Input variables Cost of project, Interest rate of debt, depreciation rate, tax rate, salvage value, project variable

ariable cost, fix

Assumptions Project funded with both debt and equity

Lets assume term of 5 years and Interest of 11.5%
In beginning trial value of debt capacity to be 2.

Output Required Debt Equity ratio

Model Equation=Cost of financing*(Debt/Debt+Equity)

Tools to be used Goal seek

Steps
Assume a trial value of debt Capacity
Calculate EMI of the debt repayment.
Compute Debt Service Coverage Ratio(DSCR), then We can find out DSCR by dividing Operating cash flo
Compute 5 years average DSCR and compare the same with the accepted rate mentioned by your bank
Use goal seek from What-if analysis to obtain optimal debt equity ratio
Set cell: Average DSCR to a value of your choice

Average DSCR should be equal to the accepted DSCR referred by the banker

Interpretation of the output

Goal seek provides the solution by altering trial value of debt by suggesting the optimum debt to equity ratio.
e, project variable cost, fixed cost

dividing Operating cash flow by Intsallment This can be done for all the years of CF's
te mentioned by your banker
Data set

Variable 1 Par value

Variable 2 Yield to maturity
Variable 3 Coupon rate
Variable 4 Probability to default
variable 5 Expected future cash flows
variable 6 Term of bond 5 years( which is given in the question)

Assumptions
coupon rate assumption- 10% annualy
Since the bond is at par, Yield to maturity = coupon rate

Output
Rating and the Number of times it defaults

Equation
Present value of cashflows

Interpretation
Based on how many times the default occurs, the rating of bond will also differ.
Tools to be used
Data table to calculate the cash flows
changing variable is YTM( Yield to maturity)
The treasury department will need the following parameters in Pension fund part
Steps
The prices of the bonds are calculated using the Price function
Then total duration of the bond is done by calculating time weighted cash flows
Then it need to calculate the Present Value of the future liability pension fund by discounting the future cash outflo
Then choose the bonds and allocate weights using the following optimization algorithm and solver
The duration of liability should be matched to the duration of assets for hedging purpose
weighted average of duration of Assets = weighted average duration of liability

Tools to be used- Solver

The solver table will consider the following functions
The objective function is set to equalise the bond duration to the asset duration
The variables to be changed are the weights and the condition is that the summation of weights is equal to 1
The scenario can be checked by using the Data table function and by ensuring that the % change in the asset and lia

If the percentage change is large, then bond portfolio requires rebalancing.

 unting the future cash outflows
m and solver

f weights is equal to 1
% change in the asset and liability that is very less
Data Set
Bisco stock trading price
Strike price
volatality
Time
Returns
Sample size
Risk free rate to calculate the present value of expected payoff

Assumptions
Building confidence interval
Returns follow normal distribution
Risk free ra 5%
Asset prices will follow

Interpretation
Expected price is calculated
Tools used
Standard deSTD.F
Z function Normsinv(Rand())

Model equation
max(3*Bisco stock two years from now-40,0)
Expected pAverage payoff
PV of pay oExpected payoff * exp(-rf)*t(compounding)
SD of payofSD of payoff range
Standard erSD/sqrt of sample size
confidencePV of payoff-1.96*Standard error
PV of payoff+1.96*Standard error
Question 5
Data Set- The input variables taken are:
1. Loan Amount
2. Repayment Schedule
3. Rate at which money borrowed
4. Cost of deposit
5. Tenure
6. Prime Lending Rate
7. Operating expenditure
8. Margin

Assumptions: The given below are the assumptions taken for the model:
1. No tax rate
2. Base MCLR

Output:
Sum of PV pattern must be equal to the loan amount and it will be bench mark to the IRR bank w

Model Equations Used:

1.lending rate=Sum(Cost of funds, Operating expenditure,margin on a product, credit risk premiu

2. tenure=prime lending rate/base MCLR

Tools & Techniques:

Calculation of the Present value of the CF

Interpretation
IRR should be equal to the lending rate
nch mark to the IRR bank will Charge

a product, credit risk premium)

Retirement portfolio optimization financial model

Data set variable:

§  Earnings, Spending
§  Current Savings
§  Total Wealth
§  Current Age
§  Asset owned by your friend
§  Expected future earnings
Assumptions:

§     Total savings have to be invested in fixed deposit and mutual funds.

§     Earning after fixing inflation rate

§     Past investment to be default free

§     Return from risky asset

Output:

§  Ratio of investment (Proportion to be invested in MF and FD)

Model equation:

§  MF=Wealth*Risky asset

§  FD=Wealth*Risk free asset

Tools and techniques used:

§  WHAT if analysis(Data Table)

§  COUNTIF()

§  RAND()

Interpretation of the output:

§  If investor is ready to take more risk he can invest more in risky asset and can incre

§  Hence, depending on concept of glide path investor can go ahead with his investm
posit and mutual funds.

e in risky asset and can increase return.

an go ahead with his investments.