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$0
Name: .
Roll No:
Date:
Time Allowed: One Hour & 30 minutes
a) Swap
b) Hedging
c) Speculation
f
10
X#3: What do you understand with the FOREIGN EXCHANGE MANAGEMENT &
discuss the following:
a) Motives of investing in Foreign Exchange Market
b) Motives of providing credit in foreign exchange market
Over Bought & Over Sold position of a currency.
10
Q#4: By defining & explaining ARBITRAGE & CROSS RATES make the following
decision to invest or not in the respective currency in UK Foreign Exchange Market then to
resell in Pakistan that foreign currency or not. Comment on your decision also.
IN PAKISTAN:
1 USD= Rs.100
1 6BP= Rs.150
1 UAE Dirham= Rs.20
IN UK:
1 GBP=USD1.60
1 GBP= 6 UAE Dirham
'
10
CORPORATE FINANCE
FINAL TERM EXAlMINATION, 2015
BBA-7, BS (Accoi rnting and Finance)
(SUBJECT IVE PART)
Total Marks: 90
Obtained Marks:
Roll No:
Instructions:
/ g(
4.
Date:
5.
as
MIN
6.
O. No. I:
Seth Bullock, the owner of Bullock Gold Mining is e> aluating new gold mine in South Dakota. Dan Dority.
the company's geologist, has just finished his analysis if the mine site. He has estimated that the mine would
be productive for eight years, after which the gold wot Id be completely mined. Dan has taken an estimate of
the gold deposits to Alma Garrett, the companys financial officer. Alma has been asked by Seth to perform
an analysis ot the new' mine and present her recommei dation on whether the company should open the new
mine. Alma has used the estimates provided by Dan tc determine the revenues that could be expected from
the mine. She has also projected the expense of openii g the mine and the annual operating expenses. If the
company opens the mine, it will cost $500 million :oday, and reclaiming the area surrounding it. The
expected cash flows each year from the mine are sh iwn in the table. Bullock Mining has a 14 percent
required return on all of its gold mines.
it
1
2
3
4
90,000,000
1 70,000,000
230,000,000'
205,000,000
140,000,000
110,000,000
70,000,000
I0
500,000,00.0
60,000,000
oOl
'
Required:
1) Construct a spreadsheet to calculate the payback period, discounted payback period, profitability
index and net present value of the proposed mine.
2) Based on your analysis, should the company oper the mine?
(Marks: 30)
O. No. 2:
You are evaluating the potential purchase of a small bus ness currently generating $42,500 of after-tax cash
How ( Do= $42,500). On the basis of a review of similar- isk investment opportunities, you must earn a 14%
flows, you
rate of return on the proposed purchase. Because you : relatively uncertain about future cash flows.
y<
decide to estimate the firms value using several possible issumptions about the growth rate of cash flows.
ar
Required:
,
What is the firms value if cash flows are expec ed to grow at an annual rate of 0% from now to
infinity (Zero growth model)?
What is the firms value if cash flows are expectec to grow at a constant annual rate of 7% from now
to infinity?
j
(Marks - 10+10)
o.3:
R has sales of 10Q.QQ0 units at $2.00 per unit, variable operating costs of $1-70 per unit, and fixed
operatfng costs of $6,000. Interest is $10,000 per year. Firm W has sales of 100,000 units at $2.50 per unit.
variable operatingcosts of SLOCTpeFunit, and fixed operating costs of $62,500. Interest is $17,500 per year.
Assume that both firms are in the 40% tax bracket.
l
Required:
Compute the degree of operating, financial, ani total leverage for firm R.
(Marks: 20)
O. No. 4:
Qreg and Debra Quilici own a four bedroom home in an affluent neighborhood just north, of San Francisco,
(Salifbrnia. Greg is a partner in the family owned com nercial painting business. Debra now stays home with
their child, Brady, who is age' 5. Until recently, the ( uilicis have felt very comfortable with their financial
position.
After visiting Lawrence Krause, a family financial ijlanner, the couple became concerned that they were
spending too much and not putting enough funds asid< for both their child's future education needs and their
own retirement. Greg earns $85,000 per year, bait
the rising costs of education, their past contribution
efforts have left them short of their financial goals.
with
To estimate the amount of money the Quilici need to begin putting away for future security some general
Information was obtained by their financial planner. Tl e couple felt that the amount of money they currently
bbntribute to their Koegh plan would be sufficient for their retirement needs. What they had not accounted
for was Brady's education.
tl
Greg is an alumni of Stanford University, a private sc 100I with an extremely high tuition of approximately
$20,000 per year. Debra graduated from the University of North Carolina at Chapel Hill. The tuition expense
there is only $2,500 per year. When Brady turns lj the couple wishes to send him to either of these
exceptional universities. They have a slight preferenc for the much more local Stanford University. The
broblfjn, however, is that with the rate at which tuitio l is increasing the Quilici are not sure they can raise
enough money.
To assist in the calculations, assume the tuition at boti universities will increase at an annual rate of 5%.
ar at both schools. This expense is expected t6 gr'ow
t only 3% per year. Further assume the'Quillds"can de )Osit their money into a growth oriented mutual ffind
at NeuBerger&Herman Management, Inc., which has listorically earned a 12% return per annum (1% per
the couple wishes to have a pre-determined monthly amount automatically drafted from their checking
account. When Brady starts college they will slowly lie uidate the account by making an annual payment to
Brady to cover tuition and living expenses at the begi ining of each year for the four years he will be in
college.
(Questions
j.
