[This question paper contains 4 printed pages.) Your Roll No. Sr. No. of Question Paper : 9518 Unique Paper Code : 61011602 Name of the Paper : International Finance Name of the Course : Bachelor of Business Administration BBA (FIA), 2018 (CBCS) Semester VI Duration 3 Hours ‘Maximum Marks 5 . did 1, Write your Roll No. on the top immediately on receipt of this question paper. 2.’ Attempt any 5 questions. 1. @_ Explain Purchasing Power Parity with the help of an : example. (5) Gi) Between 2000 and 2015 the YEN/USD exchange rate moved from YEN 226.63/USD to YEN 93.96/USD. During this same 15 year period, the consumer price index (CPI) in Japan rose from 91.0 to 119.2 and BEG,9518 Gi) 3 6 @ (i) the USA CPI rose from 82.4 to 152.4 if the Purchasing Power Parity had held over this period, what would the YEN/USD exchange rate have been in 2015? a0) Forward rate is an unbiased predictor of future dated spot rate. Comment, @ Suppose on Feb 12 a firm booked a 4 month forward contract to sell USD 100,000 at a rate of INR 66.50. ‘The delivery date is June 14. On April 12, the firm requested the bank for delivery on May 14. The rates on April 12 are as follows : USD/INR Spot: 65.40/42 1 month swap: 20/25 2 month swap: 30/38 Calculate the cash flow for the exporter. (8) What do you mean by direct quotation and indirect quotation? Explain with suitable examples, @) A bank gives you the following quotes You can buy a euro for 14 Mexican pesos. The bank will pay you 13 pesos for a euro. You can buy a U.S. dollar for 0.9 euros. 9518 4. @ i) Gi) 5 @ The bank will pay you 0.8 euros for a U.S. dollar, You can buy a U.S. dollar for 10 pesos. The bank will pay you 9 pesos for a U.S. dollar, You have $1,000. Can you use triangular arbitrage to generate a profit? If so, explain the order of the transactions that you would execute and the profit that you would eam. If you cannot earn a profit from triangular arbitrage, explain why. (12) Explain H.O. Model of international trade. 6) An Indian Firm finds that by investing in a project in East Africa, its borrowing capacity will go up by Rs. 50 million, If the firm’s borrowing rate in India is 15% and risk free rate is 6%, what is the net benefit owing to the increased borrowing capacity? Assume Tax rate applicable in India is 30% and the life of the project is 5 years. © What do you mean by Economic Exposure? Explain the factors affecting the investment any foreign country, 6) “India Oil needs to borrow USD 2 million or equivalent for 90 days to settle its crude payment, it faces the following rates P.T.O.9518 4 USD/INR spot: 64.95/65,00 90 day swap point: 15/20 USD interest rates: 5.00%/5.25% Their bankers advise it to take a JPY loan instead. They offer a JPY loan at 2.5% p.a, Indian oil checks the USD/JPY exchange rates and finds the following quotes : USD/JPY spot: 123.50/124.00 90 day swap: 20/10 In which currency should IOC borrow? (12) (i) Explain Leading and Lagging tool for cash management, @) Briefly explain the following (any five) : (5*3=15) (i) International portfolio diversification Gi) Euro bond (ii) Bretton Woods System (iv) Forward-forward in (v) Home Bias (vi) Hedge Ratio (200)[This question paper contains 5 printed pages.] Your Roll No, Sr. No. of Question Paper : 9519 Unique Paper Code : 61011603 Name of the Paper : Corporate Restructuring Name of the Course : Bachelor of Business Administration (BBA) (FIA), 2018 (CBCS) Semester : Vi Duration : 3 Hours ‘Maximum Marks 15 Instructions for Candidates 1 Write your Roll No. on the top immediately on receipt of thf question paver, Attempt 5 questions in all, (a) Explain the various strategies adopted by companies positioned in different blocks of BCG matric model. (7.5) (b) What is joint venture? Discuss the objectives, issues and challenges of Joint Venture with the help of an example. (7.5) (a) Explain the tax aspects of a demerger. (7.5) P,T.O.9519 2 sues and challenges of cross border (7.5) (b) What’ ‘are the merger and acquisition? 