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Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Scanned by CamScanner Q.1 .I Machine A 0 OMR) ( 1 (000) 2 (000) 3 000) ( 4 000) ( 5 000) ( 110.00 0 116.60 123.60 Labor Cost (10.50) (11.03) Power Cost (09.27) (09.55) Net Operating Cost Flow Capital Allowance 96.83 103.02 (50.00) (37.50) 46.83 65.52 (14.52) 138.8 7 12.16) ( 10.13) ( 116.5 9 21.09) ( 95.49 25.26) ( 21.09 91.33 147.2 0 12.76) ( 10.43) ( 124.0 1 63.28) ( 60.73 29.60) ( 63.28 94.41 Additional Sales Net Taxable Cash Flow Taxation Add bead Capital Allowances Capital ((15% Net Projected Cash Flow (200) (200) 50.00 96.83 37.50 88.51 131.0 1 11.58) ( 09.83) ( 109.6 0 28.13) ( 81.48 20.31) ( 28.13 89.29 0.870 0.756 0.658 0.572 0.497 84.20 66.92 58.71 52.22 46.94 6 000) ( 18.83) ( 18.83) ( 0.432 08.14) ( Discount Factors = 318.85 DCI NPN M/A = 100.85 Machine B Addition Sales Labor Cost Power Cost Net Operating Cost Flow Capital Allowance 0 OMR 1 2 (000) (000) 3 000) 4 5 6 (000) (000) 000) ( 110.00 0 116.60 123.60 131.01 138.87 147.20 07.35) ( 04.12) ( 105.13 07.72) ( 04.24) ( 111.64 08.11) ( 04.37) ( 118.53 (08.51 ( 04.50) ( 125.86 (08.93 ( 04.63) ( 133.64 62.50) ( 42.63 46.88) ( 64.76 35.16) ( 83.37 26.37) ( 99.49 19.78) ( 113.86 Net Taxable Cash Flow Taxation Add bead Capital Allowances Capital ((15% Net Projected Cash Flow (250) (250) 62.50 105.13 13.21) ( 46.88 98.43 20.07) ( 35.16 98.46 25.84) ( 26.37 100.02 30.84) ( 19.78 102.80 0.870 0.756 0.658 0.572 0.497 91.46 74.41 64.79 57.21 51.09 35.30) ( 35.30) ( 0.432 15.25) ( Discount Factors =323.71 DCI NPN M/B = 73.71 NPN M/A is 100.85 And NPN M/B is 73.71 So Machine a Better than (Machine B.Beta and weights(2011 .II Q.2 .A .Ismail subscribes for 250 new shares Shares cum right @ 2.10 = 2100.000 1000 Cash for 250 new shares @ 1.85 2562.500 = 462.500 Shares ex right @ 2.05 = 2562.500 1250 0000.000 .B .Ismail sells all his rights shares ex- right @ 2.05 = 2050.000 1000 Sells of right 1000 @ 5baiza= Carnot subscribe for shares 50.000 = 462.500 2562.500 Shares @ 2.05 = 2562.500 1250 0000.000 .C -:Ismail takes no action over the rights issue Initial position 1000 @ 2.10 = 2100.000 Feral position 1000 @ 2.05 = 2050.000 (50.000) Q.3 .A Company Red Tag OXY Pandora Nike Reebok NO. Of Shares 70000 150000 10000 80000 130000 Share Price 3.75 4.25 2.50 4.50 3.50 Market value 262500 637500 250000 360000 455000 1965000 Weight 0.1336 0.3244 0.1272 0.1832 0.2315 Beta 1.27 1.53 1.01 0.95 0.82 Weighted beta 0.1696 0.4963 0.1284 0.1740 0.1898 1.16 = 1.1581 -:Comment .B Company Red Tag OXY Pandora Nike Reebok Beta 1.27 1.53 1.01 0.95 0.82 %(E(R j 18.89 20.71 17.07 16.65 15.74 As per CAPM (E (R j) = R f + B j (R m - R f (Red Tag = 0.10 + 1.27 (.17 - .10 (0.07) 1.27 + 0.10 = 0.0889 + 0.10= 18.89% = 0.1889 = (OXY = 0.10 + 1.53 (0.17 - 0.10 0.1071 + 0.10 = 20.71% = 0.2071 = (Pandora = 0.10 + 1.01 (0.17 - .10 (E(R 17 21 19 14.5 20 (E(R) -E(R (1.89) 0.29 1.93 (2.15) 4.26 Advice Sell Hold Hold Sell Buy (0.07) 1.01 + 0.10 = 0.0707 + 0.10 = 17.07% = 0.1707 = (Nike = 0.10 + 0.95 (.17-.10 (0.07) 0.95 + 0.10 = 0.0665 + 0.10 = 16.65% = 0.1665 = (Reebok = 0.10 + 0.82 (0.17 - .10 (0.07) 0.82 + 0.10 = 15.74% = 0.1574 = 0.0574 + 0.10 = (b) .II Q.4 .A Securit y x Security Y Portfolio X = 25 *60% = 15% Portfolio Y = 30 * 40% = 12% Portfolio XY = 30 * 40 = 12% 16- = 25 - 9 15 =25 - 10 19 = 25 - 6 2 16 =256 152=225 2 19 =361 842 ^=(R-R)/N Possible Return (%) 30 25 20 Probability Possible Return (%) 50 30 10 Probability 0.3 0.4 0.3 0.2 0.6 0.2 9 10 6 25 10 18 2 30 For Security X Probability R 0.3 0.4 0.3 30 25 20 R*X R-E 9 10 6 E(R)25 5 0 5- Standard deviatio n 25 0 25 Valance P* 7.5 0 7.5 15 15=3.87 = Standard deviation of X 3.87 100=15.48 = 25 For Security Y Bribabilit y 0.2 0.6 0.2 R R*P (R-E(R 50 30 10 10 18 2 E(R)30 20 0 20- Standard deviation 400 0 400 160=12.649 = Standard deviation of Y 42.16% = 100 * 12.649 = 30 -:Portfolio of Risk = (12.649 * 40%) + (3.87 * 60%) 7.318 = 4.996 + 2.322 ( 60 15.48 ) + ( 40 42.16 ) = Portfolio of coefficient 26.144 = 16.864 + 9.28 = 5.113 = .II .A P* 80 0 80 .B Q.5 .I .II = Convert the Share price to ex dividend Po = 3.45 - .20 baize = 3.25 OMR :Using the Gordon growth model (g) / 0.15 - g+1) * 0.20) = 3.25 -:Re arranging G = 0.2875 / 3.45 8.33% = The future growth of Current price of share = 8.33% -:Comment