Security Valuation Additional Q M19 To J21

Chapter - 6
SECURITY VALUATION
YIELD TO MATURITY (YTM) AND HOLDING PERIOD RETURN
Question No. 8E [RTP-Nov-2019-New] [MTP-May-2019-New-7M]
A hypothetical company ABC Ltd. issued a 10% Debenture (Face Value of ₹1000) of the duration of 10 years,
currently trading at ₹850 per debenture. The bond is convertible into 50 equity shares being quoted at ₹17 per
share.
If yield on equivalent comparable bond is 11.80%, then calculate the spread of yield of the above bond from this
comparable bond.
Present values t1 t2 t3 t4 t5 t6 t7 t8 t9 t10
PVIF 0.11, t 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352
PVIF 0.13, t 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295
Solution:
// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Page 6.2 Additional Question-
BOND DURATION, BOND VOLATILITY & BOND CONVEXITY

Question No. 13.5 [MTP-Nov-2019-New-8M]
A Ltd. has issued convertible bonds, which carries a coupon rate of 14%. Each bond is convertible into 20 equity
shares of the company A Ltd. The prevailing interest rate for similar credit rating bond is 8%. The convertible
bond has 5 years maturity. It is redeemable at par at Rs. 100. The relevant present value table is as follows;
Present Value t1 t2 t3 t4 t5
PVIF0.14, t 0.877 0.769 0.675 0.592 0.519
PVIF0.08, t 0.926 0.857 0.794 0.735 0.681
You are required to estimate: (Calculations be made upto 3 decimal places)
(i) current market price of the bond, assuming it being equal to its fundamental value,
(ii) minimum market price of equity share at which bond holder should exercise conversion option; and
(iii) duration of the bond.
Ans: (i) Rs.124, (ii) 6.20, (iii) 4.028

Additional Question in Security Valuation Page 6.3
Solution:
Question No. 13.6 [Nov-2020-New-8M]

The following data are available for a bond:
Face value (to be redeemed at par on maturity)  10,000

Coupon Rate 8.5%
Years to Maturity 5 Years
Yield to maturity (YTM) 10%
You are required to calculate:
(i) Current Market Price of the Bond,
(ii) Macaulay’s Duration,
(iii) Volatility of the Bond,
(iv) Convexity of the Bond,
(iv) Expected market price, if there is a decrease in the YTM by 200 basis points
(a) By Macaulay’s Duration based estimate
(b) By intrinsic Value Method
Given:
Years 1 2 3 4 5
PVIF (10%, n) 0.909 0.826 0.751 0.683 0.621
PVIF (8%, n) 0.926 0.857 0.794 0.735 0.681

Solution:

VALUE OF EQUITY SHARE [CONSTANT DIV GROWTH, PE MULTIPLE APPROACH]

Question No. 20P [Nov-2020-New-8M]
AB Industries has Equity Capital of  12 Lakhs, total Debt of 8 Lakhs, and annual sales of  30 Lakhs. Two
mutually exclusive proposals are under consideration for the next year. The details of the proposals are as under
Particulars Proposal no. 1 Proposal no. 2
Target Assets to Sales Ratio 0.65 0.62
Target Net Profit Margin (%) 4 5
Target Debt Equity Ratio (DER) 2:3 4:1
Target Retention Ratio (of Earnings) (%) 75 -
Annual Dividend ( In Lakhs) - 0.30
New Equity Raised ( in Lakhs) - 1
You are required to calculate sustainable growth rate for both the proposals.

Solution:

DIFFERENT GROWTH STOCK PRICE

Question No. 21H [Nov-2020-New-8M]
An investor is considering to purchase the equity shares of LX Ltd., whose current market price (CMP) is 112. The
company is proposing a dividend of  4 for the next year. LX Ltd. is expected to grow @ 20 per cent per annum
for the next four years. The growth will decline linearly to 16 per cent per annum after first four years. Thereafter,
it will stabilise at 16 per cent per annum infinitely. The investor requires a return of 20 per cent per annum.
You are required
(i) To calculate the intrinsic value of the share of LX Ltd.
(ii) Whether it is worth to purchase the share at this price
Period 1 2 3 4 5 6 7
PVIF (20% n) 0.833 0.694 0.579 0.482 0.402 0.335 0.279
Solution:

Question No. 21.4 [Nov-2019-Old-8M]

