Prepare abridged from of balance sheet of a company
** assignment /CCE**
1
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:
- The number of beneficiaries will be four in number
- The total cost of purchasing apartments will be Rs.1 crore
- PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
- The company will pay the housing finance company on an installment basis.
- 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.
- 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.
- 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.
- The housing loan is offered on a fixed interest basis and EMI will not change.
- Assume the individual apartments are of equal value.
- 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
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:
- The number of beneficiaries will be four in number
- The total cost of purchasing apartments will be Rs.1 crore
- PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.
- The company will pay the housing finance company on an EAV basis.
- 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.
- 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.
- Assume a 6% accrual on the deductions taken from the employee under either option with quarterly compounding.
- 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.
- The housing loan is offered on a fixed interest basis and EAV will not change.
- Assume the individual apartments are of equal value.
- Calculate the two EAV options and choose the best one.
- Calculate monthly deduction of each employee under the two options
- Calculate the accumulated maturity value per year inclusive of compounded quarterly interest.
- Calculate the EAV differential borne by the company a. on annual basis b. over the tenor.
0
Corporate Finance