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[20:57:02] --------------------------Home--------------------------



[20:57:10] --------------------------Paper P4--------------------------



[21:21:16] priyak: QUESTION : FLY 400 - Pilot Paper



[21:27:49] priyak: hello



[21:27:52] priyak: start?



[21:28:01] priyak: y there was no response for this much time?



[21:28:23] priyak: anyways



[21:28:24] Phoebey: i am wondering the use of the cashflow statement



[21:28:38] Phoebey: it says dec 2005 is the current year



[21:28:39] priyak: CF ststement?



[21:28:50] priyak: part c of the requirement



[21:28:54] priyak: direct jump



[21:28:55] Phoebey: o



[21:29:21] Phoebey: just an overview



[21:29:57] priyak: ok



[21:30:09] priyak: so start off with part a in a hurry



[21:32:44] priyak: y no response



[21:32:48] priyak: degear the beta



[21:32:57] priyak: get the values for Ve Vd and Be



[21:33:26] priyak: Ve can be either taken as 3bn / 1.25 = 2.4 bn



[21:33:31] priyak: or 60%



[21:33:43] Phoebey: yes and i am not sure of FLI debt equity ratio



[21:33:48] priyak: Vd as 2.4bn * 150% = 3.6 bn



[21:34:05] Phoebey: debt equity for Rover is 60 : 40



[21:34:12] Phoebey: what is fly for regearing

[21:34:29] priyak: u mean teh 2 sentence u got mixed up y'day?



[21:35:04] Phoebey: 60:40 is for Rover



[21:35:07] priyak: yes



[21:35:11] Phoebey: but we need Ke for Fli



[21:35:18] Phoebey: so what is ratio for Fli



[21:35:27] priyak: and rover details are used as the proxy for Fly4000



[21:35:35] cgarcia: 1.5:1



[21:35:35] priyak: and we are degearing beta



[21:35:45] Phoebey: yes i understand



[21:36:00] priyak: degearing fly 400



[21:36:02] Phoebey: to regear what is the debt equity for Fli



[21:36:07] Phoebey: not Fly



[21:36:19] Phoebey: w are finding Ke for fli



[21:36:26] priyak: when we speak of degear y u think of regear?



[21:36:27] Phoebey: using capm



[21:36:30] priyak: let us come to tat



[21:36:37] priyak: or else u confuse up



[21:36:52] priyak: tat is the requirement



[21:37:00] priyak: find Ke using capm



[21:37:16] priyak: to find Ke u need to degear beta and then regear



[21:37:30] cgarcia: ok..so we are ungearing using Rover Airways firgures



[21:37:54] priyak: {cgarcia} yes



[21:37:58] Phoebey: regearing using which debt:equity



[21:37:58] cgarcia: and regearing based on Flihi proposed level of gearing



[21:38:09] Phoebey: {cgarcia} what is it

[21:38:12] Phoebey: cant see



[21:38:27] priyak: para 2 of the question



[21:38:44] priyak: Ve : Vd = 120 : 150



[21:39:10] Phoebey: ok thanks, it was not straight forward :cry:



[21:41:03] priyak: fine now move on



[21:41:11] Phoebey: yes



[21:41:22] cgarcia: ok



[21:41:26] priyak: what is the degeared beta value u got?



[21:41:36] cgarcia: so I ungeared using



[21:41:45] cgarcia: ve as:40



[21:41:54] cgarcia: and vd as 60



[21:41:56] priyak: yes



[21:42:05] cgarcia: got .9756



[21:42:08] priyak: there is other way also



[21:42:10] cgarcia: as the ba



[21:42:14] priyak: {cgarcia} yes u r correct



[21:42:15] cgarcia: which is?



[21:42:33] priyak: Ve = 3bn / 1.25 = 2.4bn



[21:42:49] priyak: 3bn being the equity market capital



[21:42:55] cgarcia: right



[21:42:57] priyak: and 1.25 the price to book value



[21:43:03] cgarcia: right



[21:43:13] priyak: and Vd = 2.4 * 150% = 3.6 bn



[21:43:14] Esther: that is price per share



[21:43:18] cgarcia: so u use this at all times to ungear?

[21:43:27] priyak: any one of the method is sufficient



[21:43:32] cgarcia: np



[21:43:35] priyak: both will give u the same answer



[21:43:47] Esther: {cgarcia} no there are many ways to to it and this is the other way



[21:44:02] cgarcia: ok.. I never learned it that way so thanks...



[21:44:09] priyak: fine



[21:44:12] Esther: ok



[21:44:15] priyak: 0.9756 is fine



[21:44:18] priyak: all fine with it?



[21:44:24] Esther: yes



[21:44:32] Phoebey: yes



[21:44:37] cgarcia: so then how would i get the vd from this



[21:44:45] cgarcia: not to keep ull back



[21:44:48] cgarcia: jus curious



[21:44:53] priyak: mentioned above



[21:45:00] Phoebey: beta for ungeared co = 0.9756



[21:45:01] priyak: take 150% of 2.4bn



[21:45:06] priyak: yes



[21:45:07] cgarcia: ok



[21:45:16] Esther: {cgarcia} they is no information given to find that so don't bother with that at this

point



[21:45:17] priyak: now regear beta



[21:45:30] cgarcia: ok



[21:45:37] Esther: using ve and vd of FliHi



[21:46:22] Esther: we can use net asset for ve and the long term debt for vd



[21:46:32] Esther: which is ve 120 and vd 150

[21:46:49] Phoebey: yes



[21:48:07] Esther: so the beta for FliHi is be =baXve +vd(1-T)/VE



[21:48:36] cgarcia: correct



[21:48:42] cgarcia: which gives u 1.829



[21:48:53] Esther: .975X 120+150(1-.30)/120= 1.829



[21:49:59] priyak: now the capm



[21:50:06] Esther: ok



[21:51:01] Esther: ke=rf+b(rm-rf)



[21:51:14] priyak: please increase ur speed



[21:51:28] Esther: we are given the risk premium therefore



[21:51:54] Phoebey: 10.90



[21:51:59] Esther: 4.5+1.829(3.5)=10.90



[21:52:13] priyak: perfect



[21:52:22] priyak: so the assumptions now



[21:52:49] Phoebey: Rovers beta is adequate



[21:53:03] Phoebey: as a comparator



[21:53:03] Esther: right why?



[21:53:22] Phoebey: its an unlimited co.



[21:53:22] priyak: yes complete the sentence to get 1 mark



[21:53:34] Esther: because they do not have the same business risk



[21:53:59] priyak: next



[21:54:02] priyak: fast fast



[21:54:24] Esther: inoder to use CAPM the business risk must be the same we are sure if this is so with

rover



[21:54:28] Esther: ok



[21:55:15] Esther: no one has another assumptions

[21:55:21] priyak: contributions plz



[21:56:11] Esther: we use the book value to equity and not the market value which can distort the

figure



[21:56:55] priyak: the business risk is same for both provided with diff levels of activity and business mix



[21:56:59] cgarcia: ok....it is assumed that these companies operate in the same sector however,



[21:57:18] cgarcia: flihi is smaller



[21:57:24] Esther: {cgarcia} right



[21:57:37] priyak: 3 points for now



[21:57:43] priyak: jump to part b



[21:57:47] Esther: ok lets move on to part b as it is getting late for priya



[21:57:53] Phoebey: {cgarcia} and fly has partnershios with independent operators



[21:57:59] cgarcia: ok



[21:58:33] Esther: expected growth rate for FliHi



[21:58:33] priyak: expected growth rate using current rate of retention



[21:58:42] Esther: right



[21:59:00] priyak: get the FCFe first to get thue retention rate



[21:59:12] Esther: ok we have the capital expenditure and the net cahlows from opereating activies



[21:59:25] Esther: ok



[21:59:58] Esther: so we have 210+(12-4-6)-4.1 =207.4



[22:00:25] priyak: fine



[22:01:08] priyak: sum responses required to understand tat u follow



[22:01:21] priyak: if not we keep waitin



[22:01:24] Esther: therfore we can take the 120.2/2007.4



[22:01:37] Esther: all agree



[22:01:38] priyak: 207.1



[22:01:49] Esther: ok

[22:02:05] priyak: {Esther} no response yet



[22:02:18] Esther: is anyone there



[22:02:27] priyak: wonder all r off their seat



[22:02:29] Esther: knock knock



[22:02:37] cgarcia: yes i am here



[22:02:39] Phoebey: {Esther} is that gordons growth



[22:02:43] cgarcia: jus trying to giure out



[22:02:44] Esther: do you agree



[22:02:51] Esther: no honey



[22:03:01] cgarcia: where u got the 6 from



[22:03:01] Esther: {Esther} ok



[22:03:16] Esther: sorry its 6.5 interest



[22:03:21] cgarcia: oh..