The current EPS of M/s VEE Ltd. Is ₹ 4. The company has shown an extraordinary growth of 40% in its earnings
in the last few years. This high growth rate is likely to continue for the next 5 years after which growth rate in
earnings will decline from 40% to 10% during the next 5 years and remain stable at 10% thereafter. The decline in
the growth rate during the five years transition period will be equal and linear. Currently, the company’s pay-out
ratio is 10%. It is likely to remain the same for the next five years and from the beginning of the sixth year till the
end of the 10th year, the pay-out will linearly increase and stabilizes at 50% at the end of the 10th year. The post-
tax cost of capital is 17% and the PV factors are given below:
Years 1 2 3 4 5 6 7 8 9 10
PVIF@17% 0.855 0.731 0.625 0.534 0.456 0.390 0.333 0.285 0.244 0.209
You are required to calculate the intrinsic value of the company’s stock based on expected dividend.
If the current market price of the stock is ₹ 125, suggest if it is advisable for the investor to invest in the company’s
stock or not.
Solution: Working Notes:

(i) Computation of Growth Rate in Earning and EPS:
Year 1 2 3 4 5 6 7 8 9 10
Growth in 40% 40% 40% 40% 40% 34% 28% 22% 16% 10%
Earning
EPS (₹) 5.60 7.84 10.98 15.37 21.51 28.82 36.89 45.00 52.20 57.42

(ii) Computation of Payout Ratio and Dividend:
Year 1 2 3 4 5 6 7 8 9 10
Payout 10% 10% 10% 10% 10% 18% 26% 34% 42% 50%
Ratio
Dividend 0.56 0.78 1.10 1.54 2.15 5.19 9.59 15.30 21.92 28.71
(₹)
(iii) Calculation of PV of Dividend:
Year Dividend (₹) PVF PV of Dividend (₹)
1 0.56 0.855 0.48
2 0.78 0.731 0.57
3 1.10 0.625 0.69
4 1.54 0.534 0.82
5 2.15 0.456 0.98
6 5.19 0.390 2.02
7 9.59 0.333 3.19
8 15.30 0.285 4.36
9 21.92 0.244 5.35
10 28.71 0.209 6.00
24.46
28.71 (1.10)
TV = 0.17− 0.10
× 0.209
= ₹ 94.29
Intrinsic Value = ₹ 24.46 + ₹ 94.29 = ₹ 118.75
Since the Intrinsic Value of Equity share is less than current market price, it is not advisable to
invest in the same.
Question No. 22D [RTP-Nov-2019-New] [MTP-May-2019-New-6M]

Mr. A is thinking of buying shares at 500 each having face value of 100. He is expecting a bonus at the ratio
of 1:5 during the fourth year. Annual expected dividend is 20% and the same rate is expected to be maintained on
the expanded capital base. He intends to sell the shares at the end of seventh year at an expected price of 900 each.
Incidental expenses for purchase and sale of shares are estimated to be 5% of the market price. He expects a
minimum return of 12% per annum.
Recommend whether Mr. A should buy the shares? If so, what maximum price should he pay for each share?
Assume no tax on dividend income and capital gain.
Solution:

EARNING BASED MODEL (GORDON’S MODEL, WALTER MODEL)

Question No. 25.5 [Nov-2020-Old-5M]
Summit Ltd:, an All Equity Company, has a PAT of  300 Crores and 15,00,000 Shares of 10 each outstanding at
the end of financial year. Its Cost of Capital is 13% and Rate of Return is 17%.
Ascertain the Value of the Company under Walter's Model, if payout ratio is - (a) 15%, (b) 30%, (c) 60%, and (d)
90%. Also draw out the inference from the values obtained under different cases.

Solution: Walter Model is as follows: -
R
D+ a (E−D)
Rc
Vc = Rc
Here,
Vc = Market value of the share
R a = Return on retained earnings
R c = Capitalization rate
E = Earnings per share
D = Dividend per share
(i) Value of the Company if pay-out ratio is 15% -
0.17
Market value of the share Vc 300+
0.13
(2000−300)
= 0.13
Or
0.17
Vc 300+
0.13
(1700)
= 0.13
Or
Vc = 19,408.26
Value of Summit Ltd. = Rs. 19,408.28 x 15,00,000 = Rs. 2911.2420 Crores
(ii) Value of the Company if pay-out ratio is 30% -
0.17
0.13
(2000−600)
= 0.13
Or
0.17
Vc 600+
0.13
(1400)
= 0.13
Or
Vc =  18,698.22
(iii) Value of the Company if pay-out ratio is 60% -
0.17
0.13
(2000−1200)
= 0.13
Or
0.17
Vc 1200+
0.13
(800)
=
0.13
Or
Vc =  17,278.10
(iv) Value of the Company if pay-out ratio is 90% -
0.17
0.13
(2000−1800)
=
0.13
Or
0.17
Vc 1800+
0.13
(200)
=
0.13
Or
Vc =  15,857.99
Inference: According to Walter’s Model, the value of the company is inversely related to
Dividend pay-out Ratio. An increase in Dividend Pay-out Ratio leads to decrease in value
of the share and value of the company, and vice-versa.

