Case 15.

1 Samrudh Company Limited

CASE 15.1 SAMRUDH COMPANY LIMITED

Q1

Book D/E
Curr Ratio
Inter Cover

1.04 Mkt Val D/E

1.00
4.00

Q2

Curr Ratio will drop to

0.80
High interest cover and low mkt value D/E may make this acceptable to lender

Q3

No. Post tax analysis is against renancing since tax break is deferred
NPV
IRR
Post Tax
4.40%
Computations appear at the end
_ 1.22
Pre Tax

Q4

0.73

0.55

6.71%

NPV suggests tiny but negative impact of

21.7
_
_ 1.22

6 paise in the share price of 35.25

crore shares

_ 0.06

P/E will suggest large positive impact

420
deltaPAT _
_

5.00%

65%
0.63

deltaEPS _
P/E

13.65

21.7

6.67

price rise _

_
4.20

P/E

8.50

price rise _

5.35

Computation of NPV and IRR

IDBI_loan

420

old_kd

14%

new_k

9%

kd_post_tax

5.85%

tax_rate

35%

prepay_
premium
11%

13.65

Case Solutions

Post tax analysis

opg prin

post tax
int diff

2002-03
2003-04
2004-05
2005-06
2006-07

420
315
210
105

prem

tax

cash ow

_ 46.2

3.234

13.65
10.24
6.83
3.41
34.13

_ 46.2

3.234
3.234
3.234
3.234
16.17

int diff

prem

cash ow

_ 46.2

_ 46.20
21.00
15.75
10.50
5.25
6.30

_ 42.97
16.88
13.47
10.06
6.65
4.10

Pretax analysis
opg prin
2002-03
2003-04
2004-05
2005-06
2006-07

420
315
210
105

21.00
15.75
10.50
5.25
52.50

_ 46.2