CASE-1

Vivek is an employee of Mighty Bank in Corporate Banking sector, ABC Ship Breaking Company is a client of this bank but this company is in total debt and in losses. The mighty bank has approached fe companies for ac!uiring this ABC company and turning it over in debt and management level changes. There ere " companies bidding for this #$$$ cr credit. #. BBC Ship Breaking Company % &ndian, ell established and has e'tensive e'perience in shipping sector. Already have done this for ( companies. The bid is #$$) recovery payable in * yrs at + )pa (. Credit... Company % ,arge -ublic Sector but no e'perience in such cases. The bid is .$) recovery payable in + yrs at . )pa ". Sonyo Shipping % /ldest shipping firm in 0apan % trying to ac!uire companies in &ndia or China as these are lo cost models. The bid is +1) recovery payable in 1 yrs at #" )pa Vivek has to go through these bids and recommend a particular company. BBC has already 1 yrs of relationship ith the bank. 2ahar the president of the bank is suggesting to Vivek that Credit company ants to establish relationship if their bid is cleared. 3rom Vivek4s position u need to recommend a choice. Solution &n real life banks use Compound &nterest for loan pay back calculations. 5o ever, for simplicity sake, here e can use Simple &nterest concept to calculate the bank4s 6eturn /n &nvestment7 Assuming loan amount 8 6s #$$

1- BBC Shipbreaking Company: SI = 100*7*8/100 = 56, Rs 156 is 100% recoverable by 7 yrs. 2- Credit Co !a"y# SI = 100*8*$/100 = 72, %s 172 is $0% recoverable &= Rs 154.8' by 8 yrs. (- Sonyo Shipping: SI = 100*5*1(/100 = 65, %s 165 is 85% recoverable &= Rs 140.25' by 5 yrs. )o*, lets see +o* ,c+ %-I ba". /ets, at t+e e"d o0 5 yrs 0or eac+ o0 t+ese

1. 11C S+i! 1rea.i"/ Co !a"y - %s &156/7' *5 = %s 111.2 2. Credit Co !a"y - %s &152.8/8'*5 = %s $6.75 (. So"yo S+i!!i"/ - %s 120.25 So, i0 t+e ba". /ives %s 100 to eac+ o0 t+ese, So"yo S+i!!i"/ *o,ld /ive t+e best ret,r" by 5 yrs. 3e"ce, y vote /oes 0or So"yo