Paper Finance IV
Paper Finance IV
SV"'S NR"S
K|RIT P. REHTA SCHOOL OF LAW / SCHOOL
AcedemicYear:202l-2022
Date.: 20May2022
Marks: 50
,
FINAL EXAMmIATION
SECTION A
QI In wake of economic slowdown activities due to lock down, the rise in NPA is inevitable. In thi;
context critically analyses need for Bad banks. ( 5 marks)
Q2. Explain the provision of the companies Act with respect to merger and acquisition. (5 rna.rks)
SECTION 8
i Q) Calculate the intrinsic value of call.and put with the below mentioned details - (4 marks)
Underlying stock current price 120
Call strike price 100
Put strike price is 140
a. Q) Calculate the profitability of an option for various values of index at expiry where strike price is 17000
and a premium of 100 is paid. Also draw up a payoff diagram and clearly rna+k on the graph the break
evenpoint, maximum loss / gain. s PGL pt|` ce _ \G ,irD o I-- {6 marks)
SECTION C
Any two
\ I Q) Price of share of polar energy Ltd. in spot market is € 400. Rate of int?rest prevailing in money market
is 12% p.a. apHipounded annually.
Determine the fair future price and indicate if there is any arbitrage opportunity. If yes. determine the
arbitrage strategy and explain the process of arbitrage under the following situations:
1/3
2, Q) Parag Ltd. and Chirag Ltd. agreed to amalgamate and form a new company nanely Anurag Ltd. which
will take over all the assets and liabilities of both the companies. Following are the Summary Balance Sheet
#r of Parag Ltd. and Chirag Ltd. as on 31St March, 2017.
Liabilities Parag Chirag Assets Parag Chirag
Ltd. € Ltd. € Ltd. € Ltd\=
Equity Shires of € 10 each,fullypaid Plant and Machinery 8,00,000 8,00,000
4,00,000 5,00,000 Stock 65,000 60,000
6% Preference Shares of € 100 Debtors 95,000 50,000
each, fully paid 3,00,000 Profit and Loss A/c 1,40,000
Profit and Loss A/c 5,00,000 Bank 65,000 40,000
. Statutory .Reserve9%Debenturesof € 100 each 50.000 .
- 2,00,000
• Creditors I 75,000
90,000
Total 10,25,0`00 10,90,000 10,25,000 10,90,000
Terms of Amalgamation :
In case of Parag Ltd. : Assets and Liabilities are to be taken over at book values. For every 4 Equity shares
in Parag Ltd. 5 Equity Shares of € 10 each in Anurag Ltd. shall be issued at 10% premium.
L9Q)RILLtd.wantstoacquireDHILLtd.andthecashflowsofLtd.andthemergedentityaregivenbelowT'
Year 1 2 3 4 5
Earnings w.ould have witnessed 6% constant growth rate without merger and 7% with merger on account
of economies of operations after 5 years in each case. The cost of capital is 15%.
The number of shares outstanding in both the companies before the merger is .the same and the companies
agre`e to an exchange ratio of o.5 shares of RIL Ltd. for each share of DHIL Ltd.
2/3
(i) Compute the value ofRIL Ltd. before and after merger.
SECTION D
) Q) From the following information find out the amount of provision to be shown in the Profit and Loss account
of a commercial bank.
Assets € in Lakhs
(5 Marks)
2LQ) Company X is contemplating to purchase Company Y. Company X has 3`00,000 shares having a
market price of Rs. 30 per share while company Y has 2,00,000 shares selling at Rs. 20 per shar,e.
The EPS ai.e Rs. 4 and Rs. 2.25 for X and Y Respectively.
t `anagement of both the companies are discussing proposal for exchange of share in proportion to the
•J_/
relative earning per s`hare of two companies.
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