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Return ( Ri)
15
12
20
(10)
14
Mean
Standard
deviation
=AVERAGE(B2:G2)
10.00
=STDEV(B2:G2)
10.45
Year
Cash Flow
Discount rate
1
1,000
12%
2,000 2,000
4
3,000
5
3,000
=NPV(B3,B2:I2)
PV of Uneven Cash Flow
6
4,000
7
4,000
8
5,000
13,375
(FV)
2,000,000
Annual saving (PMT)
Annual deposit
(PMT)
8,000
1,000
Interest rate
= RATE(B3,-C3,,A3)
11.43%
1,000,000
50,000
12%
= NPER(C3,B3,,-A3)
10.80
36
=PV(C3,B3,-A3)
1.50%
331,928
No. of
instalments
Present value Interest rate (in years)
Annual
instalment
amount
1,000,000
15%
(298,316)
Year
Beginning
amount
Annual
instalment
Interest
Principal
repayment
Remaining
balance
1,000,000
298,316
150000
148,316
851,684
851,684
298,316
127753
170,563
681,121
681,121
298,316
102168
196,148
484,973
484,973
298,316
72746
225,570
259,403
259,403
298,316
38910
259,406
(3)
Initial deposit
Interest rate
Period in years
-300,000
10% =PMT(B2,B3,B1
10
48,824
Exhibit 6.1
Balance Sheet of Horizon Limited as at March 31, 20x1
Rs in million
20 x 1
20x0
500
450
100
100
400
350
Non-current Liabilities
300
270
Long-term borrowings*
200
180
50
45
Long-term provisions
50
45
Current Liabilities
200
180
Short-term borrowings @
40
30
Trade payables
120
110
30
30
Short-term provisions
10
10
1,000
900
Non-current Assets
600
550
Fixed assets
500
450
Non-current investments
50
40
50
60
Current Assets
400
350
Current investments
20
20
Inventories
160
140
Trade receivables
140
120
60
50
20
20
1000
900
ASSETS
@ These borrowings are working capital loans which are likely to be renewed in A4the normal
course of business.A36
@ These borrowings are working capital loans which are likely to be renewed in A4the normal
course of business.A37
Exhibit 6.2
Statement of Profit and Loss for Horizon Limited for Year Ending March 31, 20x1
Rs. in million
Current
period
Previous Period
1290
1172
Other Income
10
Total Revenues
1300
1180
Material expenses
600
560
200
180
Finance costs
30
25
50
45
Other expenses
240
210
Total expenses
1120
1020
180
160
180
160
180
160
Tax Expense
50
40
130
120
Expenses
Exceptional Items
Profit before Extraordinary Items and Tax
Extraordinary Items
13
Diluted
13
Exhibit 6.5
Cash Flow Statement
(Rs. in million)
Formula
180
=B53
Adjustments for :
50
=B45
Finance costs
30
=B44
Interest income*
-10
=-B39
250
=sum(B65:B69
-20
=-(B27-C27)
Inventories
-20
=-(B26-C26)
10
=(B15-C15)
220
=B70+B72+B73+B74
-50
=-B54
170
=B75+B76
-100
=-(B21-C21+B45)
-10
=-(B22-C22)
10
=(C23-B23)
Interest income
10
=B39
-90
=SUM(B79:B82)
20
=B10-C10
10
=B14-C14
=B11-C11
=B12-C12
Dividend paid
-80
=-(B55-(B8-C8))
Finance costs
-30
=-B44
-70
=SUM(B85:B90)
10
=B77+B83+B91
50
=C28
60
=B28
Formula
Net profit
=B55
130
=B45
50
=B10-C10
20
=B11-C11
=B12-C12
=B14-C14
10
=B15-C15
10
10
Total sources
240
=SUM(G6:G13)
Foumula
Current ratio
2.00
=B24/B13
Acid-test ratio
1.20
=(B24-B26)/B13
Debt-equity ratio
1.00
=(B9+B13)/B6
Debt ratio
0.50
=(B9+B13)/B18
7.00
=(B53+B44)/B44
Inventory turnover
8.60
=B38/((B26+C26)/2
Debtors turnover
9.92
=B38/((B27+C27)/2)
2.72
=B38/((B21+C21)/2)
36.78
=365/F24
1.37
=B40/((B30+C30)/2)
36.43%
=(B38-F39)/B38
10.0%
=B55/B40
Return on assets
13.68%
=B55/((B30+C30)/2)
Earning power
22.1%
=(B53+B44)/((B30+C30)/2)
15.5%
=(B53+B44)*(1-F40)/((B30+C30)/2)
( Rs.in million
Return on equity
27.4%
=B55/((B6+C6)/2)
Price-earning ratio
15.38
=F38/(B55/F41
=F38/(B6/F41)
Given:
--The market price per share of Horizon
as on 31st March 20X1 is Rs.