Question No. 25.6
The following information is supplied to you, about a company:
Earnings of the company ₹ 15,00,000

Dividend Paid  5,00,000
Number of issued shares 1,00,000
Price earnings ratio 10
Rate of return on investment (%) 15
(i) Determine the theoretical market price of the share.
(ii) Are you satisfied with the current dividend policy of the Firm? If not, what should be the optimal dividend
payment ratio in this case?
[CMA-MTP-June-2020-8M]
Solution:
(i)
(ii) The Company’s D/P ratio is not optimal. At 33.33 per cent D/P ratio, the price per share is
₹200. The zero per cent D/P ratio would be optimum, as at this ratio the value of the share
would be maximum as shown below:
Working Notes:
(a) Ke is the reciprocal of P/E ratio = 1/0.10 = 10 per cent.
(b) EPS = ₹15,00,000/1,00,000 = ₹15.
(c) DPS = ₹5,00,000/1,00,000 = ₹5.
INVESTMENT DECISION AND EFFECT ON SHARE PRICE

Question No. 26D
DJ Company has a Capital Structure of 20% debt and 80% equity. The company is considering various
investment proposals costing less than ₹ 60 Lakhs. The company does not want to disturb its Present Capital
Structure. The cost of raising the debt and equity are as follows:
Project Cost Cost of debt Cost of equity
Upto ₹10 Lakhs 9% 13%
Above ₹10 lakhs and upto ₹ 40 Lakhs 10% 14%
Above ₹40 lakhs and upto ₹80 Lakhs 11% 15%
Above ₹80 lakhs and upto ₹2 Crores 12% 15.55%
Assume that the tax rate is 50%. Compute the cost of two Projects A and B, whose fund requirements are ₹ 16
Lakhs and ₹ 44 Lakhs respectively. If the project are expected to yield after tax return of 11%, determine under
what conditions it would be acceptable.
[CMA-RTP-DEC-2018]

Solution:
Question No. 26.3 [Nov-2017-8M]

Rahim Enterprises is a manufacturer and exporter of woolen garments to European countries. Their business is
expanding day by day and in the previous financial year the company has registered a 25% growth in export
business. The company is in the process of considering a new investment project. It is an all equity financed
company with 10,00,000 equity shares of face value of 50 per share. The current issue price of this share is 125
ex-divided. Annual earning are 25 per share and in the absence of new investments will remain constant in
perpetuity. All earnings are distributed at present. A new investment is available which will cost 1,75,00,000 in
one year’s time and will produce annual cash inflows thereafter of 50,00,000. Analyse the effect of the new
project on dividend payments and the share price.
Solution:

Question No. 26.4 [MTP-May-2019-New-8M]
ABC co. is considering a new sales strategy that will be valid for the next 4 years. They want to know the
Information relating to the year which has just ended, is available:
Income Statement ₹
Sales 20,000
Gross Margin (20%) 4,000
Administration, Selling & distribution expense (10%) 2,000
PBT 2,000
Tax (30%) 600
PAT 1,400
Balance Sheet Information

Fixed Assets 8,000
Current Assets 4,000
Equity 12,000
If it adopts the new strategy, sales will grow at the rate of 20% per year for three years. The gross margin ratio,
Assets turnover ratio, the Capital structure and the income tax rate will remain unchanged.
Depreciation would be at 10% of net fixed assets at the beginning of the year.
The company’s target rate of return is 15%.
Calculate the incremental value due to adoption of the strategy.
Solution:

Question No. 26.5

A Company requires ₹15 Lakhs for the installation of a new unit, which would yield an annual EBIT of ₹
2,50,000. The Company’s objective is to maximise EPS. It is considering the possibility of Issuing Equity Shares
plus raising a debt of ₹3,00,000, ₹6,00,000 and ₹9,00,000. The current Market Price per Share is ₹50 which is
expected to ₹40 per share if the market borrowings were to exceed ₹7,00,000. The cost of borrowing are indicated
as follows:
Level of Borrowing Upto ₹2,00,000 ₹2,00,000 to ₹6,00,000 ₹6,00,000 to ₹9,00,000

