aie [This question paper contains 9 printed pages.] Sr. No. of Question Paper > 6377 Unique Paper Code : + 61017916 Nanc-of the Paper : Investment Banking and Financial Services Name of the Course : Bachelor of Business Administration, 2022 (BFIA) (LOCF) Semester ow Duration 2 3 Hours Maximum Marks 3 8 Instructions for Candidates 1. Write your Roll No. on the top immediately on receipt of this question paper. 2. Use of a non-scientific calculator is permitted. 3. Attempt all the parts of a question together. 1. The New India Company Ltd. (NICL) desire to purchase a machine costing Rs. 40,00,000, which will be used for a period of 5 years. It is considering two alternatives: (i) Taking the machine on lease P.T.O.6377 2 (i) Purchasing the asset by raising a loan ‘The NICL has been offered a lease with lease rental payment of Rs. 9,00,000 per annum for $ years payable in advance. The company's banker requires the loan to be repaid @20% per annum in 5 equal daaializats, each installment being due at the beginning of each year. Depreciation be charged on machine is 20% as per written-dewn value method. The end of Sth year the machine can be sold at Rs.3,50,000 and Tax rate is 20%. You are required to evaluate the proposals and also comment on the acceptability of the proposals. (Apply Present value method). as) 2. (a) Mr. Bhagwant das wants to purchase a Flat for Rs. 1,00,00,000 from NBCC Builders Pvt, Ltd. He can pay only Rs. 25% of the total price now. So, he decided to take home loan from HBEC Bank for 75% of the purchase price of the flat. The bank has offered loan to him for the period of 10 years and Installments to be paid on annual basis. HBEC bank offered following rate of Interest: (i) Fixed rate of interest 10% Gi) Floating rate of interest 8.5%. Itis expected that after 6 year fixed rate will be 10.5% and floating rate will be 9.5%.6377 w Assume (hat [BIBI bank will offer him to refinance his home loan in the beginning of Tih the rest period of loan, Details are as follows: () Fixed rate of interest 9% (ai) Floating rate of interest 8% Note: The cost of switching over of loan will be 2% of the outstanding loan amount. You are required to calculate: (@) Home loan from HBFC bank on fixed rate for 10 years. (b) Home loan from HBFC bank on fixed rate for first 6 years and switch to floating rate of HBFC bank. (c) Home loan from HBFC bank on floating rate for first 6 years and switch to floating rate of [BIBI bank. Give your suggestion to Mr. Bhagwant. 9) (b) Explain the concept of prospectus. Discuss different types of prospectus. © PTO.6377 4 3. (a) Tata Power Lid. has recently acquired equipment worth Rupees 300 Lakhs under the industrial hire purchase plan scheme from Larsen & Toubro (L&T) on the following terms: The flat rate of interest to be charged shall be 13% P.A. The installments are to be paid annually for four years. The down payment is also to be paid 25% of the equipment cost. You are required to calculate the annual hire purchase installment and split in between principle and interest according to (i) Sum of Years Digit Method (SOYD) Gi) Effective Rate of Interest method (ERI) 3) (b) What will happen when an IPO is undersubscribed? Discuss role of underwriter in publie issue. a (a) Ina fast changing environment, investment bankers have a very important role, a challenging one too, for they have to play the balancing act between achicving optimum benefit to the client, maintaining their credibility and taking care of the investors! interests. Elaborate the various challenges faced by investment bankers and measures undertaken to cope up with these challenges in India. @) (b) What are the roles of IRDA in Indian insurance sector? Discuss the opportunities and challenges of insurance industry in present scenario. a (@) ABC Ltd. manages its accounts receivable internally by its sales and credit department, The cost of sales ledger administration stands at Rs. 10 crores annually. The company has a credit policy of 2/10, net 30. Past experience of the company has been that on6377 5 an average 40 percent of the customers avail of the discount by paying within 10 days while the balance of the receivables are collected on average 90 days after the invoice date. Bad debts of the company are currently 1.5 percent of total sales. The projected sales for the next year are Rs. 1,000 crores. ABC Ltd. finances its investment in debtors through a mix of