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USually Pe is the amount the company has to invest for it to be call option.
This looks like a Put option setup. Just my opinion. I think I will be lucky to get 2 marks in that section.The paper was lonnnnnnnnnngggg.
Qt 2. FRA 3-7 gave around 738,000 of interest, locked.
Futures gave 768,000 and 732,000. March buy 32 contracts.
Options with 94.50 strike were much lower. About 61,900 in premiums.
Best choice Futures as equal chance of rising or falling rates hence better expected value. For maximin manager FRA slightly better.Qt3. M has Vd of around 507 Million. But Debt of combined firm does not make sense then at 40:60. AS N has no debt. This confused me a lot.
WACC for 8.88% or so, Took 9%.
NPV of firm much higher than combined market cap. So acquisition should go ahead.
Changing from 30-50% increases cost by 96 million. Not a big deal if benefits realized.
Can do 1 year commercial paper, increase % of cost paid with shares or combine with rolling over existing debt. Too small to do bond offering by itself.QT 1 i HAD 55 MINUTES TO DO THIS!
A) WTO part was ok. Cannot remember what exactly they asked here. Any comments appreciated.
B) 1) That was a long calculation for the 14 marks. I would not be surprised if the examiner threw in 16-17 max marks IE you can get full14 getting a few things wrong.
Exchange rates are easy with 1.08/1.02 differential. Sales and Operating margin was tedious and no space on columns. NPV was marginal.
2) Black scholes put option?. I had no clue how to calculate it., A lot of marks gone down the drain here. The reason is that I could not come up with Pe. There is nothing differed at this point.
3) Assumptions and risks. Wrote them in bullet form but could not discuss anything. No time. Do we get points for that?Good luck to all.