[22:03:26] cgarcia: thought i was going crazy



[22:03:27] Esther: hence we get 207.1



[22:03:31] priyak: tats the thing if u dont understand then n there so we could help



[22:03:38] cgarcia: ok...



[22:03:41] cgarcia: i follow



[22:03:44] Esther: ok great



[22:03:53] Esther: {Phoebey} r u understanding



[22:03:59] priyak: {Phoebey} ? ? ?



[22:04:05] Esther: what we did we find the FCFE to equity fist



[22:04:11] Phoebey: i get fcf



[22:04:19] Esther: and then to find the true retention trate



[22:04:22] Esther: ok

[22:04:31] Phoebey: dont know what formula is 120.2/207.4



[22:04:44] cgarcia: they said to use the retention rate in the question



[22:04:44] Esther: so the reation rate is taking the capital expenditure and divoide it by the FCFE



[22:04:53] cgarcia: correct



[22:04:57] Esther: {Phoebey} tell me if you get that part



[22:05:13] cgarcia: and from the question



[22:05:21] Esther: {cgarcia} yes



[22:05:22] cgarcia: the capial expenditure is 120.2



[22:05:27] Esther: {cgarcia} right



[22:05:28] cgarcia: check the cash flow



[22:05:29] priyak: everything doesnt prescribe a formula



[22:05:33] Phoebey: {Esther} has it got something to do with g= bre?



[22:05:44] priyak: tat is later



[22:05:57] Phoebey: ok



[22:06:05] Esther: yes when we find the retention rate then we plug in it the Gordon growth model



[22:06:05] priyak: u try jumping one step ahead of what v r discussin dear



[22:06:16] Phoebey: thats weird



[22:06:40] Esther: no we have to find this first if not how do we calculate g=br



[22:06:52] Phoebey: yes



[22:07:02] Esther: ok so all at this point



[22:07:53] priyak: so now u got the v



[22:07:59] Esther: ppl come on we are running out of time



[22:08:13] priyak: phobes favourite



[22:08:22] Esther: V?



[22:08:25] Esther: you meant r

[22:08:28] priyak: g



[22:08:54] priyak: get the g now



[22:08:58] Esther: ok



[22:09:50] cgarcia: so since we have figured out the retention



[22:09:52] Esther: g=br g=58x10.9=6.3%



[22:10:00] cgarcia: ok



[22:10:02] cgarcia: yup



[22:10:07] cgarcia: was jus gonna say that



[22:10:18] Esther: {cgarcia} ok



[22:10:23] Esther: {Phoebey} following



[22:10:28] Phoebey: yes



[22:10:34] Esther: great find G



[22:10:40] Phoebey: now 6 years



[22:11:19] Esther: so we have to find now the FCFE for 6 year



[22:11:47] Esther: {Esther} wait what about the estimated required return



[22:12:06] priyak: {Esther} yes



[22:12:16] priyak: what about it



[22:12:19] Esther: how do we find that



[22:12:33] priyak: get thecurrent rate of euity first



[22:12:36] Esther: they are talking about ROE agree all



[22:13:11] Esther: which is return on equity



[22:13:39] Phoebey: roce is the accounting rate of retuern



[22:13:46] Esther: ROE



[22:13:52] Esther: not ROCE



[22:13:53] Phoebey: do oh

[22:13:56] Phoebey: ok



[22:14:19] Esther: how do we find ROE



[22:14:26] Esther: does any knows



[22:14:32] Esther: anyone



[22:15:03] cgarcia: i dont understand



[22:15:19] cgarcia: isnt it the 10.9 calcuated earlier



[22:15:34] Phoebey: capital employed = net assets



[22:15:36] priyak: see the requirement is estimate required rate of return on equity



[22:15:39] Phoebey: profit =?



[22:16:07] priyak: for this we have to know what the current rate of return on equity is



[22:16:15] Esther: right but now they want us to calculate the return on equity we cannot calaculate KE

we already have that



[22:16:21] priyak: and the reivestment / retentiaon rate



[22:16:22] Esther: {priyak} agree



[22:17:05] priyak: and what is it?



[22:17:08] Esther: {Esther} use figures please



[22:17:20] Esther: {priyak} use fuigures pleas



[22:17:35] Phoebey: roe= POT/Capital employed



[22:17:42] Phoebey: PAT



[22:17:45] Esther: {Phoebey} right



[22:17:53] Phoebey: PAT?



[22:18:05] priyak: 50m / 120m * 100 = 41.67%



[22:18:07] priyak: agree?



[22:18:21] Esther: agreed



[22:18:30] Phoebey: how did you work out 50



[22:18:46] cgarcia: hmm..in the first paragraph phoebey

[22:18:50] cgarcia: they gave it to u



[22:18:56] Phoebey: its in the question



[22:19:03] Phoebey: thanks am blind totally



[22:19:07] cgarcia: lol



[22:19:11] Esther: {Phoebey} lol



[22:20:17] priyak: fine so the calc is ok



[22:20:19] Phoebey: now growth



[22:20:49] Esther: ok



[22:20:57] Esther: in FCFE



[22:21:28] priyak: yes the required rate of ROE



[22:21:43] Phoebey: aha for each of the 6 years



[22:21:50] Phoebey: the last yearis 4%



[22:21:55] priyak: not yet dear tat is part c



[22:22:00] Esther: {Phoebey} good good



[22:22:20] Phoebey: i was panicking and looking for actual cash flows



[22:22:31] Esther: {Phoebey} lol



[22:23:04] priyak: the ROE = 0.58 (retention rate) * 41.67 ( Current ROE)



[22:23:21] priyak: which gives 24.36%



[22:23:24] Esther: right



[22:23:28] priyak: then the assumptions to this



[22:23:44] priyak: 24.36 is unlikely to obtain



[22:23:50] priyak: now u tell me y?



[22:24:17] Esther: because the current rate of ke is 10.9



[22:24:31] priyak: ok



[22:25:15] Esther: also the PAt may be distorted from management manipluating the figures

[22:25:17] priyak: more contributions plz



[22:25:21] priyak: yeap



[22:25:54] Esther: the growth rate of 16.3 is unlikey to occur in the future



[22:26:02] priyak: 16.3?



[22:26:04] Esther: sorry 6.3%



[22:26:05] priyak: or 6.3?



[22:26:07] priyak: ok



[22:26:21] priyak: but tat is only for 5 years then onwards it is 4% only



[22:26:35] Esther: right



[22:26:47] Esther: which might not be the case



[22:26:47] priyak: steady growth rate not possible



[22:26:56] Esther: right



[22:27:04] Esther: moving on .....



[22:27:10] priyak: one more plz



[22:27:13] priyak: then move on



[22:27:14] Esther: or anyone has more



[22:28:13] Phoebey: i have a q



[22:28:14] Esther: {priyak} the repayment of the lons cannot affect the growth aswell too ? i am asking?



[22:28:18] priyak: this gives us rates that is clear for rover due to the diff in business mix



[22:28:21] priyak: {Phoebey} yes



[22:28:34] Phoebey: 24.36% , is this the amount reinvested?



[22:28:36] Esther: {Phoebey} yes



[22:28:37] priyak: yes would



[22:29:08] priyak: the required rate of return on equity that the shareholders or who so ever wants



[22:29:19] Phoebey: so75.64 is available for distribution ?

