Department of Finance

BBA 25th Batch

F 401 Corporate Finance
1st Mid-Term Test, Sec-A8& B, 2022

Section B
Marks: 20 Time: 60 Minutes
(Answer any ur of the following questions) (Section B & C)
3x3 9
1. What are the specific sources of conflicts in the corporate agency relationships? Briefly
explain.
2. In a word without tax, MM's proposition I implies that an issue of debt increases expected
earnings per share and leads to an offsetting fall in the price-earnings ratio. Explain.
3 . "In an efficient market, there is no systematic relationship between today's price and
tomorrow's price for a given security". Justify your stance.
4. Can you infer the behavioral characteristics of the firms based on its ccnsecutive OCF and
FCF? Explain.
5. Under what circumstances, firms may pass up positive NPV projects rather than commit
new equity and why?

SECTIONC
Marks: 11 Analytical Questions: Answer AlI
1. A company currently has no leverage in its capital structure. Suppose this company
decides to issue Tk 500,000 of debt and use the proceeds to buy stock back. EBIT are
expected to be Tk 300,000 per year in perpetuity. The company has a constant growth
opportunities of 2% per annum. The corporate tax rate is 30%, the cost of debt is 10%
per year, and the unlevered firm in the same industry has a cost of equity of 17%.

a) What will be the gain from leverage and effect of this transaction on firm value and
equity value?
b) What is the required return on the company's equity after the stock epurchase?
c) How can you derive the value of equity using the perpetual cash flow after tax accruing
to shareholders?
d) Can you analyze the implication of taking the debt on cost of equity, risk and firm
value? (1.5x4)=6
2. a) Suppose that X Company has decided to issue Tk 50 million of long term debt. The
goal is to roll over this debt (i.e. replace it by another Tk 50 millionissue) when it
matures. Suppose that X's marginal corporate tax rate is 40%, that the effective
personal tax rate on equity income is 10% and that the effective personal tax rate on
debt income is 25%. What is the gain from adding Tk 50 million of debt to the current
capital structure assuming that taxes (both corporate and personal) are the sole
determinant of the gains from leverage? (1.5)
b) At the end of June 2020 the long term debt to market value of equity ratio of Y
Company was 40%. If only taxes are relevant, what would Y's market value of equity
have been at the end of June 2020 if it were all equity financed? Assume a 40%
corporate tax rate and personal tax rates as listed in part (a). The market value of Y's
equity was Tk 100 million at the end of June 2020. (1.5)
3. Suppose Apple inc. hires Ms. Amber, a well-known engineer to develop the new auto-
focusing system of its camera. In an efficient market, what will happen to Apple's share
price when this is announced? suppose instead that hiring the engineer is a positive NPVV
transaction. What will be the impact? (2)
 Department of Finance
University of Dhaka
25th Batch, 4th Year BBA Exam-2022
Course; F: 402- Commercial Bank Management
Midterm Questions, Time: 1 Hour, Marks: 15 (=4+5.5 +5.5)

1. What are the recent trends affecting commercial banks in Bangladesh?

2. Suppose AB bank has the following balance sheet as on 31st December for 2022 as
follows:

Balance Sheet as on 31st December,

2022
Assets Amount Liabilities and Equities Amount
Cash and Cash Equivalent 2,000 Longterm Deposit 60,000.000
Trasurysecurities 17,000 Short-Term Depoist 35,000.00
Loans and Advances 91,000 Borrowing 5,600.00
Loan AAA 30,000 Paid-up capital 1,000.00
Loan AA 20,000 Share premoim 2,000.00
Loan A 10,000 Retianed Earnings 400.00
Loan rated B8 and B 20,000 Short-term Subordinated debt 6,000.00
Unrated Loan 11,000
Total Asset 110,000 Total liabilites and equity 110,000.000
As per the Basel-IlI requirement, compute tier 1 and tier 2 capital ratio as percentage of
RWA. Find out
a). Whether AB bank has sufficient CAR.
b). Does the AB bank has sufficient leverage ratio?
e). Can the bank declare cash dividend freely?

3. Suppose a commercial bank has the following information extracted from its financial
statement

Components ofAmount Duration Components of Amount| Duration

assets liabilities &Equity
Treasury 90 7.49 Deposit 100
Municipal loan 20 Non-Deposit borrowing 125 7.2
Commercial loan 100 6 Subordinated note 50 9
Consumer loan 50 1.2 Equity
Real Estate loan 40 2.25
Requirement: Calculate the duration of the asset and liabilities of the bank. If banks wants
keep its net worth insulated from change in interest rate, what should be duration of its
liability? Suppose that current interest rate is l0%. Show that for a given change in interest
rate in both directions, its net worth is intact.
 Department of Finance
University of Dhaka
BBA 25th Batch 4th Year 1*t Semester
F403: Investment Banking and Lease Financing
Marks: 15; Time: I Hour
1. Answer the following questions precisely. Allocate not more than 40 words for each
answer. Irrelevant discussion will earn you nothing but losses.
i. Can broker/ dealer engage in
proprietary trading?
ii. What is circular trading? Give
example.
ii. How does market misperceive the cause and effect aspect of speculation?
iv. How does aggregate
trading of speculators ensure market efficiency?
v.
Suppose a bond is downgraded from AAA to AA. If you are an analyst of JPM
what would your potential
suggestion be for the traders?
2. York Inc. is issuing shares in an IPO. The fair
price determined by the underwriter is
BDT 70 per share. The final offer
price is set at BDT 65. York has agreed to accept
BDT 63 for each share with the remained
going to the investment bank as gross
spread. Other miscellaneous charges for printing,
registration fee, lawyer fee etc. were
BDT 0.5 per share. What is the
floatation cost?
3. Why is an investment bank
needed as an intermediary? Why can't issuing firms sell
their securities directly to the
investors?
 Department of Finance
University of Dhaka
B.B.A 25th Batch
4th Year 1" Semester 1" Midterm Examination 2022
Operations Research (F-404)
Time: 1 Hour
Total marks: 15

Answer the following questions:

2.5
1.a) What is the difference between an optimal solution and feasible solution?
Give an example.
The two raw materials used in
product of a firm has a requirement that it must weigh exactly of kg.
150
b) The final
Tk. 8 per unit. Each unit of A weighs 5
manufacturing this product are A with a cost of Tk. 2 per unit and B with a cost Use the
no more than 20 units of A must be used.
kg. and each unit of B weighs 10 kg. At least 14 units of B and should be used for each unit of the final product to
graphical method to find how much of each type of raw material the active and inactive
minimize the cost. How many extreme points are there in the feasible region? Also Identify
constraints. 5

2. Deshi Pottery Company" produces bowls (x1) and mugs (x2) from labor and clay (in pound). Use the simplex method
to solve the following problem. What useful information can you derive from the optimal solution? State the economic
table (table 1 being the initial Note
justification of the numbers under slack variables columns found in your 2 solution).
that first constraint is about labor hour and the second constraint is about clay. 7.5

max Z = 40x, +50x,

s.t 2.1 8 72

+2x, S 40 O,V

4x, +3x, 120

1220