Corporate Finance Assignment Hard copy to be submitted to Prof.Abhijit Roy latest by 4.30 p.m.

on Friday, the 15th February, 2013. Answers should show detailed working Q1. A philanthropist decides to donate Rs.15 lakhs every year for next 25 years at 8%. The income from the accumulated amount would then be used for charity. In 25 years what would be the accumulated amount? Q2. What is the present value of an annuity of Rs.15 lakhs per annum contributed over 25 years assuming that the earning is at 8% per annum? Q3. You have decided to borrow Rs.5 lakhs for a new car for a period of 4 years with interest payable at 15% repayable in equal instalments at the end of each year. Find out the instalment amount, the interest paid each year and the total interest paid on the loan. (Use excel) Q4. Consider a 10% semi-annual bond with face value of Rs.100 redeemable at 5% premium at the end of 3 years. What is the price of the bond if the market expectation is 12% return? Q5. Consider two firms, namely Slow Growth firm and Fast Growth firm. Both the firms have the same earnings at Rs.10 per share and the same dividend next year at Rs.5 per share. Slow Growth offers a growth rate of 5% while Fast Growth has opportunities to grow at 15%. The expected return by investors is 20%. Find the valuations of both the firms using dividend discount model. Also calculate dividend yield and P/E ratio of the two firms. Q6. A well diversified mutual fund is considering the following stocks to add to its portfolio. Stock Beta Proportion (%) A 1.15 20 B 0.85 30 C 1.20 20 D 0.75 30 (a) What is the risk associate with the portfolio of the newly acquired securities? (b) If the risk free rate is 5% and the risk premium on the market is 10%, what return should the mutual fund expect on the new investment portfolio?