[22:30:04] Esther: {Phoebey} the 24.36 is the return on Equity



[22:30:17] priyak: 24.36 is what the people want



[22:30:17] Phoebey: so the rest is retained



[22:30:22] Esther: that is the return on thier investment



[22:30:45] priyak: {Phoebey} yes



[22:31:09] priyak: from the current info we got the retenttion rate as 57.96%



[22:31:12] priyak: 0.5796



[22:31:22] Phoebey: because retenion rate assumes that x current roe assumes the answer as a % is

what is retained



[22:31:27] priyak: so with the level of the expected info the retention becomes the diff



[22:31:57] Phoebey: my typing is back to front



[22:32:14] Phoebey: retention rate is not what is retained as such



[22:32:35] Phoebey: when multiplied by the ROE , it gives you what is distributable



[22:33:48] Esther: {Phoebey} this is what look at the answer when we are finished and see if you get it

sorted form there and then if you have doubts come back with iut



[22:34:02] Phoebey: ok



[22:34:07] Esther: {Phoebey} we have to move time is late for our head



[22:34:37] Esther: {Phoebey} agreed



[22:34:38] priyak: part c now



[22:34:44] Esther: ok



[22:34:47] Phoebey: ok



[22:35:09] Esther: {Phoebey} i myself a lil confused sop we both look it over right



[22:35:17] priyak: asked to estimate teh value of FliHi



[22:35:17] Esther: FCFE againnnnnn



[22:35:23] Esther: lol



[22:35:26] Phoebey: {Esther} yup thanks

[22:35:35] cgarcia: yea ne 2..im also confused



[22:35:36] Esther: ok



[22:35:39] cgarcia: part c



[22:35:53] Esther: so we have the fCFE to equity



[22:35:59] Esther: what is it 207.1



[22:36:00] Phoebey: i need to study a degree in English, then a Ph.d



[22:36:02] priyak: ok then way back to were the confusin started from



[22:36:51] priyak: i am waiting



[22:36:54] Esther: we have to take out the capital expenditure form here



[22:37:07] cgarcia: {priyak} so ur going back to part b?



[22:37:07] Esther: 207.1-120.2



[22:37:26] priyak: i wanna know from where the confusion arised so we sort it out b4 proceeding



[22:37:32] Phoebey: we continue i guess, i need to revise formulas



[22:37:38] cgarcia: ok...



[22:37:39] Phoebey: {Phoebey} ok



[22:38:02] cgarcia: I understand the calcualtion of the expected growth rate



[22:38:06] priyak: {Esther} not 207.1 - 120.2 it is 210 - 120.2



[22:38:06] cgarcia: based on the retention rate



[22:38:08] Esther: {priyak} am I correct



[22:38:26] cgarcia: when we reached to the required rate of rate....



[22:38:37] Esther: {priyak} ok



[22:38:55] cgarcia: u got 41.67%



[22:38:59] Esther: so i have a question why don't we take out the interest here and taxes



[22:39:01] priyak: ok



[22:39:40] cgarcia: priyak

[22:39:42] cgarcia: go ahead



[22:39:45] cgarcia: id figure it out



[22:39:51] cgarcia: :)



[22:39:53] priyak: ok fine



[22:40:34] Esther: {priyak} i guess no one can answer



[22:40:56] cgarcia: ok..



[22:41:07] cgarcia: we woud have calcualted the fcf in part b



[22:41:12] Esther: i was thinking since it FCFE we would have to take into account the interest and the

taxes to get what is remaing to equity shareholders



[22:41:20] priyak: yes tat was the current



[22:41:29] priyak: here we need the expected



[22:41:35] cgarcia: ooo ok



[22:41:42] priyak: and we dont know what the interest and tax we r to expect in the future



[22:41:56] Esther: {priyak} so therefore we do not have to take those variables into consideration



[22:42:09] Esther: {priyak} ok fair enough



[22:42:16] priyak: tats what i felt and worked through out



[22:42:21] Esther: ok



[22:42:34] Esther: so we have to state that as one of our limitations



[22:42:39] priyak: so expected FCFe = 210 - 120.2 = 89.8



[22:42:43] priyak: yes



[22:42:54] Esther: and we do that for up to 2010



[22:43:05] priyak: it is for sure that the interest and tax are not taken as the expected is unknown



[22:43:13] priyak: so figs in reality would very



[22:43:16] Esther: sorry using the graowth of 6.3% through to 2010



[22:43:20] priyak: yes



[22:43:21] cgarcia: right

[22:43:29] priyak: {Phoebey} u catching up?



[22:43:32] cgarcia: then 4%thereafter



[22:43:34] Esther: {priyak} right



[22:43:47] Esther: {Phoebey} where r u



[22:43:53] priyak: typin



[22:43:54] Phoebey: am just reading, i'll look in detail later



[22:44:00] priyak: ok fine



[22:44:06] Esther: {Phoebey} kool



[22:44:15] Esther: {Phoebey} but try to follow here



[22:44:18] priyak: so in year Toie 2005 the FCFe is 89.8



[22:44:35] priyak: then from year 2006 - 2010 increase by 1.063



[22:44:37] Esther: 2006 is 101



[22:44:44] Esther: sorry 95.45



[22:44:55] Esther: 2006 95.45



[22:44:59] Esther: 2007 101



[22:45:07] Esther: 2008 108



[22:45:09] priyak: k



[22:45:13] Esther: 2009 114



[22:45:21] Esther: 2010 121



[22:45:28] priyak: and



[22:45:28] Esther: but 2011 is 4%



[22:45:32] priyak: yes



[22:45:42] Esther: i.e 2011 is 126



[22:45:50] priyak: fine with all?



[22:46:05] Esther: {priyak} wait cgarcia is tying

[22:46:14] cgarcia: no im not



[22:46:19] Esther: ok



[22:46:20] cgarcia: im watching the calcualtions



[22:46:26] Esther: ok



[22:46:34] Esther: so you did not calaculate it



[22:46:39] Esther: try to do it here



[22:46:46] Esther: as we work together



[22:46:53] cgarcia: yea im watching ur ans...



[22:47:03] Esther: ok



[22:47:04] cgarcia: i understand



[22:47:08] Phoebey: 89.8?



[22:47:11] Esther: ok great



[22:47:22] Esther: that is 210 -120.2



[22:47:37] Phoebey: ok



[22:47:56] Esther: and then you gross it by the growth rate we calculated



[22:48:04] Esther: which is 6.3%



[22:48:20] cgarcia: priyak i have a question



[22:48:24] priyak: yes



[22:48:28] cgarcia: why didnt u pick up the interest and tax



[22:48:57] priyak: we dont know what the interest and tax is that we have to pay in the future



[22:48:59] Esther: {cgarcia} beacuse as i asked and priya explained we are not sure what the figures

gonna be in the futre



[22:49:10] Esther: hence that will be an assumptions



[22:49:18] tyna: hi all !



[22:49:28] priyak: Hai dear late for the class again



[22:49:28] Esther: {tyna} welcome

[22:49:36] cgarcia: ok..



[22:49:42] Esther: {priyak} beat her miss



[22:49:46] Esther: lol



[22:49:50] cgarcia: so cant we assume its the same as stated in the question



[22:49:54] Esther: just kidding



[22:50:02] Esther: we can asll



[22:50:05] Esther: aswell



[22:50:13] Esther: but again state the assumptions



[22:50:16] cgarcia: ok..jus checking...



[22:50:19] Esther: and here they asked for it



[22:50:25] Esther: right no probs



[22:51:08] Phoebey: so in futue similar q. ignor interest and tax for future cashflow?



[22:51:21] Phoebey: is thatthe norm?