200
820
30%
10
( Rs.in million)
Uses
Formula
Dividend payment
=G6-(B8-C8)
80
=B20-C20+B45
100
10
Increase in inventories
=B26-C26
20
=B27-C27
20
Total uses
=SUM(J6:J13)
230
=G14-J14
10
Foumula
=B24/B13
=(B24-B26)/B13
=(B9+B13)/B6
=(B9+B13)/B18
=(B53+B44)/B44
=B38/((B26+C26)/2
=B38/((B27+C27)/2)
=B38/((B21+C21)/2)
=365/F24
=B40/((B30+C30)/2)
=(B38-F39)/B38
=B55/B40
=B55/((B30+C30)/2)
=(B53+B44)/((B30+C30)/2)
=(B53+B44)*(1-F40)/((B30+C30)/2)
=B55/((B6+C6)/2)
=F38/(B55/F41
=F38/(B6/F41)
Return on Stock A
15
-5
5
35
25
Expected Return
15
15
15
Standard Deviation
14.14
14.14
9.49
=(B$5*(C5-C11)^2+$B$6*(C6-C11)^2+$B$7*(C7-C11)^2+$B$8*(C8-C11)^2+$B$
=(B$5*(D5-C12)^2+$B$6*(D6-C12)^2+$B$7*(D7-C12)^2+$B$8*(D8-C12)^2+$B
=(B$5*(E5-C13)^2+$B$6*(E6-C13)^2+$B$7*(E7-C13)^2+$B$8*(E8-C13)^2+$B
ndard Deviation
mula
11)^2+$B$8*(C8-C11)^2+$B$9*(C9-C11)^2)^0.5
12)^2+$B$8*(D8-C12)^2+$B$9*(D9-C12)^2)^0.5
13)^2+$B$8*(E8-C13)^2+$B$9*(E9-C13)^2)^0.5
State of
nature
Probability
1
0.1
2
0.3
3
0.3
4
0.2
5
0.1
Expected return on security 1
Expected return on security 2
Return on
security 1
( %)
(10)
15
18
22
27
16.0
14.0
Deviation of the
security 1 from its
mean
(9.0)
(2.0)
5.0
1.0
(2.0)
SUM=
Product of the
deviations times
probability
23.4
0.6
3
1.2
-2.2
26
Expected Standard
Return
Deviation
Coefficient of Correlation
Security A
12%
20%
-0.2
Security B
20%
40%
Proportio Proportion of
Portfolio
n of A
B
Expected Return
1(A)
1
0
12.00%
2
0.9
0.1
12.80%
3
0.759
0.241
13.93%
4
0.5
0.5
16.00%
5
0.25
0.75
18.00%
6(B)
0
1
20.00%
Formula used for
getting Expected
Return in cell D5 =
Standard Deviation
20.00%
17.64%
16.27%
20.49%
29.41%
40.00%
B5*$B$2+C5*$B$3
Period
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Return on Return on
stock
market
A(%)
portfolio(%)
10
12
15
14
18
13
14
10
16
9
16
13
18
14
4
7
-9
1
14
12
15
-11
14
16
6
8
7
7
-8
10
SUMMARY OUTPUT
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
Intercept
X Variable 1
0.274
0.075
0.004
8.619
15
Settlement
Maturity
1/1/2006
12/30/2013 The formula in this case is=B3+365*8, as the maturity period is 8 years
Rate
9%
Yield
13.2%
Redemption
100
Frequency
Basis
3 represents the day count convention :actual no.of days/365, in interest calculation
Price
79.99
Bond price is obtained per Rs.100 of the face value of the bond. Here, the redemption value being
Rs. 1000, the price would be Rs.79.99 x 1000/100 = Rs.799.9 or Rs.800
Given the bond price you can use the spreadshet to calculate the yield to maturity. In the above
worksheet, if you type the Price as 80 in cell B8 and wish to calculate the yield to maturity in cell B4
(of course all other data remaining unchanged), type =YIELD(B1,B2,B3,B8,B5,B6,B7) in cell B4 and
press enter any you will get the value as 13.2% in that cell. The cell references in the formula for the
yield respectively stand for Settlement, Maturity,Rate, Price(per Rs.100).Redemption value(per Rs.100),
Frequency and Basis.
