Paper Finance IV

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SV"'S NR"S
K|RIT P. REHTA SCHOOL OF LAW / SCHOOL
AcedemicYear:202l-2022
Program B.B.A., LL.B.¢Ions.) Year: 11 Semesl
bject:Finance lv / Batch: 2020-2025
Date.: 20May2022
Marks: 50
,
No. of pages: 03>-

/
Time:11:00 am to 01:00 pin 2 {hrs)
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:
I.Actual Future Price for 1 year is € 480.
2.Actual Future Price for 1 year is € 430. (10 Marks)
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.
In case of Chirag Ltd. :

1) 6% Preference shareholders of Chirag Ltd. would be allotted 4, 7% Preference shares of € 100 each
in Anurag Ltd. for every 5, 6°/o Preference shares in Chirag Ltd.
2) 9% Debenture holders would be discharged at par by issue of an equal number of 10% Debentures of
{ loo each in Anurag Ltd. at par.
3) Plant and Machinery and stock shall be appreciated by 10%..
4) Balance of purchase consideration would be discharged y issue of Equity shares of € 10 each in
Anurag Ltd. issued at 10% premium.
5) Sundry Debtors o.f ch.irag Ltd. include € 5,000 due from Parag Ltd.
You are required to :
a) Compute purchase con.sideratjon
b) Balance Sheet of Anurag Ltd. after anialgamation. (10 Marks)
L9Q)RILLtd.wantstoacquireDHILLtd.andthecashflowsofLtd.andthemergedentityaregivenbelowT'
•' - : (Rs lnl.alchs)
Year 1 2 3 4 5
RIL Ltd. 185 300 320 440 480
MergedEntity 420 490 535 600 610
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.
You are required to: .
2/3
(i) Compute the value ofRIL Ltd. before and after merger.
(ii) ValueofAcquisition and
(iii) Gain to shareholders ofRIL Ltd. (10 marks)
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
Standard Assets 2,000
Sub-Standard Assets 1 ,000
Doubtful Assets (Unsecured) 250

<
Doubtful Assets (Secured)
Upto I Year 450
More than 1 year upto 3 year 200
More than 3 year 150
Loss Assets 250
(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.
Calculate EPS after merger if implemented.

(5 Marks)
34

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IiRE

Program B.B.A., LL.B.¢Ions.) Year: 11 Semesl

bject:Finance lv / Batch: 2020-2025

No. of pages: 03>-

I.Actual Future Price for 1 year is € 480.

2.Actual Future Price for 1 year is € 430. (10 Marks)

In case of Chirag Ltd. :

•' - : (Rs lnl.alchs)

RIL Ltd. 185 300 320 440 480

MergedEntity 420 490 535 600 610

You are required to: .

(ii) ValueofAcquisition and

(iii) Gain to shareholders ofRIL Ltd. (10 marks)

Standard Assets 2,000

Sub-Standard Assets 1 ,000

Doubtful Assets (Unsecured) 250

Upto I Year 450

More than 1 year upto 3 year 200

More than 3 year 150

Loss Assets 250

Calculate EPS after merger if implemented.

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