Cost of Borrowing 12% p.a. 15% p.a. 17% p.a.
Assuming a tax rate of 50%, work out the EPS and the scheme, which you would recommend to the Company.
[RTP-CMA-Dec-2018]
Solution:
Conclusion: EPS is maximum under scheme II and is hence preferable.
Leverage Effect: Use of Debt Funds and Financial Leverage will have a favourable effect
only if ROCE>Interest rate. ROCE is 16.67% and hence upto 15% interest rate, i.e. Scheme
II, use of debt will have favourable impact on EPS and ROE. However, when interest rate is
higher at 17%, financial leverage will have negative impact and hence EPS falls from ₹4.61
to ₹3.83.

Question No. 30A [Nov-2019 New-8 M]

Following information is available of M/s. TS Ltd.
(₹ in crores)
PBIT 5.00
Less: Interest on Debt (10%) 1.00
PBT 4.00
Less: Tax @25% 1.00
PAT 3.00
No. of outstanding shares of ₹10 each 40 lakhs
EPS (₹) 7.5
Market price of share (₹) 75
P/E Ratio 10 Times
TS Ltd. has an undistributed reserves of ₹ 8 crores. The company requires ₹3 crores for the purpose of expansion
which is expected to earn the same rate of return on capital employed as present. However, if a debt to capital
employed ratio is higher than 35%, then P/E ratio is expected to decline to 8 Times and rise in the cost of
additional debt to 14%. Given this data which of the following options the company would prefer, and why?
Option (i): If the required amount is raised through debt, and
Option (ii): If the required amount is raised through equity and the new shares will be issued
at a price of ₹25 each
Solution:

Question No. 31A [Nov-2019 Old-5-M]

XY Ltd., Cement manufacturing Company has hired you as a financial consultant of the company. The Cement
Industry has been very stable for some time and the cement companies SK Ltd. & AS Ltd. Are similar in size and
have similar product market mix characteristic. Use comparable method to value the equity if XY Ltd. In
performing analysis, use the following ratio:
(i) Market to book Value
(ii) Market to replacement cost
(iii) Market to sales
(iv) Market to Net Income
The following data are available for your analysis:
SK Ltd. AS Ltd. XY Ltd.
Market Value 450 400 ?
Book Value 400 300 250
Replacement Cost 600 550 500
Sales 550 450 500
Net Income 18 16 14

Solution:

Chapter-6 [Unit-III]
MONEY MARKET INSTRUMENTS
MONEY MARKET INSTRUMENTS

Question No. – 32A
Classify the following items under the appropriate category –Whether Money Market (MM) or capital Market
(CM):
(i) RBI and Government are participants
(ii) Regulated by SEBI
(iii) Tenor of instruments is usually less than a year
(iv) Treasury Bills
(v) Commercial papers
(vi) Zero Coupon Bonds
(vii) Equity Shares
(viii) Debentures
[CMA Exam]
Solution: (i) RBI and Government are participants Money Market (MM)
(ii) Regulated by SEBI Capital Market (CM)
(iii) Tenor of instruments is usually less than a year Money Market (MM)
(iv) Treasury Bills Money Market (MM)
(v) Commercial papers Money Market (MM)
(vi) Zero Coupon Bonds Capital Market (CM)
(vii) Equity Shares Capital Market (CM)
(viii) Debentures Capital Market (CM)
Question No. -32B [May-1998-4M]

X Co. Ltd. issued commercial paper as per following detail:
Date of issue 17th January, 1998
Date of maturity 17th April, 1998
No. of days 90
Interest rate 11.25% p.a.
What was the net amount received by the company on issue of commercial paper?
[CMA-Compendium] [CMA-PTP-June-2015-2M] [CMA-PTP-Dec-2014-New-2M]

Solution:
Question No. -32C [May-2006-6M] [MTP-Nov-2013-8M] [MTP-May-2014-8M]

From the following particulars, calculate the effective interest p.a. as well as the total cost of funds to ABC
Ltd., which is planning a CP issue:
Issue Price of CP 97,350
Face Value 1,00,000
Maturity period 3 months.
Issue Expenses:
Brokerage: 0.125% for 3 months.
Rating Charges: 0.5% p.a.
Stamp duty: 0.125% for 3 months
Solution:

Question No. -32D [May-2007-4M] [Nov-2012-5M]

