Ensemble 2012

new TRIVIA (30 questions)

1. This happened while he came into existence. What shall we call him?

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2. Identify the financial instrument and the company that was acquired with it

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3. A bond initially does not make periodic payments but instead accrues them over a pre-determined period and then pays a lump sum at the end of that period. The bond subsequently makes regular periodic payments until maturity. Which bond are we talking about?

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4. An investor buys two gold futures contracts at $350 per ounce. Each gold futures contract is based on 5000 ounces of gold. At the same time he collateralizes his position by buying the required amount of treasury bills yielding 3%. Two months later the price of gold is $347.4 and the T-bills mature. What is the net gain or loss on the value of the investors collateralized futures position?

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5. Company X was found guilty of this scheme. X sold licenses to sell its products to its customers. These customers further sold these licenses to other people. Company X claimed that its profits were generated through sale of products and not because of the licenses. However, the profits actually came from selling the licenses and from the dues paid by the customer. Name the company and the scheme

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6. This instrument which is used by nearly everyone today was introduced in the novel Looking Backward in 1887. Name it

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7. What does Salesforce.com, Dollar Tree, Cerner, Alexion Pharmaceutical have in common?

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8. What doall these have in common?

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9. A famous US president issued some economic directives to reduce inflation in the economy that was later referred to as X. X was named after the president.What is X?

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10. I came into existence 15 years back though in essence I was much older than that. My life was estimated to be 10 years and I was nearly junked down 8 years back. I was unique and was I was created to sit on someones albums so that the said someone could earn $ 55 million upfront. I was known by two names, by a well-known musician and by the banker who created me. Who am I? (Two words)

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11. Connect the images given below:

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12. Mr. Investor bought securities, hoping to make a profit by selling it in the long run. But then he panicked and sold it the following day. What is this type of investment known as?

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13. The graph below represents the two-year share prices of a company. The company has been in news recently for various reasons. Identify the company. (Hint: Identify the trend of share price over the given period).

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14. Identify the chart.

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15. Reveal the blank!!!

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16. Identify

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17. Get the answer to the question

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18. Tit for Tat in the parlance of finance!!!!

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19. Link the pictures

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20. L V J U W. What are we talking about?

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21. X is used to describe an overly Leftist economic policy. What is X?

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22. A B.Com student from HR, College Mumbai, and with a track record of 25 years, he has proved that you dont need a management degree from a fancy college to run a business. He has driven a Formula 1 car in France, a Ferrari 360 Modena in a road and track rally across Europe, and a Lamborghini Gallardo in Europe's CannonBall Run. He also owns a tri-deck luxury yacht constructed entirely out of Burma Teak wood. Who are we talking about?

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23. Born in 1930 in Hungary, he has lived through the Nazi occupation of his country as well as Soviet imposed communism. A graduate from the London School of Economics, he is a self-made and a self-less man. He became infamous when he shorted $ 10 billion on single currency speculation and shorted a currency value. Who are we talking about?

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24. An Indian investor and trader by profession, and a Chartered Accountant by qualification. The son of an income tax officer, he started dabbling in stocks while in Sydenham College and plunged into investing as a full-time profession soon after completing his education. Also described in a magazineas the "pin-up boy of the current bull run" and by anotheras "Pied Piper of Indian bourses". Who is he?

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25. Name this personality He is the alumni of two prestigious IITs and holds an M.S. degree in Economics. He has joined the civil service and has extensively written on issues in political economy of reforms, decentralization and public finance. He also holds an A topper in the All India Civil Service examination for entry into I.A.S. and Indian Foreign Services.

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26. Name the person connected to the three

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27. Connect the Dots Viacom Salt Sony Wanted Time Warner Hackers

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28. We are talking about the inventor of one of the most famous modern day financial instruments who passed away last year. He was a Soya-bean trader initially and his trading firm, founded in 1977 was acquired by the Swiss Bank Corporation in 1992. Who is he?

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29. The graph represents % growth of X over the period of 1996-2008 for entity Y. Identify X and Y.

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30. Look carefully. There is always a method to the madness!!!!