[22:51:28] priyak: provided they have not given an estimate of the same



[22:51:46] priyak: this questionis an extra ordinary with so many assumptions



[22:52:00] Esther: {Phoebey} you have to understand that this paper is about assumptionms



[22:52:11] priyak: not a norm like requirements and the way it is worked out varies from question to

question



[22:52:20] priyak: specially examiner to examiner also now



[22:52:21] Esther: {priyak} right



[22:52:33] Phoebey: i feel sick



[22:52:34] Esther: but as you work you state your assumptions



[22:52:40] cgarcia: ok



[22:52:42] priyak: yes tat the point



[22:52:44] Esther: {Phoebey} not to worry you come



[22:52:49] priyak: u can score

[22:52:55] cgarcia: {Phoebey} dont



[22:52:57] priyak: fine move on



[22:53:04] cgarcia: ok..moving along



[22:53:10] priyak: the DF



[22:53:13] Esther: PV calculations now



[22:53:14] priyak: tell me this



[22:53:18] priyak: yeap



[22:53:41] priyak: the DF year on year plz



[22:53:57] Esther: we are using 10 % or 11



[22:53:57] cgarcia: huh?



[22:54:05] priyak: 10.9



[22:54:09] cgarcia: 10.9



[22:54:10] priyak: so 11 would be better



[22:54:16] Esther: ok



[22:54:18] cgarcia: ok 11



[22:54:18] priyak: 10.9 is what i took



[22:54:59] Esther: you have to round honey



[22:55:09] Esther: is either 11 or 10



[22:55:12] priyak: not necessary when u know to calc it



[22:55:14] cgarcia: really...



[22:55:21] cgarcia: ohh...



[22:55:23] Esther: turew



[22:55:27] Esther: true



[22:55:27] cgarcia: yup



[22:55:34] cgarcia: once u know hw to calculate no need to

[22:55:38] Esther: ok year one using 11%



[22:55:43] priyak: look at the table too



[22:55:45] Esther: 901



[22:55:53] Esther: .812



[22:55:56] Esther: .731



[22:56:02] Esther: .659



[22:56:09] Esther: .593



[22:56:16] Esther: .535



[22:56:20] priyak: no



[22:56:24] priyak: last year wrong



[22:56:32] priyak: in perpituity



[22:56:45] Esther: woww



[22:56:49] Esther: what a mistake



[22:56:51] Esther: ok



[22:57:22] Esther: last year is 126/.11x.535



[22:57:41] Esther: is that correct



[22:57:57] cgarcia: ok



[22:58:05] cgarcia: my figures are a bit different



[22:58:07] priyak: tat is how i took it



[22:58:19] priyak: but the std answer has taken it the DVM model



[22:59:01] Esther: ok



[22:59:05] cgarcia: ok.



[22:59:07] Esther: year 1 pv



[22:59:11] Esther: 86



[22:59:16] Esther: y2 82

[22:59:17] priyak: they have directly taken the PV value



[22:59:21] Esther: y3 79



[22:59:23] priyak: k



[22:59:25] Esther: y4 75



[22:59:34] Esther: y5 72



[22:59:39] priyak: k



[22:59:40] Esther: y6 the big one



[23:00:03] Esther: y6 is 613



[23:00:14] cgarcia: no..



[23:00:20] Esther: oops



[23:00:32] Phoebey: {Esther} go Esther .. speedy gonzalies :d



[23:01:20] Esther: {Phoebey} lol my dear you can always stop and ask a question



[23:01:32] Esther: i was just doing this as time is late for priya



[23:01:44] Phoebey: am fine, i see what you are doing



[23:01:50] priyak: tats ok not a probes



[23:01:51] Esther: but as they said everyone is fine with this



[23:02:05] priyak: i still have to call back on year 6



[23:02:35] Esther: ok



[23:02:39] cgarcia: for yr six



[23:02:43] Esther: y6 is wrong



[23:02:54] Esther: can some coreect it



[23:03:00] priyak: i dont know exactly



[23:03:16] priyak: coz the when i took it this way and completed checked the std answer



[23:03:27] priyak: the way they calc for year 6 is using DVM method



[23:03:29] cgarcia: last cf x (1+g)

[23:03:42] cgarcia: divided by ke-g)



[23:03:48] priyak: 121*1.04/.11-.04 is what they did



[23:03:53] Esther: wow that is strange for me



[23:03:59] priyak: {cgarcia} ok can u tell us y?



[23:04:01] Esther: ok



[23:04:02] priyak: we didnt get it



[23:04:03] cgarcia: that is for perpetuity



[23:04:14] priyak: the DVM method?



[23:04:22] cgarcia: thats the formauls my teacher gave....



[23:04:24] priyak: not what Esther mentioned earlier



[23:04:26] cgarcia: im not sure....



[23:04:35] cgarcia: *hides face**



[23:04:45] Phoebey: does it give the right answer



[23:04:50] Esther: {cgarcia} lol



[23:05:00] priyak: {Esther} i remeber practiin it other ways in other question. n u?



[23:05:25] Esther: well the answer i had can be correct however with assumptions you can be correct



[23:05:36] Esther: but if they did it that way not suree



[23:05:52] priyak: that way t he answer would be 1798



[23:05:57] Esther: i will stick to my way



[23:05:59] Esther: lol



[23:06:08] priyak: and they multipiled it again with DF of year 5



[23:06:08] Esther: ok



[23:06:18] Phoebey: last cashflow is CF/DF x previous years DF



[23:06:20] Esther: yes that is know is correct



[23:07:00] Esther: {Phoebey} lovely

[23:07:15] Esther: ok lets move on eveyone has the copncept



[23:07:25] Phoebey: thats what i know, but wheter it is right here no idea



[23:07:37] priyak: fine but still keep in mind to confrim it anf get back too



[23:07:53] priyak: {Phoebey} tat what even i know of dear and i did it tat way first



[23:08:13] priyak: {cgarcia} anyways ur also correct as the std answer shows it tat way



[23:08:14] Esther: {priyak} ok



[23:08:20] priyak: ok fine



[23:08:26] priyak: there u go u get the NPV



[23:08:35] priyak: add them up



[23:08:41] cgarcia: ok..gr8.......



[23:08:46] priyak: i mean here the present value of the equity



[23:08:51] Esther: i think they are coseect



[23:08:56] Esther: we are valuing a comapy



[23:08:57] cgarcia: i would find out tom for you'll and see what he says



[23:09:11] Esther: and therefore they use the DVM



[23:09:22] Esther: i think that is the logic behind the answer



[23:09:39] priyak: point 2 b noted my lord it is valuing equity



[23:09:51] priyak: fine



[23:10:07] priyak: do u want to go thru the whole part d report?



[23:10:07] Esther: {priyak} lol



[23:10:24] Esther: no



[23:10:28] priyak: or Fly all the way to Alsaka



[23:10:29] Esther: we can give points



[23:10:40] priyak: start shooting then



[23:10:55] priyak: contributions of points expected from all

[23:11:01] cgarcia: sigh



[23:11:05] cgarcia: really..lol



[23:11:06] Esther: culture



[23:11:12] cgarcia: jus kidding



[23:11:12] Esther: issues



[23:11:37] Phoebey: {priyak} so because they are valuing equity is that a reason to ignore the interest

and tax as well



[23:11:38] cgarcia: synergies



[23:11:44] Esther: i married to someone i don't even know verywell so in future we will have conflicts



[23:12:08] Esther: synergfies like economies of scale



[23:12:15] cgarcia: yes



[23:12:26] cgarcia: we can separate it into 3 categories



[23:12:30] cgarcia: operating economies



[23:12:35] cgarcia: financial synergy



[23:12:37] cgarcia: n other



[23:12:38] Esther: better asset sturcture in the event wanting to borrowing loans



[23:12:46] Phoebey: where are we



[23:12:53] Esther: {Phoebey} part d



[23:13:15] Phoebey: hostile takeover lol



[23:13:27] cgarcia: they could consider tehe 150 loan



[23:13:32] cgarcia: *the



[23:13:40] cgarcia: highly geared.



[23:13:42] Esther: {cgarcia} what about the loan



[23:13:49] Esther: {cgarcia} right great point



[23:13:56] Esther: too heavy debt



[23:14:13] priyak: {Phoebey} if so then we had to avoid it in the earlier calc also

[23:14:13] cgarcia: they expanded their fleet of operations



[23:14:17] Esther: structure and that might reflect bad on our greaing as well



[23:15:13] cgarcia: so they are interested in their assets



[23:15:15] cgarcia: correct/



[23:15:18] cgarcia: ?