3. The following table summarizes the financial characteristics * of two firms that are considering combining in a merger (Rupees amount in millions) ‘Acquiring Firm | Target Firm Big Co) (Tiny Co.) Beta 08 09 3% Pre-tax cost of debt 3% Tax rate 35% 35% ‘Debt to capital rai 10% 10 capital ratio 10% a Pre-tax return on capital = investment rate 40% 30% Length of growth rate Years 3 Years Revenues (Rs) “357,800 10,345 66 ‘Operating income (EBIT) (Rs) 11,527 25 Total Capital Invested (Rs) [37,889 = Risk free rate is 4.25% and risk premium of 4%. The combined firm will have some economies of scale. Allowing it to increase it’s current after tax operating margin slightly. ‘The annual Rupees savings will be approximately Rs. 200 million. The combines firm will also be able to na a slightly higher tax return on capital about 1% increase for 3 the next five years. While independent firms reinvestment tate will not be change. Calculate the value of synergy for the above acquisition. (is) 4. (@) A firm is generating Rs, 2 million profits and is expected to grow at 15 @ for the next 5 years. Total capital employed is Rs. 0.6 million. The cost of capital is 10%, tax rate is 30%. Capital expenditure increases at 10% p.a, Determine EVA value of the firm. (7.5) (b) What are abuses of dominant position under Competition Act 2002? How Commission deals with such situattons? Explain the process in detail. (7.5) 5. (@) Alpha Ltd. wants to acquire Beta Ltd. and the cash flows of Alpha Ltd. and the merged entity are given below : (RSTn Lakhs) Year ta ey 4 3 Alpha Ltd 180" | 220 |~300 | 340] 350 Merged Entity [~400_| 450 |~s25-] 390] a0 ‘Earnings would have witnessed 5% constant growth rate without merger and 6% with merger on account of economies of operations after 5 years in each case. The cost of capital is 15%. P.T.O.| 9519 4 ‘The number of shares outstanding in both the companies before the merger is the same and the companies agree to an exchange ratio of 0.5 shares of Alpha Ltd. for each share of Beta Lid. PV factor at 15% for years 1-5 are 0.870, 0.756, 0.658, 0,572, 0.497 respectively, You are required to: @ Compute the value of Alpha Ltd. before and after merger. Gi) Value of acquisition and (iii) Gain to shareholders of Alpha Ltd. (10) (b) Write short notes on any two : (@ Poison pill Gi) Mezzanine debt ii) Stump sale (iv) Section 68 of Companies Act 2013 (2.5*2=5) (a) Shark Limited and Tuna Limited financial data are given as below : 5 Shark Limited [Tuna Limited Earnings per share Rs. 5 Rs. 5 ‘Market price per share Rs. 70 Rs. 80 ‘No. of share 12,00,000 10,00,000 Shark Limited wants to acquire Tuna Limited and is keen on reporting Rs.6 earnings per share after acquiring Tuna Limited. ‘There is an expected synergy gain of 5%. Calculate the exchange ratio that may result in post-merger earnings er share of Rs. 6 for Shark Limited. ©) (©) What is the difference between merger and acquisitions? Discuss the different methods of payment and financing options in mergers and acquisitions, (3) (©) What are the ways to buy back the shares? Can buy back be done from debt sources? ©) (200)oO [This question paper contains 6 printed pages.] Your Roll No... Sr, No. of Question Paper ; 9520 Unique Paper Code: 61017908 Name of the Paper + Strategic Corporate Finance Name of the Course: Bachelor of Business Administration (BBA) (FIA), 2018 CBCS Semester : VI Duration : 3 Hours Maximum Marks 15 Instructions for Candidates 1 Write your Roll No. on the top immediately on receipt of this question paper. Attempt any 5 questions. (a) Stockholders can transfer wealth from bondholders through a variety of actions. How would the following actions by stockholders transfer wealth from bondholders? (An increase in dividends (ii) A leveraged buyout (ii) Acquiring a risky business How would bondholders protect themselves against these actions? (9) P.T.O.9520 2 | (&) There are some corporate strategists who have Suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail? 6 2. (a) ABC Ltd., manufacturer of consumer plasti¢ protiucts, is evaluating its capital structure. The balance sheet of the company is as follows (in millions) : Assets Liabilities | Fixed assets ['$4,000_[ Debt $2,500 Current assets | $1,000 | Equity $2,500 In addition, you are provided the following information: | + The debt is in the form of long-term bonds, with a coupon rate of 10%. The bonds are currently rated | AA and are selling at a yield of 12% (the market value of the bonds is 80% of the face value), The firm currently has $0 million shares outstanding, and the current market price is $80 per share. The firm pays a dividend of $4 per share and has a price/ earnings ratio of 10. The stock currently has a beta of 1.2; the risk free rate is 8% and risk premium 5.5%, + The tax rate for this firm is 40%. (What is the debt/cquity ratio for this firm in book value terms and in market value terms? Gi) What is the debt/(debt + equity) ratio for this 0% firm in book value terms and in market value [teow aaiaant “yi What is the firm's current WACC? ®) (b) What do you mean by excess liquidity? Suggest the ‘measures to manage the excess liquidity of a firm. © 