bank credit and own long, ‘Term funds in the ratio of 70:30. The current cost of bank credit and long-term funds are 13 Percent and 15 percent respectively. With escalating cost associated with the in-house management of debtors coupled with the need to unburden the management with the task so as to focus on sales promotion, the Company is examining the possibility of outsourcing its factoring service for managing its receivable and has two proposals on hand with a guaranteed payment within 30 days. ‘The main elements of the Proposal from First Factors Ltd. are: () Advance 88 percent and 84 percent for the re course and non recourse arrangements. (ii) Discount charge on advance 21 percent for with recourse and 22 percent without recourse. (ii) Commission, 4.5 percent without recourse and 2.5 percent with recourse. P.T.O.6377 6 The main elements of the Proposal from R. bank Factors Ltd. are: (i Advance, 84 percent with recourse and 80 percent without recourse respectively. Gi) Discount charge upfront without recourse 21 percent and with recourse 20 percent. Gii) Commission upfront, without recourse 3.6 percent and with recourse 1.8 percent. The opinion of the Chief Marketing Manager is that in the context of the fact or in arrangement, his staff would be able exclusively focus on sales promotion which would result in additional sales of 10% of projected sales. Kindly advice as a financial consultant on the alternative proposals. «sy OR 5. (b) Write short note on any three: () Refinancing and repricing of loan (i) Green shoe option ii) Book building process (iv) Right issue (v) Private placement6377 Table A-3 Relationship Between Nominal and Effective Rates of interest and Discount oor a0 on a2 013 014 018 0.16 our 018 019 920 O21 023 04 026 028 030 032 034 036 0.38 40 70025 1.0050 1.0074 ‘10099 10123 10148 0172 10196 1.0220 10244 10268 10292 10315 1.0339 100362 10385 10408 1.0431 10454 10477 1190500 119523 1.0545 110568 10612 1.0657 19701 10745 1.0788 1.0831 10874 10916 “10087 10075 10112 1.0149 1.0816 10222 1.0259 1.0285 1.0331 1.0368 1.0404 10439 1.0475 10511 10546 1.0561 10617 1.0652 1.0687 10722 10758 1.0791 1.0825 110860 1.0928 1.0096 1.1064 131 1.1197 1.1264 11330 1.1395 1074 1.0751 1.0800 1.0843 1.0887 1.0929 1.0972 1.1015 1.1057 1442 1126 11310 11393 1.76 4.1859 14681 11722 10075 10150 10224 10289 10373 1.0848 1.0522 1.0596 4.0670 10744 1.0018 1.0892 1.0985 1.1039 sana 1.1485 141258 1.1391 1.1404 4.1477 1.1560 4.1623 1.1695 1.1768 1.4912 12057 4.2201 $2645, 1.2488 1.2631 12774 1.2916 1.0082 1.0125 10187 1.0249. 1.0311 1.0372 10834 1.0495 1.0556 1.0638 $0628 19739 1.0800 1.0861 1.0821 1.0961 1.1042 1.1102 1.1162 4.1202 1.1281 11941 1.1400 41.1460 1.1578 1.1696 1.1814 1.1931 41.2087 1.2164 1.2280 1.2395 1.0054 1.0108 1.0162 10215 1.0269 4.0322 10375 10428 1.0481 10534 1.9580 1.0839 41.0591 10743 10795 1.0847 1.0899 1.0950 1.1002 1.4053 vats 1.4155 1.1206 1.1287 1.1988 1.1460 1.1560 1.1660 11759 11859 1.1957 1.2055 P.T.0.6377 PRESENT VALUE TABLE Present vatue of $1, ats (14 r)°” where + interest rate; a= number of periods und payment or receipt. fe in ee 7 Wad tbat Gari baer ase Fe0 905 Ge 0960 S61 O5e ams O90? 0809 0873 URS? Sart oz OMS 088) Om sea CEE OK sages ont 08s OaSS ORT) 0792 0783 OTH ‘gst 0906 OaGs 082 07% O17 0713 oR DoE 08k 08 07H ONG Oios OG OW Ost 087i O13 07H OTM O85 OG OS Derr 0803 078 7 Oe Ome? OSH OD DEM 017 O76 070) ass O52 OS OND Ou oad DME O67 OB 0368 O50 DARD De 980 0722 O8W OSS ORT 41s OCs Dem) 0988 OID OBE OssT OMT OM OMT aay 977s GoM oem a8 O48 als aE 5870 0758 O66 OST OMS O42 0368 OD ose OME 06K 055 gan O41) O3R? O35 Oss) OMe cea OSM OMS ORM OT OMe Da Du ceo 513 OM GI OAT az Sam om sn oa Duk Gn Gas Oe 0370 0495 am 0277 one 7 ate ame O78 680 508 034 502 e480 baa 038 0356 0226 ons oats ona az: paz nas aH 781 0.683 oz 064 ost ou? uk 0386 0380 ons 0290 0263 029 O28 e198 0360 0.164 beso 3s Ob 037 Suir boas gz 018 ous seenvovnun-fef ii oar oat Sa 078 0956 07 81 BI cmH D5 GBS O68 oe O24 nme CSS O50 OSs OS 0552 05% 051 mS O48? O89 OMT 0475 Om Bg ONS OMG 4S 04m ext 030 Os Om? 0355 ado 05 63M 0932 aa Dam 025 381 ORT OMS 025 ams O25 O21 Ome ORM O73 023 ous OS OI zi 020 O27 ome os O16 O17 oT ons 01% OWE ow os Ons wz ms ow? O18 O18 OI Gi att 8 ote aN aus ON Ore ome On « Bie 0M) 9125 O11 DO OME OTE 1 10 0122 8108 0015 OOM 0m COEF 6 123 our 0095 G08 oon e082 oom 7 0108 Om 9000 OK Dw Gas? 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