A money market instrument with face value of 100 and discount yield of 6% will mature in 45 days. You
are required to calculate:
(i) Current price of the instrument.
(ii) Bond equivalent yield
(iii) Effective annual return.
Solution: Similar to Q-9D of Security Valuation (i.e., Bond Valuation)


Question No. - 32E [May-2005-2M] [MTP-Nov-2014-5M]
RBI sold a 91 day T-bill of face value of  100 at an yield of 6%. What was the issue price?
[CMA-June-2015-2M] [CMA-PTP-June-2014-3M]
Solution:
Question No. - 32F

Calculate the price at which a T- Bill maturing on 23rd March 2015 would be valued on July 13, 2014 at a yield of
6.8204%.
Solution:
Question No. - 32G [May-2014-5Marks]

AXY Ltd. is able to issue commercial paper of 50,00,000 every 4 months at a rate of 12.5% p.a. The cost of
placement of commercial paper issue is 2,500 per issue, AXY Ltd. is required to maintain line of credit 1,50,000
in bank balance. The applicable income tax rate for AXY Ltd. is 30%. What is the cost of funds (after taxes) to
AXY Ltd. for commercial paper issue? The maturity of commercial paper is four months.
Solution:


Question No. - 32H
The RBI offers 91 -day T-Bill to raise 15000 Crores. The following bids have been received.
Bidder Bid rate Amount ( Crores)
A 98.95 18,000
B 98.93 7,000
C 98.92 10,000
(1) What is the yield for each of the price at which the bid has been made?
(2) Who are the winning bidders if it was a yield-based auction, and how much of the security will be allocated to
each winning bidder?
[CMA-PTP-June-2015-5M] [CMA-PTP-Dec-2014-2M]
Solution:
Question No. – 32I

The RBI offers 91-day T-Bill to raise  5000 Crores. The following bids have been received.
Bidder Bid rate Amount ( Crores)
A 98.95 1,800
B 98.93 700
C 98.92 1000
D 98.90 1200
E 98.90 600
F 98.87 200
G 98.85 350
H 98.85 150
(1) Who are the winning bidders if it was a yield-based auction, and how much of the security will be allocated
to each winning bidder?
(2) If this auction is single price auction, that is the price to be paid by the winning bidders?

[CMA-PTP-June-2015-(3+2)=5M] [CMA-PTP-Dec-2014-(3+2)=5M]
Solution:

Question No - 32J [May-2017-4M] [Jan-2021-Old-5M]

Bank A enter into a Repo for 14 days with Bank B in 10% Government of India Bonds 2028 @5.65% for 8
Crores. Assuming that clean price (the price that does not have accrued interest) be 99.42 and initial margin be
2% and days of accrued interest be 262 days. You are required to determine
(i) Dirty price
(ii) Repayment at maturity (Consider 360 days in a year)
Solution:

 TEST YOUR KNOWLEDGE

’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’
Question No. -32.1
Suppose a company issues a Commercial Paper as per the following details:
Date of Issue 17th January 2012
Date of Maturity 17th April 2012
No. of Days 90 days
Face Value 1000
Issue price 985
Credit rating exp. 0.5% of the size of issue
IPA(Issuing and Paying agent) charges 0.35% of the size of issue
Stamp Duty 0.5% of the size of issue
What is the cost of the commercial paper? What is the yield to investor?
[CMA-PTP/MTP-June-2015] [CMA-RTP/PTP/MTP-Dec-2014-New-3M]

Solution:
Question No. -32.2 [May-2012-5 Marks]

LMN & Co. plan to issue Commercial Paper (CP) of  1,00,000 at a price of  98,000.
Maturity Period: 4 months
Expenses for issue of CP are:
(1) Brokerage 0.10%
(2) Rating Charge 0.60%
(3) Stamp Duty 0.15%
Find the effective interest rate per annum and the cost of fund.
Solution:

Question No. -32.3 [RTP-Nov-2011] [RTP-Nov-2012/May-2014/Nov-2014]

M Ltd. has to make a payment on 30th January, 2011 of  80 lakhs. It has surplus cash today, i.e. 31st October,
2010; and has decided to invest sufficient cash in a bank's Certificate of Deposit scheme offering an yield of 8%
p.a. on simple interest basis. What is the amount to be invested now?
Solution:
Question No. 32.4