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VALUATION (9 questions)
1. Mind Boggling Ltd. has allotted Rs. 10 lakhs for capital budgeting purposes. The following proposals and associated profitability indexes have been determined. : [1 mark] PROJECT 1 2 3 4 5 6 AMOUNT 300000 150000 350000 450000 200000 400000 PROFITABILITY INDEX 1.22 0.95 1.20 1.18 1.20 1.05

On the basis of NPV, which of the above proposals should be undertaken? Assume that the projects are indivisible and there is no alternative use of the money allocated for capital budgeting.

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2. Suppose an analyst estimates equity value by discounting free cash flow to equity (FCFE) at the weighted average cost of capital (WACC) in the FCFE model and estimates firm and equity value by discounting free cash flow to the firm (FCFF) at the required return on equity in the FCFF model. The analyst would most likely [1 mark] A. Overestimate equity value with the FCFE model and underestimate firm value and equity value with the FCFF model. B. Underestimate equity value with the FCFE model and overestimate firm value and equity value with the FCFF model. C. Underestimate equity value with the FCFE model and underestimate firm value and equityvalue with the FCFF model.

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3. Chamber Group is analyzing the potential takeover of Outmenu Inc. Chamber has gathered the following data on Outmenu. All figures are in millions of dollars [1 mark] Particulars Net income FCFE FCFF Dividends D/E 2008 -26 -21 3 5 93% 2007 34 -23 4 5 91% 2006 18 14 6 4 78% 2005 26 -15 8 4 84%

The most appropriate model for valuing Outmenu is the: A. Free cash flow to equity model. B. Dividend discount model. C. Free cash flow to the firm model.

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4. The average ROE for Lever, Inc. over the last business cycle was 32%. Lever's earnings per share for 2008 is expected to be $5. The dividend payout ratio is 30%, and the current book value per share is $14. Shares are trading in the market at $54. Lever's normalized earnings per share are closest to: A. B. C. $4.48. $5.00. $5.26.

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5. Which of the following describes the appropriate approach to estimating the WACC for a private company acquisition? The WACC should be: [1 mark] A. the target's WACC. B. the acquirer's WACC. C. a weighted average of the target's and acquirer's WACC that factors in financing arrangements.

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6. An analyst calculates firm value using a single-stage model on December 31, 2007 as: Value of the firm = FCFE (2008)/(r-g) + MVD where: FCFE 2008 = free cash flow to equity forecast for 2008 r = required return on equity g = growth rate in FCFE MVD =market value of debt on 12/31/2007 Assuming there are no non-operating assets on the balance sheet. The analyst has most likely: A. correctly calculated firm value. B. incorrectly calculated firm value. The weighted average cost of capital should be substituted for the required return on equity. C. incorrectly calculated firm value. The weighted average cost of capital should be substituted for the required return on equity, and FCFE2007 (1 + g) should be substituted for FCFE2008. [2 marks]

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7. Which of the following groups would be most harmed by the imposition of a tariff on steel imports? [1 mark] A. Domestic steel producers. B. Workers in the domestic auto industry. C. Workers in the domestic steel industry.

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8. An analyst gathered the following information about a company's investment plan: Capital budget of$5,000. Target capital structure is 70% debt and 30% equity. Net income is $4,500. If the company follows a residual dividend policy, the portion of its net income it will pay out as dividends this year is closest to: [2 marks] A. 50%. B. 60%. C. 67%.

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9. A German company's annual pretax earnings are 300. The corporate tax rate on retained earnings is 35%, and the corporate tax rate that applies to earnings paid out as dividends is 20%. Assuming that the company pays out 50% of its earnings as dividends, and the individual tax rate that applies to dividends is 30%, calculate the effective tax rate on one euro of corporate earnings paid out as a dividend. [2 marks]

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Crossword

Across 2 Took Over Piramal Healthcare 4 A Single Window Clearance for Proposals on FDI in India 5 Automated, Screen-based trading platform of BSE 7 Cash to Shareholders 8 The Falling Wall 9 Smith and Keynes 11 "I provided memories, now I am myself a memory" 12 A measure of finance leverage, demonstrating the degree to which a firm's activities are funded by owner's funds versus creditor's funds 14 Name of a charting method in stock analysis 15 Uncovered put (2 words) Down 1 Bank Headquartered in Paris 3 Mortgage that has one large payment due on maturity 6 Type of Bond whose owners stand last in line among creditors, but before equity holders, when an issuer fails financially 10 First Oil tanker to bring Iran Crude with Indian Cover 13 Quick moderate rise on a stock price followed by a precipitous decline