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SEMESTER Fall 2015
Corporate Finance

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.
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%.
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
Please read the following instructions carefully before preparing the assignment solution:
· Do prepare the solution after completely reading and understanding the questions.
Put your genuine efforts in order to understand the concepts and calculations thoroughly.
Provide complete calculations for all parts of the questions.
Only in the case of Assignment, 24 hours extra / grace period after the due date is usually
available to overcome uploading difficulties which may be faced by the students on last date. This
extra time should only be used to meet the emergencies and above mentioned due dates should
always be treated as final to avoid any inconvenience.
Other Important Instructions:
Read the following instructions carefully before attempting the assignment solution.
· Make sure to upload the solution file before the due date on VULMS.
· Any submission made via email after the due date will not be accepted.
Rules for Marking:
Please note that your assignment will not be graded or graded as Zero (0) if:
· If plagiarism found more than 20%, your assignment will be marked zero because university
is following Zero Tolerance Policy for plagiarism. Plagiarism reports will be attached with your
assignment solution files to give you exact results of copied data.
· It has been submitted after due date
· The file you uploaded does not open or is corrupt
· It is cheated or copied from other students, internet, books, journals etc.
· Your answers must be concise and to the point. Avoid providing unnecessary lengthy
Formatting guidelines:
· Use the font style “Times New Roman or Arial” and font size “12”.
· It is advised to compose your document preferably in MS-Word.
· Use black and blue font colors only.
Note related to load shedding: Please be proactive
Dear students!
As you know that semester activities have started and load shedding problem is also prevailing in
our country now a days. Keeping in view the fact, It is requested to all of you to manage to post
your activities as early as possible and don’t wait for the due date. For your convenience activity
schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be
entertained after due date of assignments or GDBs.

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Replies to This Discussion

thnx for helping WAFA

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

Plz share handouts of FIN 722.


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