3. (a) Following are information of D.D. Ltd. 2015 [2016] 2017 oo lee 170.00 | 120.00 [200.00 : coun receivable 280.00 | 160.00 | 320.00 et 400.00 | 220.00 | 430.00 . ‘Other Current Assets 450,00 | 300.00 | 470.00 » ‘Total Current Assets 1300.00 | 800.00 _| 1420.00 FA. '3800.00_| 3700.00 [3600.00 [otal Assets 5100.00 | 4500.00 | 5020.00 Pe [decouns paste 140.00 [30.00 | 110.00 [Notes payable 210,00 | 70.00 | 200.00 betosop? oe °*°T Other Current Liabilities | 300.00 | 90. = ©° otal Current Liabilities | 650.00 __| 190.00 _| $70.00 2) joel ofong term debt 2850.00 | 2550.00 | 2300.00 1) [Total Liabilities 3500.00 | 2740.00__| 2870.00 i ‘Common shares 1490.00_| 1500.00 _| 1800.00 Retained eaing 200.00 | 260.00 | 350.00 “Total equity 1600.00 | 1760.00_| 2150.00 Total Liabilities & Equity | 5100.00 | 4500.00 | $020.00 P.T.O.9520 4 Year 2015 2016 | 2017 Revenue 1000.00 | 800.00 | 1100.00 Cost of Goods Soid 500.00 | 450.00 | 650.00 Gross Profit 500.00 _| 350.00 | 450.00 [ Operating Exp 25.00 [15.00 | 30.00 [Depreciation 4040 | 40 EBIT 435.00 _| 295.00 | 380.00 Interest payable 1425 [1275 [115 EBT 292.50_| 167.50 | 265,00 Taxes 87.75 [50.25 | 79.5 ‘Net Incomie 204.75 | 117.25 | 185.50 Dividends 7 104.75 [57.25 [9515 share o/s (millions) 100.00 _| 100.00 | 100.00 Market Price ($/share) | 50.00 44,00_| 55.00 ‘You are required to calculate original Altman's Z score of bankruptcy of all 3 years with Interpretation. (9) (b) Explain the factors determining of dividend policy of a firm. Which one increases the value of a firm- dividend distribution or retained earnings? Justify the answer. (6) (a) You are a venture capitalist and have been approached by XYZ Electronics, a private firm. The firm has no debt outstanding and does not have earnings now but is expected to be earning $15 million in four years, when you also expect it to go public. The average price- earnings ratio of other firms in this business is 50. Gi If your target rate of return is 35 percent, estimate the discounted terminal value of Cirrus Electronics. fins VIF you are contributing $75 million of venture capital to Cirrus Electronics, at a minimum what percentage of the firm value would you demand im return (ownership)? © .¢ss in the 45 percent tax bracket is considering “borrowing money at 10 percent. @ What is the after-tax interest rate on the debt? at is the after-tax interest rate if only half of s interest expense is allowed as a tax a? Gi) Would your answer change if the firm is losing ‘money now and does not expect to have taxable ~ jmcome for three years? (6) A firm that has existing assets in which it has capital invested of $100 million. Assume these additional facts about the firm. (a) The after-tax operating income on assets in place is $15 million. This return on capital of 15% is expected P.T.O.9520 6 * to be sustained in the future and the company has a cost of capital of 10%. (b) At the beginning of each of the next 5 years, the firm is expected to make investments of $10 million cach. ‘These investments are also expected to earn 15% as a return on capital and the cost of capital is expected to romain 10%. (c) All assets and investments are expected to have infinite lives and the assets in place and the investments made in the first five years will make 15% a year in perpetuity, with no growth. You are required to calculate: @ EVA Gi) Value of the firm by using an economic value added approach (as) Explain any five of the following : (@) Yieldco (b) Green Bond (©) Management Buy-in (@) Quality Costing (@) Life Cycle Costing (f) Strategy v/s Planning (1S) :[This question paper contains 8 printed pages.] Your Roll No... Sr. No. of Question Paper : 9521 Unique Paper Code 61017910 Name of the Paper : Management of Financial Institutions Name of the Course : Bachelor of Business Administration (BBA) (FIA), 2018 CBCS Semester ss Ma Duration : 3 Hours Maximum Marks 2 aa instructions for Candidates 1, Write your Roll No. on the top immediately on receipt,of this question paper. 