1 . How much will be the tuition and living expens :s per year when Brady is ready to attend? Give an
;
n
answer for each university.
2. Once Brady starts college what will his total ex :nses be in each of his four years? Again, give1an
1
answer for each university.
3. How much money will Greg and Debra have to leposit per month to allow Brady to attend Stanford
University? How much money will have to be leposited per month to allow Brady to attend the
University of North Carolina? (HINT: To answer (this question you need to consider the costs of ALL
four years.)
(Marks - 10+5+5)
Management Science
Muhammad Ahmad Bajwa
Total Marks: 30
Obtained Marks
Instructions:
Name:
1.
Roll No:
The subjective part is to be submitted within 2:00 hours, extra time will
not be given...
Date:
2.
Neat handwriting, use of margins and marker for headlines will increase
the outlook/presentation of your paper
Total marks: 30
.2 - Discuss the salient features of Markowitz theory. What are the principles on
which a portfolio can be selected? Discuss in detail.
(5 Marks)
Q.4 - What are portfolio management theories? Give details of each theory.
(5 Marks)
Q.5 - How can you test the market efficiency? Also discuss the market anomalies
and the effects of behavioral Finance on an efficient market.
(5 Marks)
i/
Risk ManagemtJi#
Final Term Exam
(Subjective Type)
BS(A&F) + BBA - 7 - Finance
(Evening Program)
Obtained Marks:
Time Allowed: 80 Minutes
Name:
<S
ctifn
Instructions:
3. Any one Question questions is to be attempted from Questions
2 and 3 on the paper and returned to the invigilator within 80
Date:
minutes.
4. Any cutting and overwriting in answering will not be accepted
1/
20 Marks
Give one reason why do we do not transfer all risks by using insurance.
5 Name one way to manage the risk to items that are susceptible to water damage.
6. Name two items covered in a risk management statement.
7. How do you decide on items of priority? What factors are taken into account when deciding priority?
manual?
12. How to link risk management into the business planning process?
13. How to determine and communicate risk appetite?
Q. 3
20 Marks
A)
(5 Marks)
A small cleaning company specialises in providing contre ct cleaning services for medical providers. A recent
OH&S audit conducted internally by this company identif ed the following hazards:
manual handling tasks including heavy lifting and repetitive, forceful or awkward movements
the work environment, including wet floors and chittered workspaces
unsafe work practices, including faulty electrical equipment
prevalence of sharp materials resulting in exposu e to dangerous blood-borne viruses
The use of hazardous chemicals.
Draft a basic risk treatment plan that indicates how you v\ ould deal with each of these risks.
B)
(15 Marks)
DMG Manufacturing (DMGM) owns a high-rise office building with glass cladding (a protective covering) and
adjacpt factory premises, and it operates from these factory premises. DMGM refurbishes and sells electric
motors. Its processes include stripping down old motors, sandblasting motor casings, armature winding,
varnishing, spray-painting and assembly.
In order to write a risk management statement, the risk rr anager will carry out a physical inspection to
familiarize him or herself with the factory layout and procpsses. The risk management process of identification
will consist of listing all manufacturing processes using a checklist to ensure that he or she asks all the relevant
questions. The checklist will also include questions such as what flammable liquids are used, in what
quantities, and where are they stored?
During the identification step of the risk management pro ;ess for DMGM, the risk manager identifies the
following insurable risks:
Risk
jOffice building
Factory premises
Fire
Low probability
Low probability
High probability of hail damage
High probability
High probability
Medium probability
Explosions
Storm
to glass cladding
Theft
Personal
disputes
disputes
Medium probability
Low probability
Low probability
High probability
liability
The next step in the risk management process is to measure the potential risks, or place a value on the impact
of the risk. The measurement process for DMGM reveals the following
Information:
Fire damage to the office building: The low potential for fire in the office building is further improved by
the construction specification that includes fire resistant doors on stairways and the installation ofa
/sprinkler
system. In the event of fire, estimates suggest that the damage would be limited to 60% of the
building. However, this exercise identified the possibility of damage through accidental activation of the
sprinkler system. This risk must be added to the list.
Sprinkler leakage: In the case of leakage, estimates suggest that the damage would be 15% of the
insured contents value of the office building.
Fire damage to factory premises: The factory premises contain potential sources of ignition and
inflammable material that could feed a fire. Open flames are used to strip old motors. Therefore, the
potential for fire damage is high and likely to be 80% of the total value of the contents and building. Fire
would also damage the combustible component? of the stock of refurbished and new motors.
Storm damage: The potential loss from storm damage is estimated at 25% of the value of the factory
premises, and 20% of the value of the office building. The potential damage to the glass cladding must
be separately evaluated. The impact of hail darrjage could be 25% of the total cost of glass
replacement, representing one total side of the building. Statistics also show that, on average, five
panes of glass break accidentally every year. This equates to R4 000 in totals, at a cost of R800 per
pane.
Riot and strike damage: The potential loss from riot and strike damage is estimated at 10% of the total
value of the factory premises.
Theft: In the case of theft the estimate loss, per event, is R50 000 for the factory and R10 000 for the
office.
Product liability: The refurbished products could attract product liability claims against DMGM if
DMGM's negligence caused damage to property where the motors are installed. The estimated loss is
R2million, inclusive of legal fees.
Business interruption: A fire could seriously impact on the ability of the business to continue. In this
event, competitors would move into DMGMs market if the company could not provide its services for
an extended period. It is estimated that DMG could be affected for at least six months after a serious
fire.
Draft a risk management plan to deal with the following risks that have been identified:
J
Good Luck