Q No.1- Suppose PTC sold an issue of bonds with 8 years maturity at a Rs.

1190, par value was 1000, a 10 percent coupon rate and quarterly interest payments. (a) Three years after the bonds were issued, the going rate of interest on bonds such as these fell by 4%. At what price would the bonds sell? (b) Suppose that 2 year after the initial offering the going interest had raised by 2%. At what price would the bonds sell? (c) Suppose that condition in part a existed that is interest rates fell to 6% 3 years after the issue date. Suppose further that interest rates remained at 6% to next 5 years. What would happen to the price of the PTC bond over time? (d) Suppose that condition in part b existed-that is, interest rate rose to 12% 2 years after the issue date. Suppose further that interest rates remained at 12% to next 6 years. What would happen to the price of the PTC bond over the time?

Q No.2- assume that your father is now 40 years old that he plans to retire in 20 years and then he expects to live for 20 years after he retired. He wants a fixed retirement income Rs. 80,000 per year. His retirement income will begin the day he retires, 20 years from today and he will then get 19 additional annual payments. He currently has Rs. 200,000 saved up and he expects to earn a return on his saving. The interest rate is 8% per year in initial 10 year and 12% from year 11 to 15 and 20% per year thereafter, annual compounding. To the interest rupees how much must he save during the each of the next 20 years, assume that 10th , 15th , 16th, and 20th payments are missing(with deposit being made at end of each year) to meet his retirement goals.

Q No.3-The OCS Company recently purchased a new delivery bike. The new bike cost Rs. 22500 and it is expected to generate net after tax operating cash flows, excluding depreciation of Rs. 1750 per year. the bike has a 5-year expected life and depreciated in straight line method. The expected abandonment values (salvage values after tax adjustments) for the bike are given below. The companys cost of capital is 10%. year 0 1 2 3 4 5 Required: Annual operating cash flow (excluding depreciation) (Rs. 222500) 1750 1750 1750 1750 1750 Abandonment value 22500 17500 14000 11000 5000 0

(a) Should the firm operate the bike until the end of its 5-year physical life or if not, what is its optimal economic life?

(b) Would the introduction of abandonment values, in addition to operating cash flows, ever reduce expected NPV and or IRR of project?

Q No.4- EBIT of PSO for year 2010 is rs. 3000000. It pays Rs. 625000 as dividend. Its number of shares outstanding is 200000 par values Rs. 50 each sold at discount at RS. 30each. Retained earnings balance on January 1, 2010 was Rs. 1200000. Assume there is no preferred stock, beta of PSO is 0.5, risk free rate on T-bills is 14% and market risk premium 6% interest expense is Rs. 500000, tax rate is 50% and total debt is 3 million. Required: (a) Calculate market value per share (b) Calculate dividend payout ratio and retention ratio (c) Comment on payout ratio, what indication can be expected from it.

Q No.5- your broker offers to sell you some shares of Unilever. Common stock that paid a dividend of Rs. 10 yesterday. (a) You expect the dividend to grow at the rate of 20% per year for the next 5 years. If you buy the stock you plan to hold it for 4 years and then sell it. You expect the price of stock 4 years from now to be Rs. 1500. How much would you pay for this stock if your expected rate is 24%. (b) Assume that growth is 8% and that is constant and dividend yield is 8% too, then how much would you pay this stock. (c) Assume that growth rate is 14% for 3 years and then 6% for two years and then 8% and that is the constant then how much would you pay for this stock if dividend yield is 6% throughout this time. (d) Suppose required rate of return for investor is 14% for 3 years, 16% for 2 years then after and then 12% that is constant. Same way growth for initial 6 years is 10% and 5% constant growth then after. Calculate price of share.