2, Attempt 5 questions in all. 3. All questions carry Equal marks. (15 marks) 1, (a) Calculate capital adequacy ratio as per latest RBI norms. Separately Tier I, Tier II and overall. Does the bank meet Tier I, Tier II and overall capital adequacy as per latest RBI guidelines if not which kind of capital need raise or how much, o P.T.O.nq bulainege enetne: 3 9521 i ot “2.6 (a) The asset classification of SBI as on 313.2014 is as Risk weights: Ws: Tie “Amount | ARR 29. pein ARAL eres cae ; 7 To% ‘Capital, reserves (74° [ Cash in hand | Standard assets: and surplus Balance with RBI [90 Om" | Loan to agriculture/MSME sector 1500. | Deposits i Balan wit ben [100 [200 i Loan to real estate sector 2500 ‘Borrowings si it 7 100% th 50 ‘Other liabilities | 53 Held to maturity Other 3500 er ivesent in ‘Sub —"standard assets 850 corporate securities is < 150 - 360___| 100% Bssets 3 years 1800 Jong tem a be Other assets 50 | 100% Loss assets 2260 S82 — has po ‘Amount | Counterparties | (CCF) a7] Private sector | 100% “Acceptances 39 Private sector | 100% Forward exchange [520 | Privatesector | 2% contracts with residual maturity ease | Porward exchange | 130 contracts with ‘residual maturity of 1 to 2 years or tas Private sector | 5% 100% (b) Explain the three major categories of NPA as per RBI 6 latest guideline with their provisioning. (6) What should be the amount of the provision as per latest RBI norms for the bank if the unsecured portion is assumed to be 40%? mM (©) What. is the nature of an off-balance-sheet activity? How dos evo Hgm does an FI benefit from such activities? Identify various risks that these activities generate for an Fls-and explain how these risks can create varying degrees of financial stress for the FI at a later time, (2+2+4=8) (@) SBI offers one-year loan with 9 percent stated or base rate, charges a 0.25 percent loan origination fee, impose 2 10 percent compensating balance requirement and must ay 6 percent reserve requirement to the RBI. The loan typically is repaid at maturity. P.T.O.9521 4 @ If the risk premium for a given customer is 2.5 percent, what is the simple promised interest return on the loan? (i) What is the contractually promised gross return on the loan per rupee lent? (ii) Which of the fee item has the greatest impact on the gross return? a © -(b) Consumer Bank has $20 million in cash and a $180 million loan portfolio. The assets are funded with demand deposits of $18 million, 2 $162 million CD, and $20 million in equity. The loan portfolio has a maturity of ‘two years, earns interest at an annual rate of 7 percent, and is amortized monthly. The bank pays 7 percent annual interest on the CD, but the interest will not be paid until the CD matures at the end of two vor (i) What is the maturity gap for Consumer Bank? (i) Is Consumer Bank immunized, or protected, against changes in interest rates? Why or why not? (iii) Does Consumer. Bank face interest rate risk? That is, if market interest rates increase or decrease 1 percent, what happens to the value of the equity? 5 (iv) How can a decrease in interest rates create interest rate risk? @) (a) A bank has the following balance sheet : ‘Aapount_ [Avg Rate | iahlievequtier [ Amomt ules | Amount [Avg Rate 50000 [7.75 Rate senstive | 375000 [38 [738000 [8.75 [Fixed rte an5000~1750 265000 Nonpaying [390000 sro Toa Ts7a000 Suppose interest rates rise such that the average yield on rate-sensitive assets increases by 45 basis points and the average yield on rate-sensitive liabilities increases by 35-basis points. e tei ks Oe ee the bank's CGAP and gap ratio, >osattanill@iAssuming the bank does not change the Hi Composition of its balance sheet, calculate the resulting change in the bank’s interest income, interest expense, and net interest income. Epis ji Sex tecoGiil) Explain how the CGAP and spread effects 10 ott influenced this increase in net interest income, a (b) If the rate on one-year T-bills currently is 6 percent, what is the repayment probability for cach of the P.T.0.9521 6 following two securities? Assume that if the loan is defaulted, no payments are cxpected. What is the market-determined risk premium for the corresponding probability of default for each security? (@ One-year AA-rated bond yielding 9.5 percent. i (ii) One-year BB-rated bond yielding 13.5 percent. @) (©) Why are most retail borrowers charged the same rate f of interest, implying the same risk premium or class? ‘What is credit rationing? How is it used to control credit risks with respect to retail and wholesale loans? (4) (a) A DI (Depository institution), has assets of $10 million consisting of $1 million in cash and $9 milfion in loans. ‘The DI has core deposits of $6 million, subordinated debt of $2 million, and equity of $2 million. Increases in interest rates are expected to cause a net drain of $2 million in core deposits over the year. (i The average cost of deposits is 6 percent, and the average yield on loans is 8 percent. The DI decides to reduce its loan portfolio to offset this expected decline in deposits. What will be the effect on net interest income and the size of the DI after the implementation of this strategy? Hoos) a (i) If the interest cost of issuing new short-term debt is expected to be 7.5 percent, what would be the effect on net interest income of offsetting the expected deposit drain with an increase in interest-bearing liabilities? il) What will be the size of the DI after the drain if the DI uses this strategy? _ iv) What dynamic aspects of DI management would further support a strategy of replacing the deposit ~ drain with interest-bearing liabilities. (10) ‘bank has made a loan charging a base lending “rate of 105 ‘Percent. It expects a probability of default oars r If the loan is defaulted, the bank expects + 50 percent of its money through the sale ‘of its collateral. What is the expected return on this oan? () notes on any three :~ (3x3) Financial Resolution and Deposit Insurance Bill (FRDD) Bill 2017. (i) CAMELS risk system. P.T.O.° 9521 8 Giii) Assets liability Management in Indian Banking system. (iv) Deposit insurance WS Moral hazard problem. | (v) Core banking system, { octte (vi) Letter of Understanding (LOU) in banking. (200)[This question paper contains 4 printed pages.] Your Roll Novssesessssee Sr. No. of Question Paper : 9522 Unique Paper Code : 61017912 Name of the Paper Forensic Accounting and Fraud Investigation Name of the Course; Bachelor of Business Administration (BBA) (FIA), 2018 CBCS Semester : VI Duration 3 Hours ‘Maximum Marks : 78 i ions _ fe dates Write your Roll No. on the top immediately on receipt of this question paper. Attempt all questions. Explain the concept of fraud triangle. with the help of suitable case studies, (is) Explain the common symptoms of financial reporting fraud with the help of suitable case studies. (sy Write down a short note on the following with the help of suitable case studies. P.T.O.ion. (b) Security Fraud. (c) The audit committee of the Group has contacted Kennel & Co to discuss an incident that took place on 1 June 2013. On that date, there was a burglary at the Group's warehouse where inventory is stored prior to dispatch to customers. CCTV filmed the thieves loading a lorry belonging to the Group with boxes containing finished goods. The last inventory count took place on 30 April 2013. The Group has insurance cover in place and Kennel & Co’s forensic accounting department has been asked to provide a forensic accounting service to determine the amount to be claimed in respect of the burglary. The insurance covers the cost of assets lost as a result of thefts. It is thought that the amount of the claim will be immaterial to the Group’s financial statements, and there is no ethical threat in Kennel & Co’s forensic accounting department providing the forensic accounting service Required: In respect of the theft and the associated insurance claim : (@) Identify and explain the matters to be considered, and the steps to be taken in planning the forensic accounting service; and 9522 3 .. Gi) Recommend the procedures to be performed in determining the amount of the claim. (53615) Write a short note on the following with the help of suitable case studies. (a) Conversion Investigation Method. (b) Inquiry Investigation Method. (c) You are a manager in Beck & Co, an audit firm. Your firm performs the audit of Jarvis Co, a company which installs windows. Jarvis Co uses sales representatives to make direct sales to customers. The sales representatives earn a small salary, and also carn a sales commission of 20% of the sales they generate. Jarvis Co's sales manager has discovered that one of the sales representatives has been operating a fraud, in which he was submitting false claims for sales commission based on non-existent sales. The sales representative started to work at Jarvis Co in January 2012. The forensic investigation department of your firm has been engaged to quantify the amount of the fraud. Required: Recommend the procedures that should be used in the forensic investigation to quantify the amount of the fraud. (%3+15) BLO:9522 4 5. Explain the following Predictive Analytics Methodologies with the help of suitable examples. (a) Logistic Regression and interpret the following table which provide the result of the bankruptcy prediction study using logistic regression, + (10) Varabes a te Euan La fous be Lae fie a a asi foe fh fosr lao no fare ft fons frases jor fss20 by fost fons los hom hb low [ae ois him ae Wat) ened one EG I TSR The ution fr the dela flo Lo gAMeS202°%. SOK ALINE HBR SSE, Hose X= Wang Cain Tol A Xe Chick ato XppNetineme by Tot Asset Xerces inte Coveage ato ‘Xi-Cosh Reno vest Fd Asses Pula Ratio (b) Time Series Analysis. (6) (200)