Face value
Coupon payable
per annum
Years to maturity
in years
Redemption value
Current market
price
100
15%
6
100
=RATE(C3,C1*C2,-C5,C4)
89.5
Settlement
Maturity
Frequency
Basis
1/1/2006
12/31/2011
=DURATION(C6,C7,C2,F3,C8,C9)
18%
4.256
2
6
20%
10%
15%
2.40
70.76
3
50%
10
12%
16%
226.50
Exhibit 13.4
Free Cash Flow Forecast
Year
Asset value (Beginning)
NOPAT
Net investment
FCF
Growth rate
ROIC
Tax rate
Debt : equity
Debt value
WACC
Horizon value of the firm
Enterprise value
Equity value of Azura
Value per share of Azura
1
2
3
4
5
500.00 600.00 720.00 864.00 967.70
60.00 72.00 86.40 103.70 115.50
100.00 120.00 144.00 103.70 115.50
-40.00 -48.00 -57.60
0.00
0.00
20%
20%
20%
12%
12%
12%
Cost of equity
33.33%
Pre-tax cost of debt
1
:
1
250
No.of equity shares(cr)
11.00%
1563.9
742.24
492.24
49.22
Rs. in crore
6
1083.20
130.10
86.66
43.44
8%
16%
9%
10
Closing price
28.0
Moving Average
27.0
26.0
25.0
24.0
23.0
Ac t
ual
1 2 3 4 5 6 7 8 9 10
Trading day
S
E
u
d
r
R
=Rs.
= Rs.
=
=
=
=
200
220
1.4
0.9
0.1
1.1
Binomial Model
Illustration : page 6.24
Formula
Cu
=MAX(B6*B4-B5,0)
Cd
B
C
=MAX(B7*B4-B5,0)
=(H4-H5)/((B6-B7)*B4)
=(B7*H4-B6*H5)/((B6-B7)*B9)
=I6*B4-I7
60
Rs.
0
0.6
98.18
21.82
S0
60
Exercise price,
E
56
Standard deviation of
continuously compounded
annual return
0.3
Years to maturity,
t
0.5
d1
=(LN(C1/C2)+(C5+(C3^2)/2)*C4)/(C3*(C4^0.5))
0.7613
=C6-C3*(C4^0.5)
0.5492
= C1*NORMSDIST(C6)-(C2/EXP(C5*C4))*NORMSDIST(C7)
9.61
Exhibit 20.1
Loan Amortisation Schedule
Year
Amount
Outstanding
in the
Beginning
Interest
1
2
3
4
5
6
7
8
9
10
8,000,000
7,544,126
7,033,547
6,461,699
5,821,229
5,103,902
4,300,496
3,400,682
2,392,890
1,264,162
960,000
905,295
844,026
775,404
698,547
612,468
516,060
408,082
287,147
151,699
Amount
Principal
Installmen
Outstandin
Repayme
t
g at the
nt
End
Given:
1,415,874 455,874 7,544,126 Loan interest
1,415,874 510,579 7,033,547 Rent per year
1,415,874 571,848 6,461,699 Increase in rent per annum after the
1,415,874 640,470 5,821,229 Net salvage value after 10 years
1,415,874 717,327 5,103,902 Required hurdle rate from the investm
1,415,874 803,406 4,300,496 Equity in the property
1,415,874 899,814 3,400,682 Loan on the property
1,415,874
###
2,392,890 No.of equated annual instalements
1,415,874
###
1,264,162
Amount of equated annual instalmen
1,415,874
###
-12
Rental
Income
Post-tax
Rental
Income
Year
A
1
2
3
4
5
6
7
8
9
10
Interest
Payment
1,600,000
1,680,000
1,764,000
1,852,200
1,944,810
2,042,051
2,144,153
2,251,361
2,363,929
2,482,125
B = (0.79A)
1,264,000
1,327,200
1,393,560
1,463,238
1,536,400
1,613,220
1,693,881
1,778,575
1,867,504
1,960,879
Post-tax
Principal
Repayment
Interest
Payment
D=(0.7C)
960,000
905,295
844,026
775,404
698,547
612,468
516,060
408,082
287,147
151,699
672,000
633,707
590,818
542,783
488,983
428,728
361,242
285,657
201,003
106,190
455,874
510,579
571,848
640,470
717,327
803,406
899,814
1,007,792
1,128,727
1,264,175
Net Cash
Flow
F=(B-D-E)
136,126
182,915
230,894
279,985
330,090
381,086
432,825
485,125
537,774
590,515
an interest
nt per year
rease in rent per annum after the first year