A one day repo is entered into on Jan 10, 2013 on an 11.99% 2014 security, maturing on April 7, 2014. The face
value of the transaction is ate is 6%, what is the settlement amount on Jan 10, 2013? [Use 360 days convention]
[CMA-PTP-June-2014-3M]
Solution:
Question No. -32.5

You are required to compute the annualized cost of fund to XYZ Bank Ltd., Given; Face value of CD –  15
lakhs
Issue price –  14,45,000
Tenure –  5 months
Stamp duty –  0.25% of face value
[CMA-PTP-June-2014-5M]

Solution:
Question No. -32.6 [Nov-2014-5M]

Wonderland Limited has excess cash of 20 lakhs, which it wants to invest in short term marketable securities.
Expenses relating to investment will be  50,000.
The securities invested will have an annual yield of 9%.
The company seeks your advice
(i) as to the period of investment so as to earn a pre-tax income of 5%.
(ii) the minimum period for the company to break even its investment expenditure over time value of money.
Solution:

Question No. -32.7

Mr. A purchased Treasury Bill for 9950 maturing in 91 days for 10,000. Find what would be the annualized
investment rate for Mr. A. Government, on the other hand pays 5000 at maturity for 91 days Treasury Bill. If Mr.
A is desirous to earn an annualized discount rate of 3.5%, then what maximum amount he can pay for Treasury
Bill?
[CMA-PTP-Dec-2014-3M]
Solution:
Question No. -32.8

Calculate the current price of a money market instrument with face value of 100 and discount yield of 8% in 90
days. Take 1 year = 360 days.
[CMA-PTP-Dec-2014-3M]
Solution:
Question No. -32.9

A treasury bill is maturing on 28-June- 2014 is trading in the market on 3rd July 2013 at a price of 92.8918.
What is the discount rate inherent in this price?
[CMA-PTP-June-2015-2M] [CMA-PTP-Dec-2014-2M]

Solution:
Question No. - 32.10

Mr. Anil purchased a commercial paper of Zenith Inc. issued for 6 months in the market for  9,61,000. The
company issued the CP with a face value of 10,00,000. Determine the rate of return which Mr. Anil earns.
Solution:
Question No. -32.11

PNB Ltd. placed 52 Crores in overnight call with a foreign bank for a day in overnight call. The call ruled at
5.65% p.a. What is the amount it would receive from the foreign bank the next day?
[CMA-PTP-June-2015-2M] [CMA-MTP-Dec-2014-2M]
Solution:

Security Valuation Additional Q M19 To J21

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Security Valuation Additional Q M19 To J21

Uploaded by

Copyright:

Available Formats

Chapter - 6

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

BOND DURATION, BOND VOLATILITY & BOND CONVEXITY

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 13.6 [Nov-2020-New-8M]

Face value (to be redeemed at par on maturity)  10,000

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

VALUE OF EQUITY SHARE [CONSTANT DIV GROWTH, PE MULTIPLE APPROACH]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

DIFFERENT GROWTH STOCK PRICE

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 21.4 [Nov-2019-Old-8M]

Solution: Working Notes:

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 22D [RTP-Nov-2019-New] [MTP-May-2019-New-6M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

EARNING BASED MODEL (GORDON’S MODEL, WALTER MODEL)

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Earnings of the company ₹ 15,00,000

INVESTMENT DECISION AND EFFECT ON SHARE PRICE

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 26.3 [Nov-2017-8M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Balance Sheet Information

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 26.5

Level of Borrowing Upto ₹2,00,000 ₹2,00,000 to ₹6,00,000 ₹6,00,000 to ₹9,00,000

Conclusion: EPS is maximum under scheme II and is hence preferable.

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 30A [Nov-2019 New-8 M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. 31A [Nov-2019 Old-5-M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

MONEY MARKET INSTRUMENTS

Question No. -32B [May-1998-4M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. -32C [May-2006-6M] [MTP-Nov-2013-8M] [MTP-May-2014-8M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. -32D [May-2007-4M] [Nov-2012-5M]

Solution: Similar to Q-9D of Security Valuation (i.e., Bond Valuation)

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. - 32F

Question No. - 32G [May-2014-5Marks]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. – 32I

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No - 32J [May-2017-4M] [Jan-2021-Old-5M]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

 TEST YOUR KNOWLEDGE

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. -32.2 [May-2012-5 Marks]

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM

Question No. -32.3 [RTP-Nov-2011] [RTP-Nov-2012/May-2014/Nov-2014]

Question No. 32.4

Question No. -32.5

// CA NAGENDRA SAH // WWW.NAGENDRASAH.COM