Chartered Accountants of India Final Exam: Suggested Answers
DISCLAIMER
The Suggested Answers hosted in the website do not constitute the basis for evaluation of the students’ answers in the examination. The answers are prepared by the Faculty of the Board of Studies with a view to assist the students in their education. While due care is taken in preparation of the answers, if any errors or omissions are noticed, the same may be brought to the attention of the Director of Studies.
The Council of the Institute is not in anyway
responsible for the correctness or otherwise of the answers published herein.
© The Institute of Chartered Accountants of India
PAPER – 2 : STRATEGIC FINANCIAL MANAGEMENT
Question No.1 is compulsory.
Answer any five questions from the remaining six questions.
Working notes should form part of the answer.
Question 1
(a) A Bank sold Hong Kong Dollars 40,00,000 value spot to its customer at ` 7.15 and covered itself in London Market on the same day, when the exchange rates were:
US$ = HK$ 7.9250
7.9290
Local interbank market rates for US$ were
Spot US$ 1 = ` 55.00
55.20
You are required to calculate rate and ascertain the gain or loss in the transaction.
Ignore brokerage.
You have to show the calculations for exchange rate up to four decimal points.
(5 Marks)
(b) ABC Limited is considering acquisition of DEF Ltd., which has 3.10 crore shares issued and outstanding. The market price per share is ` 440.00 at present. ABC
Ltd.'s average cost of capital is 12%. The cash inflows of DEF Ltd. for the next three years are as under:
Year
` in crores
1
460.00
2
600.00
3
740.00
You are required to calculate the range of valuation that ABC Ltd. has to consider.
Take P.V.F. (12%, 3) =0.893, 0.797, 0.712
(5 Marks)
(c) Ramesh owns a plot of land on which he intends to construct apartment units for sale.
No. of apartment units to be constructed may be either 10 or 15. Total construction costs for these alternatives are estimated to be `
The Suggested Answers hosted in the website do not constitute the basis for evaluation of the students’ answers in the examination. The answers are prepared by the Faculty of the Board of Studies with a view to assist the students in their education. While due care is taken in preparation of the answers, if any errors or omissions are noticed, the same may be brought to the attention of the Director of Studies.
The Council of the Institute is not in anyway
responsible for the correctness or otherwise of the answers published herein.
© The Institute of Chartered Accountants of India
PAPER – 2 : STRATEGIC FINANCIAL MANAGEMENT
Question No.1 is compulsory.
Answer any five questions from the remaining six questions.
Working notes should form part of the answer.
Question 1
(a) A Bank sold Hong Kong Dollars 40,00,000 value spot to its customer at ` 7.15 and covered itself in London Market on the same day, when the exchange rates were:
US$ = HK$ 7.9250
7.9290
Local interbank market rates for US$ were
Spot US$ 1 = ` 55.00
55.20
You are required to calculate rate and ascertain the gain or loss in the transaction.
Ignore brokerage.
You have to show the calculations for exchange rate up to four decimal points.
(5 Marks)
(b) ABC Limited is considering acquisition of DEF Ltd., which has 3.10 crore shares issued and outstanding. The market price per share is ` 440.00 at present. ABC
Ltd.'s average cost of capital is 12%. The cash inflows of DEF Ltd. for the next three years are as under:
Year
` in crores
1
460.00
2
600.00
3
740.00
You are required to calculate the range of valuation that ABC Ltd. has to consider.
Take P.V.F. (12%, 3) =0.893, 0.797, 0.712
(5 Marks)
(c) Ramesh owns a plot of land on which he intends to construct apartment units for sale.
No. of apartment units to be constructed may be either 10 or 15. Total construction costs for these alternatives are estimated to be `