t salvage value after 10 years
quired hurdle rate from the investment
uity in the property
an on the property
.of equated annual instalements
Year
0
1
2
3
4
5
6
7
8
9
10
IRR=
12%
1,600,000
5%
32,000,000
14%
8,000,000
8,000,000
10
1,415,873.31
1,415,874
Exhibit 22.13 :Portfolio composition for Constant Mix and CPPI policies
Proportion of
stocks in the
portfolio in
Constant Mix
policy
Multiplier in CPPI
policy
2
Floor value in CPPI policy
Constant Mix Policy
CPPI Policy
Market level
Stocks
Bonds
Total
Stocks
100
50,000
50,000
100,000
50,000
(Formulae used)
B5*(1-$B$2)/$B$2
B5+C5
80
45,000
45,000
90,000
30,000
(Formulae used) (B5*A7/A5+C5)*$B$2 B7*(1-$B$2)/$B$2
B7+C7 $D$2*(E5*(A7/A5)+F5-$F$2)
100
50,625
50,625
101,250
45,000
(Formulae used) (B7*A9/A7+C7)*$B$2 B9*(1-$B$2)/$B$2 B9+C9
$D$2*(E7*(A9/A7)+F7-$F$2)
50%
CPPI policies
75,000
CPPI Policy
Bonds
50,000
Total
100,000
E5+F5
60,000
90,000
(E5*(A7/A5)+F5)-E7
E7+F7
52,500
97,500
(E7*(A9/A7)+F7)-E9 E9+F9
Mean
Standard
Treynor
Fund
return
deviation Beta
Measure
A
17.1
28.1
1.2
7.083
B
14.5
19.7
0.92
6.413
C
13
22.8
1.04
4.231
Market Index
11
20.5
1
2.400
Risk-free return
8.6
0
0
Formula used for getting Treynor measure in cell E2
=
Formula used for getting Sharp measure in cell F2
=
Formula used for getting Jensen measure in cell G2
=
Formula used for getting M2 measure in cell H 2
=
Sharp
Measure
0.302
0.299
0.193
0.117
(B2-$B$6)/D2
(B2-$B$6)/C2
B2-($B$6+D2*($B$5-$B$6))
(($C$5/C2)*B2+(1-$C$5/C2)*$B$6)-$B$5
Managed Portfolio
Stock component
Bonds component
Cash component
Return earned
(percentage)
3.567
1.24
0.60
Weight
0.60
0.25
0.15
Exhibit 23.9
Bogey Performance and Excess Return
Benchmark
Weight
0.50
0.40
0.10
Component
Stock(Nifty)
Bond (I Sec)
Cash (Money market)
Bogey return
Return on managed portfolio
Excess return of managed portfolio
Return of Index
During
Month(percentage)
3.24
1.20
0.60
2.16
2.54
0.38
Exhibit 23.10
Performance Attribution
A: Contribution of Asset Allocation to Performance
Asset Class
Stock
Bond
Cash
Asset Class
Stock
Bond
Cash
Excess
Weight
0.10
-0.15
0.05
Portfolio
Excess
Performance(
Index
Performance(
%)
Performance(%)
%)
3.567
3.24
0.327
1.24
1.20
0.040
0.6
0.60
0.000
Contribution of selection within asset classes
Index
Return(%)
3.24
1.20
0.60
Portfolio
Weight
0.600
0.250
0.150
Exhibit 23.11
Sector Selection within the Stock Market
Sector
Difference in
Weights
-6
-5.6
4.1
2.2
-8.2
-2.3
7.2
4.6
4.4
-0.4
Sector
Return(%)
2.55
3
3.4
3.6
2.4
2.2
4.1
4.3
2.7
3.5
3.1
Exhibit 23.12
Summary of Portfolio Attribution
Portfolio weight
Asset allocation
Selection
a. Stock excess return
i. Sector allocation
ii. Security allocation
b. Bond excess return
Total excess return
Contribution(
Basis Points)
17.4
24.8
7.9
32.7
4.0
0.60
0.25
19.6
1.0
38.0
Contribution to
Performance(%)
0.324
-0.180
0.030
0.174
Contribution (%)
0.196
0.010
0.000
0.206
ck Market
Sector Over/Under
Performance
-0.55
-0.1
0.3
0.5
-0.7
-0.9
1
1.2
-0.4
0.4
Sector
Allocation
Contribution(B
asis Points)
3.3
0.56
1.23
1.1
5.74
2.07
7.2
5.52
-1.76
-0.16
Total=
24.8