 15 years remaining to maturity? The next coupon is due six months from now.
0

evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an installment basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the installment will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  8. The housing loan is offered on a fixed interest basis and EMI will not change.
  9. Assume the individual apartments are of equal value.
QUESTION
  1. Calculate the two EMI options and choose the best one.
0

The traditional internal rate of return (IRR) assumes that cash flows are reinvested at the _____.

  • A. Market rate of return
  • B. Risk-free rate of return
  • C. Firm's expected rate of return
  • D. Project's internal rate of return
  • E. Firm's opportunity rate return
4
anushay-avatar
almost 7 years ago

Evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an EAV basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the EAV will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7.  Assume a 6% accrual on the deductions taken from the employee under either option with quarterly compounding.
  8. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  9. The housing loan is offered on a fixed interest basis and EAV will not change.
  10. Assume the individual apartments are of equal value.
PVIFA 18, 9=    8.76                           PVIFA 15, 8 = 8.56 You are called upon to do the following:
  1. Calculate the two EAV options and choose the best one.
  2. Calculate monthly deduction of each employee under the two options
  3. Calculate the accumulated maturity value per year inclusive of compounded quarterly interest.
  4. Calculate the EAV differential borne by the company a. on annual basis b. over the tenor.
Hints for developing the solution A. Develop loan amortization tables for 1 person for both loan options B. Deduct the appropriate employer contribution in annual value- (eav )and divide by 12 to get monthly emi C. Calculate effective rate of interest for quarterly compounding of emi deducted D. Calculate annual realization of investment (multiplied) by 4 and compare with best option EAV
0
1-6 of 9

evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an installment basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the installment will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  8. The housing loan is offered on a fixed interest basis and EMI will not change.
  9. Assume the individual apartments are of equal value.
QUESTION
  1. Calculate the two EMI options and choose the best one.
0

Manual requried

Do any body have solution of corporate finacnce by stephen a ross 10 th edition
1
anushay-avatar
almost 7 years ago

Evaluation of employee group housing offer

A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:
  1. The number of beneficiaries will be four in number
  2. The total cost of purchasing apartments will be Rs.1 crore
  3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
  4. The company will pay the housing finance company on an EAV basis.
  5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.
  6. In case of availing the loan from HDFC, 50% of the EAV will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.
  7.  Assume a 6% accrual on the deductions taken from the employee under either option with quarterly compounding.
  8. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.
  9. The housing loan is offered on a fixed interest basis and EAV will not change.
  10. Assume the individual apartments are of equal value.
PVIFA 18, 9=    8.76                           PVIFA 15, 8 = 8.56 You are called upon to do the following:
  1. Calculate the two EAV options and choose the best one.
  2. Calculate monthly deduction of each employee under the two options
  3. Calculate the accumulated maturity value per year inclusive of compounded quarterly interest.
  4. Calculate the EAV differential borne by the company a. on annual basis b. over the tenor.
Hints for developing the solution A. Develop loan amortization tables for 1 person for both loan options B. Deduct the appropriate employer contribution in annual value- (eav )and divide by 12 to get monthly emi C. Calculate effective rate of interest for quarterly compounding of emi deducted D. Calculate annual realization of investment (multiplied) by 4 and compare with best option EAV
0

The traditional internal rate of return (IRR) assumes that cash flows are reinvested at the _____.

  • A. Market rate of return
  • B. Risk-free rate of return
  • C. Firm's expected rate of return
  • D. Project's internal rate of return
  • E. Firm's opportunity rate return
4

stock and bond valuation

Given a required return of 6%, how much you would be willing to pay for a semi-annual-pay bond with an 8% pa coupon rate, a $1,000 face value, and 15 years remaining to maturity? The next coupon is due six months from now.
0

stock and bond valuation

Which of the following statements is correct regarding bonds and bond ratings? A. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be higher than the yield to maturity of a bond with a speculative grade rating (BB and lower) B. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be equal to the yield to maturity of a bond with a speculative grade rating (BB and lower) C. The yield to maturity of a bond with an investment grade rating (credit rating: AAA to BBB) will generally be lower than the yield to maturity of a bond with a speculative grade rating (BB and lower) D. Bonds with investment grade ratings (credit rating: AAA to BBB) are considered more risky than bonds with a speculative grade rating (BB and lower)
1
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Corporate Finance