[23:15:22] Esther: wher is tyna



[23:15:34] tyna: :)



[23:15:36] Phoebey: {priyak} i was joking



[23:15:37] cgarcia: so maybe they can do a valuation on a net asset basis



[23:15:39] Esther: {cgarcia} might be that too



[23:15:51] Esther: {tyna} come talk the talk girly



[23:15:51] cgarcia: to see how much their assets are worth



[23:16:00] priyak: done with all the contributions?



[23:16:06] Esther: no



[23:16:23] priyak: go ahead just went missing for a min tat y asked



[23:16:25] Esther: they will be getting into other markets



[23:16:32] tyna: {Esther} am trying to follow



[23:16:32] Esther: {priyak} ok



[23:16:34] cgarcia: i gave some



[23:16:37] Esther: {tyna} ok



[23:16:39] cgarcia: dont know if im right



[23:16:46] Phoebey: {cgarcia} not good for market valuation purpose- the asset based approach, due to

historical nature



[23:17:01] Esther: {Phoebey}great



[23:17:03] cgarcia: hmm....



[23:17:24] cgarcia: ok

[23:17:33] Phoebey: consider p/e ratio



[23:17:38] cgarcia: their PE RATIO



[23:17:41] Esther: they should not relay on that figure as they valuation is done historically that is what

she is saying



[23:17:47] cgarcia: HA..PHOEBEY U GOT ME



[23:17:48] Esther: {Phoebey} right



[23:17:59] Phoebey: i just woke up



[23:18:07] cgarcia: if th pe ratio is higher than theirs



[23:18:15] Esther: {Phoebey} lol



[23:18:16] cgarcia: it would reduce their eps



[23:18:36] Esther: {cgarcia} right



[23:19:06] cgarcia: can we also look @ the dividend yield priyak



[23:19:09] cgarcia: it is 0.00



[23:19:17] Esther: {Esther} but there might be synergies that balance out the higher payments



[23:19:18] Phoebey: they will probaly do other types of ratios, investment, profitability and liquidity



[23:20:03] Esther: they can as they use rover and not flihi



[23:20:06] Phoebey: look for costs of purchase of a comparative business as well



[23:20:12] Esther: {Phoebey} right



[23:20:18] Esther: we can talk so much here



[23:20:30] Esther: but try to fit in the scenarios as well



[23:20:39] Phoebey: based on combined synergies, they can revalue the company



[23:20:52] Esther: {Phoebey} yes



[23:20:56] cgarcia: gr8 point phoebey



[23:21:22] Esther: priya may be fallen asleep



[23:21:37] Phoebey: am looking at this CF statement and cant think of any questions lol apart from the

said loan

[23:22:00] priyak: not yet



[23:22:05] priyak: here as much alaive



[23:22:13] cgarcia: lol...k



[23:22:27] Esther: {priyak} ok thanks for accomodating us



[23:22:46] Phoebey: yes its been enriching once again, thanks to all



[23:22:51] priyak: so done with the part d?



[23:22:56] cgarcia: yea



[23:22:57] Phoebey: i wouldnt have a clue where to start



[23:23:00] cgarcia: i cant find anything else



[23:23:25] Esther: {Phoebeworking question and you will get familiar with it



[23:23:35] Phoebey: yes



[23:23:58] Phoebey: i didnt do f9, no teacher apart from u guys, and its my biggest challenge to get 50

marks



[23:24:30] priyak: {Phoebey} dont worry u will



[23:24:36] tyna: {Phoebey} dont worry about it,



[23:24:49] cgarcia: practice practice practice



[23:24:58] Phoebey: am learning how to discect the question which is good



[23:24:59] cgarcia: can isay practice again!



[23:25:11] Phoebey: you can if you spellit as practise



[23:25:19] cgarcia: hahahahaha...



[23:25:23] Phoebey: as opposed to a medical practice



[23:25:30] Phoebey: :d



[23:25:47] priyak: ok done with fly



[23:25:52] cgarcia: yup



[23:25:55] priyak: now settle down to alsaka?



[23:26:02] passed: awwww i missed the wonderful class tonight :cry:

[23:26:04] cgarcia: priyak were the ans for d substantial enuff



[23:26:26] passed: but have been following the discu



[23:26:26] priyak: pretty much



[23:26:36] cgarcia: ok



[23:26:39] Phoebey: for those who did f9, was it useful for p4?



[23:26:41] priyak: but could have a look at the std answer to have the concept clear



[23:26:41] cgarcia: which yr is alaska



[23:26:45] passed: :cry:



[23:26:59] priyak: dec 09



[23:27:02] cgarcia: ok



[23:27:09] priyak: BPP que 39



[23:27:15] cgarcia: ok



[23:27:15] passed: are we going on with alaska



[23:27:23] priyak: Kaplan que 55



[23:27:24] passed: aare moving on with it



[23:27:33] priyak: {passed} starting now



[23:27:39] passed: ok



[23:28:21] priyak: now dont tell me u guys need time to read the question



[23:28:36] priyak: as i know u guy would really need



[23:28:41] priyak: so 5 mins is mre than enuf



[23:28:49] cgarcia: ok



[23:29:00] cgarcia: hides face..



[23:29:55] cgarcia: priyak are u male or female..



[23:30:06] cgarcia: im assuming u did p4 a;ready



[23:30:13] Phoebey: BSOP

[23:30:15] priyak: female



[23:30:17] Phoebey: pa



[23:30:19] Phoebey: pe



[23:30:24] Phoebey: RISK free rate



[23:30:24] priyak: my second attempt



[23:30:27] Phoebey: volatility



[23:30:31] Phoebey: and



[23:30:32] priyak: she jumped



[23:30:38] priyak: wait myt dear



[23:30:43] Esther: {Phoebey} {priyak} lol



[23:30:43] cgarcia: lol



[23:30:46] priyak: have everyone read the question



[23:30:48] cgarcia: phoebe .....



[23:30:56] Phoebey: :d



[23:32:09] passed: can we continue with the question if u guys are done



[23:32:10] Phoebey: t



[23:32:17] passed: u wanna chat for a while



[23:32:23] priyak: fine so we start off



[23:32:24] passed: not time to chat abi?



[23:32:29] Esther: we are going to statrt now



[23:32:32] passed: ok BSOP



[23:32:38] priyak: yes



[23:32:45] passed: straight to the variables



[23:33:00] Esther: ok



[23:33:06] passed: can we state the variables

[23:33:14] passed: what is Pa



[23:33:19] Esther: pa pe and stiff like that



[23:33:20] passed: current pice



[23:33:23] cgarcia: pe - 90



[23:33:26] priyak: yes



[23:33:30] Esther: present value



[23:33:34] cgarcia: correct?



[23:33:35] passed: no currenct pirce is 85



[23:33:48] Esther: {passed} ok



[23:33:48] passed: 90 is the exercise price



[23:33:49] priyak: {cgarcia} correct



[23:33:55] passed: pls look at the question again



[23:33:56] priyak: {passed} wrong



[23:34:03] cgarcia: rf - 5%



[23:34:09] priyak: Pa is 85 and Pe is 90



[23:34:19] cgarcia: pa 85



[23:34:23] passed: {priyak} why am i wrong



[23:34:24] cgarcia: right



[23:34:26] Phoebey: exercise price is pe



[23:34:32] cgarcia: yes it is



[23:34:35] passed: you are restated what i suggestedd



[23:34:37] Phoebey: what is t



[23:34:42] passed: 5yrs



[23:34:45] priyak: wait



[23:34:53] passed: {priyak} ok

[23:34:53] priyak: let us sort out frist what is Pa n Pe



[23:34:59] cgarcia: 5 yrs



[23:35:03] priyak: {passed} u fine then?



[23:35:30] cgarcia: question i knew pe was 90



[23:35:31] passed: ok



[23:35:34] passed: lets move one



[23:35:36] cgarcia: but jus a quick exp



[23:35:37] passed: on*



[23:35:38] priyak: good



[23:35:42] cgarcia: as to why pa is 85



[23:35:46] Esther: ok



[23:36:07] Esther: that is the current market price



[23:36:13] passed: the shares are currently trading at 85



[23:36:13] priyak: the current value or strike price



[23:36:14] cgarcia: k



[23:36:16] cgarcia: gotcha!



