Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis – I - Question Paper

(e) The details of repurchase facility are disclosed in the offer document.
< ans >





END OF part A









part B : issues (50 Marks)

· This part consists of ques. with serial number one – 6.

· ans all ques..

· Marks are indicated against every ques..

· Detailed workings should form part of your ans.

· Do not spend more than 110 - 120 minutes on part B.

1. The data provided beneath relates to stock prices of Satyam Computers Ltd. for the 1st thirteen trading sessions in the month of November, 2003 and November, 2005 respectively.

Days
Closing price (2003)
Closing price (2005)

1
372.45
612.55

2
373.90
630.30

3
390.65
636.40

4
387.65
642.45

5
393.10
636.25

6
391.65
630.55

7
399.80
651.10

8
405.15
648.55

9
403.20
652.05

10
404.30
654.15

11
412.35
646.25

12
411.35
630.15

13
430.75
625.75


You are needed to check whether these stock prices are independent or not using auto-correlation test.

(9 marks) < ans >

2. Mr. Biswajit Poddar an analyst is evaluating Halol Industries Ltd (HIL). The company has maintained high growth rates in the face of strong competition in the last few years; it has done so while maintaining high returns on capital. The fundamentals suggest that growth will continue on to be high and provided the size of the market and potential growth (as well as the strong brand name identification), growth seems sustainable for a longer period.

Mr. Biswajit Poddar has the subsequent info for HIL:

Current Earnings / Dividends

Earnings per share in 2005-06 is Rs.26.00.

Mr. Biswajit has presumed the subsequent inputs:

Inputs for the High Growth Period

· Length of the high growth period is five years.

· Expected growth rate in earnings is 22.00% (Based upon analyst projections).

· Beta during high growth period is 1.20.

· Risk free rate is 5.5%.

· Market rate of return is 12%.

· Dividend Payout Ratio is 25% (based on existing payout ratio).

Inputs for the transition period

· Length of the transition period is five years.

Earning:   Approval pending.