Show your work on paper or excel. You are offered the opportunity of lifetime; a financially challenged property developer needs to borrow funds quickly to build a hospital in the emirate. He is willing to double your money and pay you back in around 3 months. He is offering collateral of uncut diamonds, but the collateral will remain in the vault of a local jewellers. You don't believe that you will get your money back in 3 months but think that the developer will possibly pay you back in 12 months and most likely within 36 months. You are trying to decide if the return is worth the risk. You estimate the following probabilities: Scenario Outcome Probability 1 100,000 Payback in 12 mos. 20% 2 E100,000 Payback in 24 mos. 20% 3 100,000 Payback in 36 mos. 20% 4 250,000 of diamond in 48 mos. 20% 5 0 receive nothing. 20% You are willing to offer 50,000 and will (hopefully) receive 100,000 upon payoff. You estimate the uncut diamonds are valued at 250,000. c) A recession hits after 12 months and you realise that you are unlikely to be repaid. Calculate the outstanding balance on the credit card and loan at 12 months and the monthly payment required on the credit card and weekly payment required on the loan to pay off the balance by the end of 48 months (36 months' time). Show your work on paper or excel You are offered the opportunity of lifetime, financially challenged property developer needs to borrow funds quickly to build a hospital in the emirate. He is willing to doute your money and pay you back in and 3 months. He is offering collateral of uncut diamonds, but the colateral will remain in the vault of a local jewellers. You don't believe that you will pret your money back in 3 months but think that the developer will possibly pay you back in 12 months and most likely within 36 months. You are trying to decide if the return is worth the risk You estimate the following probabilities: Scenario Outcome Probability 16100,000 Payback in 12 mas 20% 2 100,000 Payback in 24 mos 20% 3 100,000 Payback in 36 mos 20% 4 E250,000 of diamond in 48 mos. 20% 5 to receive nothing 20% You are willing to offer 50,000 and will (hopefully) receive 100,000 upon payoll. You estimate the uncut diamonds are valued at 250,000 a) What is the estimated internal rate of return on investment? Is there more than one IRR? b) You decide to borrow the 20,000 on a credit card and 30,000 on a payday loan. The credit card quoted interest is 18% compounded monthly. The payday loan quoted interest rate is 52% compounded weekly. What is the effective annual rate (EAR) for the credit card and loan? c) A recession hits after 12 months and you realise that you are unlikely to be repaid. Calculate the outstanding balance on the credit card and loan at 12 months and the monthly payment required on the credit card and weekly payment required on the loan to pay off the balance by the end of 48 months (36 months' time) di After repaying the balance of your borrowings, to your great surprise 100% of the 100,000 outstanding shares of the company that owns the uncut diamonds. Sparkles plc is transterred to your name. The diamonds need to be cut and polished. The cutting will cost around 55,000 and the polishing around 35,000. The investment bank organising the rights offer will charge Spackles 10,000 in fees. You do not have any cash left and want pay for the above expenses or buy additional shares via a rights offering you want to maintain majority control >50%) of shares outstanding and raise at least 25,000 from selling all of your rights, is this possible? e) How would you structure the rights offer to maximise your ownership while raising E25,000 from the sale of rights? 