[23:36:17] passed: so the current pice



[23:36:22] priyak: yes



[23:36:25] passed: or strike price



[23:36:29] priyak: s n r?



[23:36:40] passed: have we stated all the variables



[23:36:40] priyak: s & r?



[23:36:44] cgarcia: r - 5%



[23:36:51] priyak: k then



[23:36:52] passed: s=.2

[23:36:59] cgarcia: correct



[23:37:18] passed: so lets plug them in the formular



[23:37:23] priyak: the di plz?



[23:37:24] Phoebey: why is t 5 years



[23:37:29] Esther: {passed} i think you are moving a lil too afast for some



[23:37:33] passed: yes the di



[23:37:46] passed: {Esther} sorry Esther



[23:37:53] cgarcia: because its five yr notes



[23:37:56] Esther: but we stillneed to move at the pace



[23:38:00] priyak: {Phoebey} the project is 5 years



[23:38:06] Esther: but we have neww ones that really need to foloow



[23:38:21] passed: may i jst joined with fresh energy :d



[23:38:30] passed: guess some are tired now



[23:38:46] cgarcia: so ur good with the 5 yrs?



[23:38:47] priyak: not tat we r not energetic but wanna make sure everyone catches up



[23:38:48] Phoebey: {priyak} thanks



[23:38:52] cgarcia: {passed} @



[23:39:02] passed: {priyak} u right



[23:39:10] priyak: not that someone is left behind and in between they come back nad u have to restart



[23:39:12] priyak: tats all



[23:39:26] priyak: fine so calc the di



[23:39:28] passed: ok



[23:39:29] Esther: so is everyone following



[23:39:31] passed: lets move on



[23:40:00] Esther: answer ppl

[23:40:09] Esther: or elkse hell move on



[23:40:24] Phoebey: is t 5 as in(... )x 5



[23:40:54] priyak: tats the formula right?



[23:40:55] passed: di 0.6548



[23:41:01] Phoebey: yes



[23:41:04] priyak: yes



[23:41:15] priyak: n d2?



[23:41:30] Phoebey: t is just no. 5 not itme apportioned or any madness like that



[23:41:37] cgarcia: .2068



[23:41:47] passed: d2 0.2076



[23:41:53] cgarcia: that is d2



[23:42:03] cgarcia: well i guess we have rounding diferences



[23:42:08] priyak: yes



[23:42:11] passed: sure



[23:42:11] priyak: yes



[23:42:24] priyak: here u could get it down to one decimal place



[23:42:34] priyak: as u have to get the figs from the distribution table



[23:42:34] passed: ok



[23:42:51] priyak: ALL CATCHING UP?



[23:42:56] cgarcia: yea



[23:43:00] passed: {priyak} yes dear



[23:43:00] priyak: {Phoebey} ?



[23:43:15] Esther: i lost but i working mine out and i will be back



[23:43:24] Esther: you all go ahead



[23:43:33] priyak: fine

[23:43:38] Phoebey: N(d1) and N9d2) from formula tables add 0.5



[23:43:42] priyak: now N(d1



[23:43:44] priyak: yes



[23:44:05] priyak: n N(d2) plz



[23:44:33] priyak: 0.7454 and 0.5832



[23:44:34] passed: nd1 = .07437



[23:44:58] cgarcia: .7435



[23:45:20] passed: {cgarcia} what was your d1



[23:45:30] cgarcia: .6541



[23:45:34] passed: which values did you use



[23:45:35] cgarcia: @ passed



[23:46:13] priyak: sorry i said one decimal point it is 2 decimal points



[23:46:16] Phoebey: 0.7422 and



[23:46:23] Phoebey: 0.5832



[23:46:29] priyak: ok diff asnwers



[23:46:31] priyak: once again



[23:46:35] Esther: why don't you all set out the figures so everyone can follow please



[23:46:36] priyak: d1 and d2 plz



[23:46:49] priyak: {Esther} all gave diff figs



[23:46:58] Esther: so ppl can see wat figures are suing



[23:47:02] cgarcia: ok my d2 is .5820



[23:47:07] priyak: di and d2 is 0.66 n 0.21



[23:47:20] cgarcia: what do ull want...



[23:47:22] passed: ok



[23:47:26] Esther: oh sorry i did not see the quation with the figure in it

[23:47:27] cgarcia: jus asking



[23:47:57] Esther: should not be if we are suing the same figures



[23:48:00] priyak: {cgarcia} everyone tend to have got different Nd1 nNd2 figs so rechecking them from

d1 onwards



[23:48:10] cgarcia: for d1



[23:48:21] cgarcia: i got .6541



[23:48:27] cgarcia: d2



[23:48:30] cgarcia: .2069



[23:48:40] cgarcia: nd1 - .7435



[23:48:47] cgarcia: nd2 - .5820



[23:48:54] priyak: fine we go with it



[23:49:09] priyak: the c value now



[23:50:17] priyak: done ?



[23:50:28] priyak: 22.48 is what i got



[23:50:42] Phoebey: syntax error



[23:51:07] cgarcia: hmmiehget that



[23:51:13] cgarcia: I did not get that



[23:51:16] cgarcia: jus now



[23:51:51] priyak: {passed} where r u?



[23:52:00] priyak: {cgarcia} what is it tat u got?



[23:52:03] cgarcia: {priyak}



[23:52:18] cgarcia: what did u get for e-rt



[23:52:42] passed: {priyak} am here



[23:52:50] priyak: .7788



[23:52:55] Phoebey: i get 63 67



[23:53:10] Phoebey: which is wrong

[23:53:21] cgarcia: i not getting that



[23:53:38] cgarcia: i wonder if i am using the wrong symbol on the calculator



[23:53:40] cgarcia: lol



[23:53:40] passed: 22.48 is what i got



[23:53:50] priyak: {passed} same here



[23:53:59] passed: yes



[23:54:08] passed: can we go ahead and interprete the value



[23:54:25] priyak: {passed} hold a min plz



[23:54:31] passed: i guess our colleages are having little arithmatic issues



[23:54:34] priyak: {cgarcia} {Phoebey} u guys ok so far



[23:54:39] cgarcia: ok i got it



[23:54:42] Phoebey: i got 22.2



[23:54:45] cgarcia: was using the symbols wrong



[23:54:46] Phoebey: near enough



[23:54:52] priyak: ok



[23:55:02] priyak: but do recalc it later when u redo them plz



[23:55:05] priyak: {Phoebey}



[23:55:14] Esther: what is the C amount please



[23:55:17] priyak: {priyak} now we can move on



[23:55:20] cgarcia: 22.41



[23:55:21] priyak: 22.48



[23:55:27] Esther: ok



[23:55:29] priyak: rounding diff



[23:55:35] cgarcia: yea i guesss



[23:55:37] Phoebey: ok

[23:55:37] priyak: {passed} move on



[23:55:40] cgarcia: :)



[23:56:01] priyak: interpret the value plz now



[23:56:05] passed: so the question says for every 100



[23:56:08] Phoebey: so in words 22.48 is the value of each warrant



[23:56:14] passed: there is a warrant



[23:56:27] passed: now we need to find the value of the warrant



[23:56:38] passed: so we multiply C with 100



[23:56:41] Esther: each warrant is 100



[23:56:52] priyak: 100 shares



[23:57:04] priyak: now multiply it with the value



[23:57:15] priyak: u get the a warrant value



[23:57:16] passed: 100 equity shares carry a warrant



[23:57:18] Esther: therefore we multiply 100x22.48 = $2,248



[23:57:23] priyak: yes



[23:57:24] passed: right



[23:57:32] priyak: {Phoebey} fine?



[23:58:04] Phoebey: 100 equity shares is each warrant



[23:58:06] Phoebey: yes



[23:58:09] priyak: ok



[23:58:13] priyak: assumptions now



[23:58:37] passed: guess the assumptions underlining BSOP



[23:58:39] passed: right



[23:58:50] priyak: tat wont score u mark



[23:58:56] cgarcia: so thats it.

