You are an Investor who focuses on IT companies with large future potential in further automation of Global Supply Chain. Last year you bought 5,000 shares in Lama Inc. a company well established in the tech domain. The following data are presented by Lama for calendar 2019

Net income                                                                                                                  $4,500,000

Common shares outstanding,                                                                            1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares          $1,600,000

8% convertible bonds; convertible into 105,000 common shares                             $7,500,000

360,000 call options exercisable at $25 per share

Additional information

1.    The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.    In 2019, a $500,000 dividend was declared and paid; however, no dividends were declared in 2016.

3.    The average market price of the common shares in 2017 was $30. The stock price was $27 on January 1, 2017, and $35 on December 31, 2017.

4.    The convertible bonds were sold at par – no discount or premium .

5.    The income tax rate for 2017 is 30%.

Instructions

a)    Calculate basic EPS. – 3 Marks

b)    Calculate diluted EPS. - 9 Marks

c)    What is the importance of reporting diluted EPS? – 3 Marks

You are an Investor who focuses on IT companies with large future potential in further automation of Global Supply Chain. Last year you bought 5,000 shares in Lama Inc. a company well established in the tech domain. The following data are presented by Lama for calendar 2019

Net income                                                                                                                  $4,500,000

Common shares outstanding,                                                                            1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares          $1,600,000

8% convertible bonds; convertible into 105,000 common shares                             $7,500,000

360,000 call options exercisable at $25 per share

Additional information

1.    The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.    In 2019, a $500,000 dividend was declared and paid; however, no dividends were declared in 2016.

3.    The average market price of the common shares in 2017 was $30. The stock price was $27 on January 1, 2017, and $35 on December 31, 2017.

4.    The convertible bonds were sold at par – no discount or premium .

5.    The income tax rate for 2017 is 30%.

Instructions

a)    Calculate basic EPS. – 3 Marks

b)    Calculate diluted EPS. - 9 Marks

c)    What is the importance of reporting diluted EPS? – 3 Marks

3. The table below shows the number of hybrid cars sold (in thousands) in the US in the following years.                                                          * Source: Wikipedia

1. Find an exponential regression equation for the data. Let x = 0 represent the year 2000. Round a to two decimal places, and round b to four decimal places.

2. Describe what a and b tell you from your equation above in the context of the problem. Be very specific.

4.1. In the period from 1977 we have largely witnessed a period of disappearing dividends. Research by Baker and Wurgler (2004) argues that the disappearing dividends are caused by firms catering to changes in investor sentiment for dividends. Briefly explain their reasoning.

4.2. Explain why managers are in a better position to exploit stock market inefficiencies than other investors.

4.3. Discuss the market timing theory with respect to managers’ decisions to issue new equity or new debt or proceed to stock repurchases.

4.4. Explain the Market timing theory in a mergers and acquisitions framework

A. Your branch has just started the day’s business and many customers are thronging to get banking services. Suddenly the computer system breaks down and the customers and staff are complaining as this problem happens frequently. What should you do?
B. Encik Bahari is a long standing customer of your branch. He applied for a housing loan recently and your head office approved the loan at an interest rate of BLR
+ 2%. Encik Bahari requests for your goodwill as the branch manager to reduce the interest rate to BLR + 1%. You are unable to do it as it is against the rules of the Institute of Banks in Malaysia and Bank Negara Malaysia. How will you explain to Encik Bahari?

A. SBE Private Limited company is applying for a working capital loan. This is the company’s first application for credit facility from your bank. SBE Private Limited company is a medium-sized company that manufactures various types of antique furniture for local as well as international markets. The company is currently facing cash flow problem due to ineffective cost control.

B. XYZ Private Limited company is applying for an additional overdraft facility from your bank. This company has a good track record with your bank. However, the company has been experiencing difficulty lately due to industry-wide recession. According to the finance manager of XYZ Private Limited company, the purpose of the additional facility is to finance the company’s overhead cost.

Part 2
TASK
Obtain the balance sheets of two Commercial banks in Malaysia from their annual reports.
Calculate the following ratios, based on the available information:
1. Capital to total deposits ratio
2. Capital to total assets ratio
3. Capital to risk weighted assets ratio
4. Capital to loans ratio
Based on the ratios, which bank has better capital adequacy? Which bank has better capital
adequacy if you also incorporate qualitative measurement into the assessment?
Various aspects that can be used as qualitative measurement are as follows:
(a) Quality of bank’s management
(b) Quality of bank’s assets
(c) Bank’s earnings history
(d) Quality of bank ownership
(e) Accommodation cost
(f) Quality of operation procedures
(g) Volatility of deposits
(h) Local market conditions

Course Name : MBA FINANCE & BANKING

Question) According to the semi-strong form of the efficient markets hypothesis, ____.

Multiple Choice Answers) Please answer and explain!

a) stock prices do not rapidly adjust to new information.

b) corporate insiders should have no better investment performance than other investors even if allowed to trade freely.

c) future changes in stock prices cannot be predicted from any information that is publicly available.

d) arbitrage between futures and cash markets should not produce extraordinary profits.

There are a number of studies which show that women engage in more private religious rituals and daily prayer than men, who tend to engage in more public religious rituals. A researcher would like to discover if there is a relationship between gender and religious type, that is extrinsically religious (publicly religious), intrinsically religious (personally religious) or nonreligious. Perform the appropriate test (α = 0.05)

A local hospital claims that you will not wait longer than 45 minutes in the emergency room. You go out to test this claim and find a sample of 81 patients chosen at random from their emergency room, you find a sample mean of 52 minutes with a sample standard deviation of 23 minutes. Can you publicly debunk their claim (call their claim fraudulent) at the 1% significance level? Use a test stat and then a p-value to determine if your conclusion is weak or strong.