1) How would implementing Mediclinand Miller Proposition il with taxes change your answer to ge? Would you propose an alternative to the rights offer? Monthly Return 000 ETT SPYETF HYG ETF XOT/USD Set ET100 COGET SPYETHYG ETT Trud 219 110 1 103 1113 NOTI NOV NICS NOO MOS 1549474 1452 15315 1421130 1451 NET NELL 66 OS NDX 100 UP SOO HY TCOIN QOCETY SPYET HYG ETF XHT/USD PERIOD DATE eta beste 10202 275.92 14258 93.42 13.850 2843 350.64 30,707 22 3202 3014 355 0 93.88 11,579 21 7202 13 11 346 20 252.6 32093 9,147 10 5202 273 31609 926 9 SOS 13 6207 2225 SO1 12 872 3.827 17 200 1936 26. 16 2200 200 12 305 92.45 2.633 15 1202 222 9360 14 123019 21561 95.65 7.158 13 11 2019 2017 92.12 7,710 12 10 2019 159.46 3106 915 10 11 9.2019 30336 9158 8.261 10 8 2019 1335 255 35 9116 7.2019 19233 302 30 90 5: 10022 8.6.2019 1824 29772 9037 11393 7.5.2019 175 17 279.15 8751 8 503 6 42019 190.68 297.57 89.31 5.255 5 3 2019 180 56 4,093 2.2019 1758 280.92 373 3.800 1.2019 168.66 27155 B626 247 2 12 2015 15457 25092 51 83 3,674 1312018 169.54 2752 839 3.930 O 10.2018 169 82 27065 34.35 6.302 -2.95 04393 088 7 19% 2.935 6.10% 240 150 OS 3.77% 5.IN 49 2.94% 7.69 15.0 12 92N 43336 18% -730N12210022493 SHON -7.23 016N 0.02 306 3.77 2.618 1.6IN 169 OSON-1610N 648N 2415 0.04% 1155 082 168 0.46N 1439% - BON 148 0.725 -9.99% 121 0 16% 11 90% 7:46 3.15% 339 13N 619 1.9156234 5.50 4.29% 100% 27.97% 3.84N 157 129 7.54% 3.09 3.455 12115 11 28 9.12 5.42% OON -8 83% 9155 -2555 5152 -0217 2.06 -0.4456-57.641 0.00 0:00N DOON 0.00 1625 1678 1.775 1.590 147 1401 1112 114 1 231 1 300 12 1224 1175 1124 1115 1155 1108 1032 1123 1063 1024 0.993 091 01998 1.26 1.549 1258 116 1 166 1113 OS 113 1325 1.228 1.192 114 1.121 1 102 1119 11 1031 11 1054 1038 10 0.922 1021 1050 1064 1034 0950 1000 111 111 10 1050 1036 1081 1073 1071 1059 1 059 1048 1095 103 092 996 1.500 1.401 100 137 14 1136 1.225 1:458 130 1527 1.591 1500 1549 0831 01649 0503 54 0589 122 1215 1740 1014201 12071 . 12010 10500 1132 49 So 2001 12231 1430 11130 302317.8010 0.954 105 09251 390 09500 N089 1 OOG 160 NDOD 11 1 2 Equity Risk Premium 52 us Treasury 10W OBN E Mic Return 520.5=504 Show your work on paper or excel. You are offered the opportunity of lifetime; a financially challenged property developer needs to borrow funds quickly to build a hospital in the emirate. He is willing to double your money and pay you back in around 3 months. He is offering collateral of uncut diamonds, but the collateral will remain in the vault of a local jewellers. You don't believe that you will get your money back in 3 months but think that the developer will possibly pay you back in 12 months and most likely within 36 months. You are trying to decide if the return is worth the risk. You estimate the following probabilities: Scenario Outcome Probability 1 100,000 Payback in 12 mos. 20% 2 E100,000 Payback in 24 mos. 20% 3 100,000 Payback in 36 mos. 20% 4 250,000 of diamond in 48 mos. 20% 5 0 receive nothing. 20% You are willing to offer 50,000 and will (hopefully) receive 100,000 upon payoff. You estimate the uncut diamonds are valued at 250,000. c) A recession hits after 12 months and you realise that you are unlikely to be repaid. Calculate the outstanding balance on the credit card and loan at 12 months and the monthly payment required on the credit card and weekly payment required on the loan to pay off the balance by the end of 48 months (36 months' time). Show your work on paper or excel You are offered the opportunity of lifetime, financially challenged property developer needs to borrow funds quickly to build a hospital in the emirate. He is willing to doute your money and pay you back in and 3 months. He is offering collateral of uncut diamonds, but the colateral will remain in the vault of a local jewellers. You don't believe that you will pret your money back in 3 months but think that the developer will possibly pay you back in 12 months and most likely within 36 months. You are trying to decide if the return is worth the risk You estimate the following probabilities: Scenario Outcome Probability 