Question 1: Illustrate the relationship between required rate of return and coupon rate on the value of a bond.
Question 2: What do you understand by the term operating cycle?
Question 3: What is the implication of operating leverage for a firm?
Question 4: Describe the factors influencing the Financial Plan.
Question 5: An employee of a bank deposits Rs. 30000 into his PF A/c at the end of each year for 20 years. What is the amount he will collect in his PF at the end of 20 years, if the rate of interest given by PF authorities is 9%?
Question 6: Mr. Harry purchases a bond whose face value is Rs.1000, and which has a nominal interest rate of 8%. The maturity period is 5 years. The required rate of return is 10%. Find out the price he must be willing to pay now to purchase the bond?
Question 7: Two companies are similar in all respects except in the debt equity profile. Company X has 14% debentures worth Rs. 25,00,000 while company Y doesn’t have any debt. Both companies earn 20% before interest and taxes on their total assets of Rs. 50,00,000. Supposing a tax rate of 40%, and cost of equity capital to be 22%, determine the value of the companies X and Y by using the NOI approach?