[23:59:05] priyak: u shud relate it to the given question also



[23:59:07] cgarcia: for the current value of the warrant



[23:59:11] passed: ok



[23:59:18] cgarcia: just mutiply by 100



[23:59:19] Phoebey: european style not american and we are dealing in dollars here



[23:59:24] passed: {cgarcia} yes



[23:59:26] priyak: ok



[23:59:27] cgarcia: ok



[23:59:47] cgarcia: assumes that it is a perfect market



[00:00:03] cgarcia: assumese that the volatility is constant



[00:00:03] priyak: unusal to see that the company pays no dividend to its equity holders



[00:00:15] passed: assume that risk free rate is contant over the period



[00:00:15] Esther: right



[00:00:20] Esther: ok



[00:00:30] Esther: {passed} which may not hold true



[00:00:37] passed: huh



[00:00:39] priyak: pretty sufficient to score for the marks alotted



[00:00:59] passed: {Esther} assumption may not hold true



[00:01:09] passed: isn't?



[00:01:20] cgarcia: can we also say that the model assumes that there is a market for the asset and it

can be traded



[00:01:30] Esther: risk free rate might not be constant over the period that what i am saying adding to

what you siad



[00:01:41] passed: ok



[00:01:46] passed: clear now



[00:02:18] priyak: {cgarcia} asset be traded?

[00:02:19] Esther: {cgarcia} right



[00:02:37] Phoebey: also assumes the exercise price will be used and not lapsed



[00:02:38] priyak: the search for gold?



[00:02:43] cgarcia: lol..



[00:02:47] cgarcia: never mind...



[00:03:01] cgarcia: no i mind....



[00:03:08] cgarcia: that is one of the assumptions of the model



[00:03:22] cgarcia: but im not sure it is relevent to this question



[00:03:25] priyak: ok accept it



[00:03:46] priyak: {cgarcia} it is good if u could point it to the scenario to score



[00:03:59] cgarcia: great



[00:04:00] priyak: or else a general answer u are not given any marks



[00:04:01] Phoebey: if marke condistions are favourable exercise price will not be used right?



[00:04:14] cgarcia: makes sense



[00:04:24] priyak: part b now



[00:04:58] priyak: required coupon rate



[00:05:50] Phoebey: this assumes we re-arrange a formula, but which formula



[00:05:54] passed: can we use the formular for finding the market value of debt



[00:06:18] passed: that is discounting the future cashflow



[00:06:27] passed: at a rate we dont know



[00:06:37] Esther: humm



[00:06:39] passed: which is what the question ask us to fine



[00:06:41] priyak: actually u could do a NPV here



[00:07:03] passed: sure?



[00:07:06] priyak: yes

[00:07:13] passed: ok



[00:07:16] priyak: u just want to get the coupon rate right



[00:07:22] cgarcia: yup



[00:07:27] passed: exactly



[00:07:29] priyak: fine set up the table



[00:07:39] priyak: what falls in To



[00:07:44] passed: 1 2 3 4 5 right



[00:07:53] priyak: no need that way



[00:07:58] passed: ok



[00:08:20] Phoebey: so there is a repayment at par



[00:08:21] priyak: down it down ine afte rthe other



[00:08:31] priyak: T0



[00:08:33] priyak: T0



[00:08:37] priyak: T1 - T5



[00:08:40] priyak: and T5



[00:08:47] priyak: put it one after the other



[00:08:53] priyak: beneath*



[00:08:54] passed: what is TO



[00:08:59] cgarcia: Im not following



[00:09:16] passed: time zero



[00:09:20] passed: ?



[00:09:34] Phoebey: 10,000 loan



[00:10:01] Phoebey: t0 and t5 has 10,000



[00:10:27] You have added a drawing:



[00:10:38] priyak: bad but this is how i meant

[00:10:44] passed: ok



[00:11:05] passed: creative :d



[00:11:18] priyak: in To we have the (10000)



[00:11:26] cgarcia: i get it



[00:11:26] passed: ok



[00:11:33] cgarcia: that is what i was thinking



[00:11:41] cgarcia: but u lost me with the to ....



[00:11:45] priyak: the next To u have 2248



[00:11:57] priyak: +ve 2248



[00:12:27] priyak: T1 -T5 u have 10,000c



[00:12:43] priyak: and in T5 10000 again +ve



[00:13:07] Esther: ok



[00:13:15] Phoebey: why did u add the warrant in To



[00:14:28] priyak: that the inflow dear



[00:14:57] passed: i thot the warrant was a cash outflow



[00:15:02] Phoebey: in year 0



[00:15:14] priyak: it the value on equity u get



[00:15:39] passed: so in my thinking we will need to deduct the warrant from the 10,000



[00:16:30] passed: so the net effect is the cashflow to lender



[00:16:50] passed: which is 10,000-2248



[00:16:55] priyak: 10000 is -ve



[00:16:56] cgarcia: priyak.....:(



[00:17:13] passed: giving 7752



[00:17:18] priyak: tat like capex we put in the nomal calc



[00:17:38] priyak: -ve (7752)

[00:17:42] priyak: not =ve



[00:17:45] passed: right



[00:17:47] priyak: +ve*



[00:17:59] priyak: {cgarcia} yes what is it?



[00:18:05] cgarcia: lost....



[00:18:09] priyak: where?



[00:18:20] cgarcia: the entire thing



[00:18:24] cgarcia: but go ahead



[00:18:30] cgarcia: id review it when ur finished



[00:18:38] priyak: ok fine then



[00:18:39] cgarcia: not gonna keep ull back



[00:18:41] Phoebey: the warrant gives what right to the lender exactly?



[00:18:54] tyna: {priyak} what is qns requiement?



[00:18:57] passed: yes



[00:19:08] priyak: get the coupon rate



[00:19:19] priyak: in short the rate where NPV is nil



[00:19:35] cgarcia: right



[00:19:39] tyna: IRR?



[00:19:49] cgarcia: so is similar to an irr calcualtion?



[00:19:52] passed: sought of



[00:19:56] cgarcia: my thoughts tina



[00:19:57] priyak: kindda yes



[00:20:06] cgarcia: so in yr 0



[00:20:09] tyna: you mean the normal trial / error IRR?



[00:20:10] priyak: i have not tried tat way

[00:20:19] passed: {tyna} no



[00:20:19] cgarcia: what is the value



[00:21:00] priyak: if u wanna show the capex and the warrant separate then it is -10,000 and +ve 2248

in To



[00:21:05] tyna: {passed} so , what are we to find?



[00:21:12] priyak: if u wanna net then then -7752



[00:21:26] priyak: {tyna} the coupon rate dear



[00:21:27] passed: right



[00:21:27] Phoebey: so 2248 is like a discount



[00:21:42] priyak: not discount



[00:21:45] priyak: inflow



[00:21:47] passed: premium?



[00:21:51] priyak: 10000 outflow



[00:22:01] passed: ok



[00:22:01] priyak: premium?



[00:22:06] Phoebey: inflow to the lender



[00:22:07] priyak: no



[00:22:14] cgarcia: 2248 wsa the value of the call premium



[00:22:33] Phoebey: what is 2248



[00:22:36] cgarcia: so then u are saying dedcut it from the 100000



[00:22:46] priyak: i am not sayin to deduct



[00:22:48] cgarcia: {Phoebey} the value of the warrant



[00:22:50] cgarcia: t



[00:22:51] priyak: i said to show separately



[00:22:56] cgarcia: ok..



[00:22:58] priyak: passed deducted it

[00:23:17] priyak: so went along with it if he felt that comfortable



[00:23:22] cgarcia: ok



[00:23:23] Phoebey: {cgarcia} ok i need to do research on what warrants are



[00:23:28] priyak: but better to show the in and out separate



[00:23:37] cgarcia: ok.



[00:23:38] priyak: fine



[00:23:49] priyak: then in T1 - T5



[00:23:53] priyak: the interest



[00:23:55] priyak: we dont know



[00:24:03] priyak: so put it as 10,000c



[00:24:15] priyak: and in T5 10,000 +ve



[00:24:26] priyak: redeemable at par



[00:24:57] cgarcia: t1-t5 - 10000?



