Finance Numericals

Formula of Venture Capital: Pre-money valuation:   It refers valuation of company assets before financing the assets through investors. Pre-money valuation: ·            Share Method Calculation ·            Percentage Method Share Method Calculation: Number of shares outstanding before investment * Price of new share Percentage Method: (Investment amount / Percentage of company for sale) – Investment amount                            OR Pre- money valuation = Post-money valuation - money raised Post-money valuation =   It refers valuation of company after investors made an investment in that company. Post money valuation = Pre-money valuation +money raised Pre-money valuation: Example:   Company XYZ has outstanding shares of Rs.5, 00,000 of Rs.10 each and it want to raise further capital in the form of 10,000 shares of Rs.8 each. Find out the pre-money valuation. Solution:  Share method: Pre-money valuation   =   Number of shares outs

Strangle:   It comes under neutral strategy. Strangle is same as straddle but the only difference is the strike price of put and call option is out of the money. Long strangle:   In long strangle the call and put option have different strike price and the premium paid is low if the investor buying a call and put option he has to pay low premium. In this case both options are out of the money. Maximum Profit = Unlimited Maximum Loss = Net premium paid + commission paid Break-Even Point = Strike price of Long call + Net premium received    (Upper break-even point) Strike price of long put – Net premium received                                         (Lower break-even point) Example:   Suppose Company XYZ stock traded at Rs.7200 and stock prices move in either upward or downward direction. How to gain in option market by using long strangle? Solution :  If the current market price of a stock is Rs.7200 and the investor buys a call option at Rs.7500 and the premi

           Bear Put spread:   In this strategy   investors assume rise in the price of an underlying   assets. In this strategy   buying a put option at higher strike price and selling another put option with lower strike price .   The premium paid is more than premium received. Maximum Profit = Strike price of long put – Strike price of short put – net premium paid – commission paid Maximum Loss = Net premium paid + commission paid Break-Even Point = Strike price of long put – Net premium paid Example:   How bear put option work where strike price of long put is Rs. 8700 for Rs.200 and the short put is Rs. 7900 for Rs. 160 and if market price of a stock is Rs.8200? Solution: If price of a stock is decreases to Rs.7700 then both options will exercise and the long put option having an intrinsic value of Rs. 1000 and short put having an intrinsic value of Rs. 200.The net profit is Rs. 760 (8700 – 7900 – 40). If price increases to Rs.8900 then both options will expire

  Today we will discuss about how to prepare cash budget under different methods? First method is receipt and payment method. Receipt and Payment method: Example:  From the following information, prepare 3 months cash budget from April to June. Find out the deficits or surplus. Months Sales Salary & Wages Material Purchase March 1, 70,000 19, 000 35, 000 48, 000 April 2, 20,000 25, 000 29, 000 62, 000 May 1, 56,320 16,890 21, 000 32, 200 June 3, 25,000 35, 000 26, 000 56, 360 ·           80% of sales were made in credit and 20% in cash. ·           70% of credit sales will be collected in next month and remaining amount collected in second months. ·           The repairing expense of a machine is Rs.10, 000 quarterly. ·           The opening cash balance in April is Rs.30, 000. Solution:   Cash   Budget for 3 months Particulars April (in Rs.) May (in Rs.) June (in Rs.) Receipts: Openin