16100,000 Payback in 12 mas 20% 2 100,000 Payback in 24 mos 20% 3 100,000 Payback in 36 mos 20% 4 E250,000 of diamond in 48 mos. 20% 5 to receive nothing 20% You are willing to offer 50,000 and will (hopefully) receive 100,000 upon payoll. You estimate the uncut diamonds are valued at 250,000 a) What is the estimated internal rate of return on investment? Is there more than one IRR? b) You decide to borrow the 20,000 on a credit card and 30,000 on a payday loan. The credit card quoted interest is 18% compounded monthly. The payday loan quoted interest rate is 52% compounded weekly. What is the effective annual rate (EAR) for the credit card and loan? c) A recession hits after 12 months and you realise that you are unlikely to be repaid. Calculate the outstanding balance on the credit card and loan at 12 months and the monthly payment required on the credit card and weekly payment required on the loan to pay off the balance by the end of 48 months (36 months' time) di After repaying the balance of your borrowings, to your great surprise 100% of the 100,000 outstanding shares of the company that owns the uncut diamonds. Sparkles plc is transterred to your name. The diamonds need to be cut and polished. The cutting will cost around 55,000 and the polishing around 35,000. The investment bank organising the rights offer will charge Spackles 10,000 in fees. You do not have any cash left and want pay for the above expenses or buy additional shares via a rights offering you want to maintain majority control >50%) of shares outstanding and raise at least 25,000 from selling all of your rights, is this possible? e) How would you structure the rights offer to maximise your ownership while raising E25,000 from the sale of rights? 1) How would implementing Mediclinand Miller Proposition il with taxes change your answer to ge? Would you propose an alternative to the rights offer? Monthly Return 000 ETT SPYETF HYG ETF XOT/USD Set ET100 COGET SPYETHYG ETT Trud 219 110 1 103 1113 NOTI NOV NICS NOO MOS 1549474 1452 15315 1421130 1451 NET NELL 66 OS NDX 100 UP SOO HY TCOIN QOCETY SPYET HYG ETF XHT/USD PERIOD DATE eta beste 10202 275.92 14258 93.42 13.850 2843 350.64 30,707 22 3202 3014 355 0 93.88 11,579 21 7202 13 11 346 20 252.6 32093 9,147 10 5202 273 31609 926 9 SOS 13 6207 2225 SO1 12 872 3.827 17 200 1936 26. 16 2200 200 12 305 92.45 2.633 15 1202 222 9360 14 123019 21561 95.65 7.158 13 11 2019 2017 92.12 7,710 12 10 2019 159.46 3106 915 10 11 9.2019 30336 9158 8.261 10 8 2019 1335 255 35 9116 7.2019 19233 302 30 90 5: 10022 8.6.2019 1824 29772 9037 11393 7.5.2019 175 17 279.15 8751 8 503 6 42019 190.68 297.57 89.31 5.255 5 3 2019 180 56 4,093 2.2019 1758 280.92 373 3.800 1.2019 168.66 27155 B626 247 2 12 2015 15457 25092 51 83 3,674 1312018 169.54 2752 839 3.930 O 10.2018 169 82 27065 34.35 6.302 -2.95 04393 088 7 19% 2.935 6.10% 240 150 OS 3.77% 5.IN 49 2.94% 7.69 15.0 12 92N 43336 18% -730N12210022493 SHON -7.23 016N 0.02 306 3.77 2.618 1.6IN 169 OSON-1610N 648N 2415 0.04% 1155 082 168 0.46N 1439% - BON 148 0.725 -9.99% 121 0 16% 11 90% 7:46 3.15% 339 13N 619 1.9156234 5.50 4.29% 100% 27.97% 3.84N 157 129 7.54% 3.09 3.455 12115 11 28 9.12 5.42% OON -8 83% 9155 -2555 5152 -0217 2.06 -0.4456-57.641 0.00 0:00N DOON 0.00 1625 1678 1.775 1.590 147 1401 1112 114 1 231 1 300 12 1224 1175 1124 1115 1155 1108 1032 1123 1063 1024 0.993 091 01998 1.26 1.549 1258 116 1 166 1113 OS 113 1325 1.228 1.192 114 1.121 1 102 1119 11 1031 11 1054 1038 10 0.922 1021 1050 1064 1034 0950 1000 111 111 10 1050 1036 1081 1073 1071 1059 1 059 1048 1095 103 092 996 1.500 1.401 100 137 14 1136 1.225 1:458 130 1527 1.591 1500 1549 0831 01649 0503 54 0589 122 1215 1740 1014201 12071 . 12010 10500 1132 49 So 2001 12231 1430 11130 302317.8010 0.954 105 09251 390 09500 N089 1 OOG 160 NDOD 11 1 2 Equity Risk Premium 52 us Treasury 10W OBN E Mic Return 520.5=504