[00:26:58] Phoebey: fixed -rate 5 year note



[00:29:15] Phoebey: loan are in chunks of 100



[00:29:22] priyak: i tried makin it in excel and sending over



[00:29:31] passed: ok



[00:29:33] passed: great



[00:29:33] priyak: but i have to mail it now coz cant share thru the chat



[00:29:36] Phoebey: so debt on a balance sheet redeemable at par is divided by 100



[00:29:43] Esther: you can



[00:30:00] Esther: file picture share



[00:30:14] priyak: it says the file is not allowed for upload



[00:30:46] priyak: could mail right away if u could check ur mails



[00:30:58] cgarcia: yes i can

[00:31:08] priyak: just give me the ids so i need not have to search



[00:31:28] cgarcia: id?



[00:32:14] priyak: e-mail id plz



[00:32:24] cgarcia: candicesharky@gmail.com



[00:33:57] abduladedokun: {priyak} hello,sister



[00:34:04] priyak: yes?



[00:34:10] priyak: mailed it to few



[00:34:20] priyak: {abduladedokun} yes tell me



[00:34:39] abduladedokun: i think i will need the info too



[00:34:39] priyak: {tyna} {Esther} {Phoebey} {cgarcia} mailed u all



[00:34:50] Phoebey: cheers



[00:34:52] priyak: the info



[00:34:55] Esther: ok thanks



[00:35:06] abduladedokun: yes



[00:35:18] priyak: u mean the mail on the coupon rate calc?



[00:35:28] priyak: ur e-mail plz then



[00:35:56] abduladedokun: abduladedokun@yahoo.com



[00:36:06] cgarcia: i would have never figured that out..



[00:36:09] cgarcia: NEVER!



[00:36:43] priyak: {abduladedokun} done



[00:36:47] priyak: check the mail



[00:37:03] abduladedokun: {priyak} thanks i will check now



[00:37:05] priyak: there r few yet whose id r not known to me



[00:37:20] abduladedokun: what?



[00:37:25] priyak: what?

[00:37:59] priyak: fin eguys?



[00:38:03] priyak: fine*



[00:38:41] Esther: ok



[00:39:00] Phoebey: what was mailed?



[00:39:15] priyak: check the mail gud morning



[00:39:22] cgarcia: {priyak} 2322/3517



[00:39:25] priyak: how to calc the coupon rate



[00:39:28] cgarcia: HW DID U GET THAT



[00:39:32] Phoebey: ok thanks



[00:39:49] Phoebey: i cant open mail .. it takes for ever... old laptop



[00:39:54] priyak: 35170 sorry if error in typin



[00:39:55] Esther: {priyak} good moring



[00:40:11] cgarcia: OH



[00:40:11] priyak: ya ya morning for me only



[00:40:15] cgarcia: MY BAD



[00:40:37] priyak: alignment problem the figure is given in full



[00:40:43] Phoebey: i guess these calculations are in the mail



[00:40:48] priyak: yes



[00:40:49] cgarcia: YES I JUST REALISED



[00:40:55] cgarcia: 2322?



[00:41:26] priyak: the net of -10000+2248+5430



[00:42:08] abduladedokun: {priyak} what is the question pls?



[00:42:22] priyak: alsaka chemicals



[00:42:30] cgarcia: {abduladDEC 2009



[00:42:36] priyak: yes

[00:42:40] cgarcia: priyak...



[00:42:43] priyak: yes



[00:42:43] abduladedokun: ok



[00:42:46] cgarcia: how did u come up with this



[00:43:38] Esther: {cgarcia} that is logical i find but to figure that out the reverse is hard lol



[00:44:05] Phoebey: {priyak} its genius



[00:44:12] priyak: not me



[00:44:15] priyak: my Sir



[00:44:20] Phoebey: dividing the DF by the annuity



[00:44:43] cgarcia: sir what?



[00:44:57] cgarcia: u did this question allready then..



[00:45:16] Esther: her teacher



[00:45:20] priyak: I work out the question tat I put for homewrok prior to comin to the session



[00:45:22] cgarcia: k.



[00:45:24] Esther: {cgarcia} thats what she meant



[00:45:32] cgarcia: ok i understand



[00:45:39] priyak: and I ask everyone to do th esame too but hardly does anyonefind time for it



[00:45:47] cgarcia: hmmm



[00:45:58] cgarcia: well i thought ws yesterday



[00:46:12] cgarcia: and i knew i couldnt make it so i didnt bother



[00:46:13] Phoebey: {priyak} for some bizarre reason it reminds me of the MIRR



[00:46:19] priyak: u were not in the group circulations so u r not aware



[00:46:25] cgarcia: but ull caught me by surprise tpday



[00:46:34] cgarcia: *today



[00:46:36] priyak: i do keep giving updates on the sessions and practice works thru e-mails

[00:46:43] priyak: yes



[00:46:51] cgarcia: ok so can u add me now?



[00:47:01] priyak: u r added without asking itself



[00:47:09] cgarcia: so i will be better prepared next time



[00:47:13] priyak: ok u guys cud look at it at ur time



[00:47:22] Esther: {priyak} ok



[00:47:25] priyak: now move on to the next part and wind up



[00:47:29] abduladedokun: {priyak} i will want to b added too



[00:47:31] priyak: gonna be 1 am for me now



[00:47:34] cgarcia: priyak..so i am added right?



[00:47:38] cgarcia: jus verifying



[00:47:41] Esther: wow



[00:47:44] priyak: {abduladedokun} yes



[00:47:52] Esther: {priyak} time for sleeping



[00:47:55] cgarcia: advantages -



[00:48:06] abduladedokun: {priyak} added already?



[00:48:13] priyak: yes



[00:48:16] priyak: {abduladedokun}



[00:48:29] priyak: mezzaine debt advantages and disadvantages



[00:48:34] abduladedokun: {priyak} good



[00:48:36] cgarcia: disadvantages - higher rate of return



[00:48:51] priyak: go with advantages first plz



[00:48:59] cgarcia: i cudnt get any lol



[00:49:00] cgarcia: sry



[00:49:24] abduladedokun: carry double face

[00:49:35] Esther: where is paased



[00:49:41] priyak: plz make it sensible



[00:49:46] priyak: {abduladedokun}



[00:49:48] cgarcia: well its a mix of equity and debt for starters



[00:50:02] abduladedokun: opportunity of being converted to equity



[00:50:04] passed: am here Esther



[00:50:16] cgarcia: and it is usually short to medium term..



[00:50:38] cgarcia: because it is unsecured..



[00:50:43] cgarcia: it is a bit easier toa ccess



[00:50:49] cgarcia: *access



[00:50:54] Phoebey: is a warrant like a convertable debt?



[00:51:03] priyak: flexible like long term with fixed rate structure



[00:51:26] priyak: yes



[00:51:29] priyak: {Phoebey}



[00:51:52] priyak: is detachable and sold within the tenure



[00:51:57] cgarcia: {priyak} correct..let me know if i am wrong



[00:52:04] priyak: less equity dilution



[00:52:19] passed: {priyak} so the warrant can be sold separately



[00:52:20] Phoebey: if exercised then shares are diluted for existing holders maybe?



[00:52:25] priyak: {cgarcia} it isnot easier ot obtain



[00:52:33] cgarcia: ok



[00:52:43] priyak: {Phoebey} tat form disadv



[00:52:59] Phoebey: ok



[00:53:01] priyak: i hope u know what mezzaine dent is in the first place



[00:53:11] passed: {priyak} can we sell the warrant separately

[00:53:25] Phoebey: its a debt at high rate of interest



[00:53:29] passed: it is a high risky investment



[00:53:38] passed: {Phoebey} same with



[00:53:49] priyak: {passed} within the tenure



[00:53:53] Phoebey: and something else too



[00:53:55] passed: ok



[00:54:21] Phoebey: and it is unsecured



[00:54:22] cgarcia: ok



[00:54:29] cgarcia: higher rate of interest



[00:54:35] cgarcia: because it is unsecured



[00:54:50] Phoebey: got there in the end