FFM - FINAL - SPRING 2020 - SECTION 1047 - Muhammad Mansoor

North Campus
Final Examination Spring Semester 2020
Subject Finance for Manager Program MBA (M)

Faculty Muhammad Mansoor Section Code 012001047
No. of Students 12 Maximum Marks 35
Start date & Time June 8th, 2020 Submission June 14, 2020
at 12:00 AM Deadline at 4:00 PM
Students should meet their submission deadline as there is no re-take or re-attempt after the deadline.
IMPORTANT INSTRUCTIONS:
Read the Instructions carefully.
1. The Final Assessment contains 3 questions and consists of 35 marks. Marks are mentioned at the beginning
of each question. Students should attempt all the questions.
2. Students are allowed to submit their answers/solutions within a maximum time period for final assessment
mentioned above.
3. Students should submit their answers/solutions via VLE only. No other medium like email, WhatsApp etc.
will be entertained in any circumstances.
4. You may use Microsoft Excel/Word or solve by hand (with black/ blue pen) on paper but have to submit in
One PDF format file.
5. Faculty member will not be available for answering student’s questions during exam, however if any anomaly
arise will be communicated through official WhatsApp Group.
6. Students must refrain themselves from all kinds dishonest academic practices, such as plagiarism. Any
case of academic dishonestly by the student will be reported to the Director Academic and HoD. All
forms of academic dishonesty by students will be penalized
7. Use of Calculators, Internet, books, video recorded lectures and any other auxiliary aid is allowed.
Page 1 of 3
Q. No. 1 Max Marks 12
(A) You are the Director Finance of Nationwide Industries Pvt. Limited which is planning to raise its capital in stock
market for the very first time. Explain in detail what are the available options company have to raise capital in stock
market?
(B) Explain which type of shares are issued in stock market and explain any two rights which common shareholders
enjoy.
(C) Discuss in detail the types of stock market transactions.
(D) Assume that the shares are issued and Nationwide Industries just paid a dividend of PKR 1.25. The dividend is
expected to grow 7% a year for the next 5 years and then 12% a year thereafter. What is the expected dividend per
share for each of the next 9 years?
(E) Assume that company’s stock currently sells for PKR 25 a share. The stock just paid a dividend of PKR 1.10 a
share (i.e., D0 = $1.10), and the dividend is expected to grow forever at a constant rate of 8% a year. What stock price
is expected 1 year from now? What is the required rate of return on company’s stock?
(F) Assume that company issued some preferred shares to its associate, and pays a dividend of PKR 3.0 per share at
the end of each year. The preferred stock sells for PKR 34 per share. What is the stock’s required rate of return
You are a financial analyst for the Little Company. The director finance, Mr. Big has asked you to analyze two proposed
capital investments; Projects X and Y. He provide you information that Project X has a cost of $ 280,000, while Project
Y has a cost of $480,000, and the cost of capital for each project is 8%.
For project X, the expected net cash flows are as follows:
Years 1 2 3 4 5 6 7 8
Cash 40,000 50,000 60,000 60,000 30,000 50,000 40,000 70,000
Inflow
s
For project Y, the expected net cash flows are as follows:
Years 1 2 3 4 5 6 7 8
Cash Inflows 80,000 70,000 60,000 190,000 100,000 90,000 80,000 70,000
Required:
You are required to calculate the following for both projects and provide justification that which project is more
feasible as per your analysis?
A. Payback Period
B. Discounted Payback Period
C. Net Present Value, and
D. Internal Rate of Return
Page 2 of 3
(A) You are the vice president of Hudson Inc. The company is considering issuing bonds to satisfy part of its
financing need for a new venture of BoPP Plant, which is going to be launched in Mid-Western Region of Nepal.
Explain in detail the key features of the bond?
(B) You know that Nepalese Financial Market is sensitive to the price and terms and condition of bond issue. As a
result of this fact you are reluctant to entertain with new issue. Explain in detail which type of Bond will be issued by
your company?
(C) Explain how is the value of a bond determined? And what is the value of a 10-year, Rs 1,000 par value bond with
a 10 percent annual coupon if its required rate of return is 10 percent?
(D) If the economic conditions in Nepal changes what would happen to the value of the 10-year bond over time if the
required rate of return increased to 13 percent.
(E) If, after certain period of time, the scenario changes and required rate of return decreased to 7 percent, what would
happen to the value of the 10-year bond?
(F) What is bond’s current yield, if the current price of bond is Rs. 1175 and a 10 percent annual coupon? Bond had a
face value of Rs. 1000.
“Best of Luck”
Page 3 of 3

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North Campus

Final Examination Spring Semester 2020

Subject Finance for Manager Program MBA (M)

Read the Instructions carefully.

(C) Discuss in detail the types of stock market transactions.

Q. No. 2 Max Marks 12

For project X, the expected net cash flows are as follows:

For project Y, the expected net cash flows are as follows:

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