Test no.

1(Mixed test)

1.What is a buyout?

2.What is a leveraged buyout?

3.Suppose you invest 10% of the needed capital(1million $) and borrow (9million $) for investment on X
company.If the interest rate is annually compounded and is 5%,and in 2 years, the investment will
produce 9.5 million dollars,is the borrowing worth the investment?

Solutions:

1.A buyout is the purchase of a companys shares in which the acquiring party gains controlling
interest(50%+1 of outstanding or a significant portion of the voting shares,or both) of the targeted firm.

2.A leveraged buyout is a buyout with borrowed funds.The collateral used is the companys assets,
company which is targeted.

3. You pay every year 0.45 million $ so in 2 years you will pay (with the face)(9.9million) so its not worth
the investment.

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4.Exemplify two types of shares of a company.

5.If you have semi-annual payments of 2% out of 9million and the shares will produce in the first year 4
million$ and in the second 6 million $ payments,would in that case be the take-over profitable?

4.Voting shares and preferred stock

5. 0.36 million $ times 4 + 9million=10.44 million.Still,it is not worth it. The loss would be 10-10.44=-0.44
= 440,000 $.

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6.What grade have the bonds issued in a buyout?

7.What do you think can be a company balance-sheet equilibria vulnerability?

6.Junk bonds because of the high leverage ratio (usually 90%-10% bond-equity, involving much risk).

7. A specific companys assets can be used as collateral by a hostile company in case of a buy-out.

It is required however that the company is profitable and growing.

8.Define the term spin-off.

9.How can become a public company private?

10.How is the probability of default of the take-over entity changing with respect to the leverage
ratio?Or the PD of the bonds associated to the take-over entity.

8.spin-off----any product or development derived incidentally from the application of existing knowledge
or enterprise.
In this case,taking over or transferring a portion of a company to either another entity or in formation of
a new entity.

9.By leveraged buyouts (sometimes).

See also this: http://www.investopedia.com/articles/stocks/08/public-companies-privatize-go-

private.asp

10.Probability of default increases with the leverage ratio increasing.

The rating of such a credit would be below B if the debt/equity ratio is greater than 0.7.

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11.Give an advantage and a disadvantage of a public company from a shareholders point of view.

12.Give at least 3 measures for financial leverages.

11.Investors who hold stocks in public companies can trade them more quickly.

However,there are also tremendous regulatory,administrative,financial reporting and corporate

governance bylaws to comply with.

Q:What is a bylaw?It is a rule made by local authorities for management its area or societies contained
In it.

12.Total debt/Total equity is one of them.

Financial Leverage Ratio=Average Total Assets/Average Total equity(it is also called equity multiplier).

Financial Leverage Ratio is a component of Return on Equity.

ROE=Net Profit Margin x Asset Turnover x Financial Leverage Ratio.

Another measure is:

Long-term Debt to Capitalization ratio=Long-term Debt/(Long-term debt+minority interest+equity).

PART 2

1.In Python, write a file-open exception error related code.

Solution:
try:
fh=open("testfile","w")
fh.write("This is my test file for exception handling!!")
except IOError:
print ("Error:can\'t find file or read data")
else:
print ("Written content in the file successfully")
fh.close()
OR,
try:
fh=open("testfile.txt","w")
fh.write("This is my test file for exception handling!!")
except IOError:
print ("Error:can\'t find file or read data")
else:
print("Written content in the file successfully")
fh.close()
The previous two examples work but the next piece of statements will raise an exception.
try:
fh=open("testfile","r")
fh.write("This is my test file for exception handling!!")
except IOError:
print("Error:can\'t find file or read data")
else:
print("Written content in the file successfully")
If it is changed the first line with r+ instead of r, it works.

2.Compute in python the average of a sequence of numbers.

Solution:
def average(l1):
s=0;
for index in range(len(l1)):
s=s+l1[index];
s=s/len(l1);
return s;

l=[2,3,4,5];
print(average(l));
3.a)Print the integer part of a number in Python

b)print the result of 4!+5! And build a function that computes n!+(n+1)!

c)print the absolute value of a number,and the square root of it

d)print the sin(x),cos(x),exp(x),e^x-sin(x)-cos(x)

import math;
print(math.ceil(2.1));
print(math.ceil(2.1)-1);
def integer_part(x):
print(math.ceil(x)-1);#function for integer part

integer_part(1.1);
integer_part(2.1);

def fact2(n):
return math.factorial(n)+math.factorial(n+1);
print(fact2(3));

def trigo(x):
 print(math.sin(x),math.cos(x),math.exp(x),math.exp(x)-math.sin(x)-
math.cos(x),sep=' ')

trigo(1);