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The document contains a series of financial questions related to dividends, pension valuation, bond yield to maturity, and capital raising preferences for a manufacturing company. It includes calculations for present value, yield to maturity, and weighted average cost of capital using both book and market values. The questions aim to assess understanding of financial concepts and valuation methods.

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37 views1 page

Question Bank

The document contains a series of financial questions related to dividends, pension valuation, bond yield to maturity, and capital raising preferences for a manufacturing company. It includes calculations for present value, yield to maturity, and weighted average cost of capital using both book and market values. The questions aim to assess understanding of financial concepts and valuation methods.

Uploaded by

Anjli Gupta Official
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question Bank

1. A company is expected to pay a dividend of rupees 4 per share after a year it's dividend are then
expected to grow at 15% for next 5 years and then at the rate of 8% indefinitely. Find out the
present value of its shares if the capitalisation rate is 12%.
2. Exactly 10 year from now Shyam will start receiving a pension of rs. 3000 a year. The payment
will continue for 16 years. how much is the pension worth now if Shyam's time preference rate is
10%.
3. A Limited has issued bonds of the par value of Rs. 1000. The bond carries an interest rate of
14%. The present value of the bond is Rs. 900. The majority period is 6 years you are required to
calculate the yield to maturity.
4. Between equity share and debenture which is preferable for raising additional long term capital
for a manufacturing company and why?
5.

Type of Capital Book Value Market Value Specific Cost


Debenetures 40,000 38,000 5%
Preference Capital 10,000 11,000 8%
Equity Capital 60,000 1,20,000 13%
Retained Earnings 20,000 - 9%
Total 1,30,000 1,69,000
You are required to determine the way to average cost of capital using (i) book value as weights
(ii) market value as weights. Do you think that can be situation where weighted average cost of
capital would be same irrespective of the weights used?
6.

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