Answer all parts:

a) akashbuys 10,000 shares of X Ltd. at a price of ` 32 per share whose beta value is 2.5 and sells 5,0000 shares of A Ltd. at a price of `50 per share having a beta value of 2.Heobtains acomplete hedge by Nifty futures at ` 1,0000 each. He closes out his position at the closing price of the next day when the share of X Ltd. dropped by 2%, share of A Ltd. appreciated by3%andNifty futures dropped by 1.5%.

Interpret the overall profit/loss of Ram?

(b) STR Ltd.'s current financial year's income statement reported its net income after tax as ` 50 Crore.

Following is the capital structure of STR Ltd. at the end of current financial year:

`

Debt (Coupon rate = 11%) 80 Crore

Equity (Share Capital + Reserves & Surplus) 250 Crore

Invested Capital 330 Crore

Following data is given to estimate cost of equity capital:

Asset Beta of TSR Ltd. 1.11

Risk -free Rate of Return 8.5%

Average market risk premium 9%

The applicable corporate income tax rate is 30%.

Estimate Economic Value Added (EVA) of RST Ltd.in ` lakh.

(c) TRC Cables Ltd. (an Indian Company) is in the business of manufacturing Electrical Cables and Data Cables including Fiber Optics cables. While mainly it exports the manufacturedcablesto other countries it has also established its production facilities at some African countries' due availability of raw material and cheap labour there. Some of the major rawmaterial suchas copper, aluminum and other non-ferrous metals are also imported from foreign countries. Hence overall TRC has frequent receipts and expenditure items denominated in Non-INR currencies.

Though TRC make use of Long-Term Debts and Equity to meet itslong term fundrequirementsbut to finance its operations it make use of short-term financial instruments such as Commercial Papers, Bank Credit and Term Loans from the banks etc. If any surplus cash is left with TRC it is invested in interest yielding securities. Recently due to stiff competition from its competitors TRC has relaxed its policy for granting credit and to manage receivablesithasformed aseparate credit division.

Further to hedge itself against the various risk it has entered into various OTC DerivativesContracts settled outside the Exchange.