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SEMESTER Fall 2015
Corporate Finance
(FIN722)


Assignment No. 1
Due Date: 9-Dec-2015 Marks: 25

Dear Student,
Here is Assignment # 01 for your course of FIN722. It will provide you an opportunity to get yourself
prepared for your mid-term exam. Before comprehending and attempting the assignment, we would like
you to note some of the following important points:
· This assignment has been designed to enhance and assess your financial knowledge so it is advisable
to put your genuine efforts towards its attempt. You may, however, consult your study resources or
to anyone who has requisite financial expertise but the solution should be prepared wholly and solely
by you.
· Always remember that copied/cheated solutions not only earn you low marks but also spoil your
knowledge. So, keep yourself at a safe distance from ready-made and substandard solutions.
· Read the assignment question twice, thrice or even more times in order to comprehend it in its true
spirit before preparing the solution. Believe it that you are capable enough to prepare the solution by
yourself so just give it a try.


Topic: Securities Valuation


Learning Objective: Purpose of this graded activity is to provide understanding that how different
securities are evaluated.
CASE # 1:
Smart manufactures and Style manufacturers are manufacturers of sports goods. Both companies have
issued bonds, each of which has par value of Rs. 1,000. Both bond issues have similar year to maturity of 5
years. However, coupon rate offered on Smart’s bonds is 12% paid quarterly while Style’s bond is offering
coupon rate of 6% quarterly.
Required:
a) Analyze which company’s bond is more sensitive to price change and why?
b) Calculate present value of each bond if market required rate of return on both bond issues is 8%.
CASE # 2:
Stemmer Limited deals in business of garments. Company has currently paid a dividend of Rs. 2 per share
to its shareholders. Company has decided to pay dividend up to year 5 at growth rate of 15%. After that
growth rate will decrease and company will start to pay dividend at 5%.
Required:
What will be the current value of Stemmer’ stock if investor’s required rate of return is 10%? Provide appropriate detailed working.


Learning Outcome: After attempting assignment, students will be able to valuate bonds and common
stocks.
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Replies to This Discussion

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

FIN722 complete solution 2015

Attachments:

idea solution u can easily solve your assigment

Attachments:

your calculation is wrong in bold form 

see this

Present value= c x F x 1-(1+r)-t /r + F/ (1+r)t

= 3% x 1,000 x 1-(1+2%)-20 /2% + 1,000/ (1+2%)20

= 0.03 x 1000 X 1- (1+ 0.02)-20 /0.02 + 1,000/(1+ 0.02)-20

= 30 x 1- (1.02)-20 /0.02 + 1,000/ (1.02)20

= 30 x 1- 0.673/0.02 + 1,000/1.486

=30 x 0.0327/0.02 +1,000/1.486

= 9.81/0.02 + 1,000/1.486

= 1498.5 + 672.9= 2171.4

 

right solution is 

first we have to calculate PVAF

i.e. c * [(1-1/(1+r)^t]/r  + Face v/(1+r)t

     (c * 490.54) + 672.97

Answer should be

1163 

bhai ge Assignmnet ha full ap k pass

Can anybody please upload assignment. I am not able to solve it properly. And time is short

bro discuss here problem

solution will be find out through discussion

 

but how to find current value
What will be the current value of Stemmer’ stock if investor’s required rate of return is 10%? Provide appropriate detailed working.

PV of Smart Bonds = 1163

PV of Style Bonds = 918

Kindly tell me my answer is correct or not

smart = 1165.4

Style = 919.4

PV @ GROWTH RATE 15% for 5 years

is 9.98

and at g=5%

the PV=-24.837

negative ans

theek hai???

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