11)
Total debt =€2850 x 10=€28500.
I can amortize this amount in 5 years that means I make annual repayment of debt of €5700(Excluded interest element).
My monthly payment shall be €475.(ex-interest).
Now, we compute interest for 5 years on reducing balance of debt amount.

Year1:€28500x12%=€3420

Year2:€22800x13%=€2223

Year3:€17100x14%=€1596

Year4:€11400x15%=€855

Year5:€5700x16%=€912.

Till the term of 3.5years we paid €24000(including half year interest of €427,rounding off) Outstanding liability cum-interest comes to €9890(€2850+427+5700+912).

If I sell the Vespas to book a loss of 10% on my debt my selling price shall be, €8900(let 100% selling price be €9890 thus at 90% it comes to €8900)

[Assumption : it is assumed that interest amount accrues annully and can be spread over the months in a year.]

6) There can be 2 approach to this question: 1st by using the formula a)Dividend price approach b) Capital asset pricing model.

2nd by using the cost of equity which you derive using capital asset pricing model (CAPM) to discount the selling price at present rate.

I will solve this by the 1st approach.

Dividend price approach : Formula being ke=D1/P0+G, where D1 is annual dividend, P0 is current market value of equity (ex-dividend) and G is for Growth rate of dividend.

Capital asset pricing model (CAPM) : Formula : Rf+b(Rm-Rf)

Where Rf is risk free returns, b is the beta coefficient, Rm is market risk.

Let's find the cost of equity using CAPM method which comes to 0.1723 by using above state formula.

Now we replace Ke in dividend price approach to 0.1723 which gets us current market value of securities I.e €8.67 Working is as follows, As the dividend grows by 50% and 38% in year 2 and 3 respectively, we can average it to 44% Using the formula we get current market price as 13.67 reduce the profit you made and that shall be the cost you paid for the securities.

[Note that this approach ignores future market value of securities.]

Use the same formula in question 2 and 5 by making appropriate assumption and you will find your answers. Only thing to care about in question 2 is that in the 1st part you won't consider dividend growth rate, only in 2nd part it is required to be considered.

Year1:€28500x12%=€3420

Year2:€22800x13%=€2223

Year3:€17100x14%=€1596

Year4:€11400x15%=€855

Year5:€5700x16%=€912.

Till the term of 3.5years we paid €24000(including half year interest of €427,rounding off) Outstanding liability cum-interest comes to €9890(€2850+427+5700+912).

If I sell the Vespas to book a loss of 10% on my debt my selling price shall be, €8900(let 100% selling price be €9890 thus at 90% it comes to €8900)

[Assumption : it is assumed that interest amount accrues annully and can be spread over the months in a year.]

6) There can be 2 approach to this question: 1st by using the formula a)Dividend price approach b) Capital asset pricing model.

2nd by using the cost of equity which you derive using capital asset pricing model (CAPM) to discount the selling price at present rate.

I will solve this by the 1st approach.

Dividend price approach : Formula being ke=D1/P0+G, where D1 is annual dividend, P0 is current market value of equity (ex-dividend) and G is for Growth rate of dividend.

Capital asset pricing model (CAPM) : Formula : Rf+b(Rm-Rf)

Where Rf is risk free returns, b is the beta coefficient, Rm is market risk.

Let's find the cost of equity using CAPM method which comes to 0.1723 by using above state formula.

Now we replace Ke in dividend price approach to 0.1723 which gets us current market value of securities I.e €8.67 Working is as follows, As the dividend grows by 50% and 38% in year 2 and 3 respectively, we can average it to 44% Using the formula we get current market price as 13.67 reduce the profit you made and that shall be the cost you paid for the securities.

[Note that this approach ignores future market value of securities.]

Use the same formula in question 2 and 5 by making appropriate assumption and you will find your answers. Only thing to care about in question 2 is that in the 1st part you won't consider dividend growth rate, only in 2nd part it is required to be considered.