SVKM’S NMIMS

School of Business Management

Academic Year 2020-21
Program: MBA Year: II Trimester: IV
Subject: Strategic Financial Management Marks: 40
Date: 7 September 2020 Time: 2 hrs.
Instructions:1) Candidates should read carefully the questions before answering.
2) This is an open book, internet enabled exam.
3) All questions are compulsory and carry equal marks.
FINAL EXAMINATION (2020 – 2021 batch)

Question 1
Some US companies gave executives big bonuses before filing for
bankruptcy, angering creditors.
Companies across America are awarding top executives multimillion-
dollar “retention” bonuses shortly before declaring bankruptcy,
angering creditors who claim the payments are rewards for failure. The
practice has become commonplace among distressed companies
pushed over the edge by the coronavirus pandemic.
The list includes high-profile collapses such as JC Penney, Hertz and
Neiman Marcus; companies squeezed by the energy downturn such as
Whiting Petroleum; and smaller groups where revenues have been hit
by the health crisis, such as century-old lawnmower engine maker
Briggs & Stratton.
Brad Holly, Whiting’s chief executive who joined the company in
November 2017, received $6.4m at the end of March under a new
compensation plan approved by the board of directors, which he also
chairs, less than a week before the company filed for bankruptcy.
Whiting, which expects to emerge from Chapter 11 next month, said
last week that Mr Holly would step down as chief executive when that
happens and would receive an additional $2.53m in severance.
(Financial Times, August 20, 2020).

What ‘Terms and conditions’ should have been imposed, prior to December 1, 2019, to ensure
that lenders are protected? Name any company from the Project Work Schedule.doc which
may have done like this.CLO1
(5)

Question 2
In the first week of August 2020, the US 10-year treasury is around a record low of -1% in yields
in real terms. The market’s conviction that interest rates aren’t lifting off the zero bound for
many years to come, suggested by overnight index swaps -- a proxy for the Fed's risk-free rate
-- for the next five years (Exhibit 1).
If you are CFO of Microsoft, what would you do with the 4.500% Notes due 2040 as described
in the HBS Case Study Tombstones by Luehrman and Lane. The Term Sheet of the Notes is

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given on the page 4 of the case. What is the market value of the note today? CLO2
(5)

Question 3
The HBS Case Study Tombstones by Luehrman and Lane suggests that the Ford Motor
Company issued 300,000,000 shares in May 2009. Since then their stock prices are given in
Exhibits 2 and 3. Critically evaluate the Ford’s decision of May 2009. Did the Ford valuation
behave in the way as predicted by the static trade off theory? CLO4
(5)

Question 4
Assume that the Berkshire Partners as described in the HBS Case – Berkshire Partners:
Bidding for Carter’s is evaluating their bid as proposed by Goldman Sachs. Carter’s June
2020 financials are given in Exhibit 4. Financial proposal of Goldman is given in Exhibit 5.
Under the assumption that due to Covid pandemic population growth will be zero in the next 5
years. What should be their equity bidding amount? Show valuation steps and describe your
reasoning. CLO3 (5)

Question 5
Private sector lender ICICI Bank has raised Rs 15,000 crore through Qualified Institutions Placement
(QIP) of equity shares (419 million) at issue price of Rs 358 per share when market price was Rs
363.4 per share. Bank would primarily use the proceeds of the issue to strengthen the capital
adequacy ratio, improve the Bank’s competitive positioning and/ or general corporate requirements.
ICICI Bank’s Capital Adequacy Ratio (CAR) stood at 16 per cent with Tier I at 14.72 per cent as on
June 30, 2020. Does it make sense to issue shares at discount? You may assume that
outstanding shares of ICICI before the QIP were 27,514 million. CLO3
(5)

Question 6
Apple has decided to move some of its manufacturing facilities of its popular iPhone from China to
India in 2019 when it was facing USD/CNY projections (Exhibit 6) and USD/INR projections (Exhibit
7). Assuming that there is no Covid pandemic and no military skirmishes in the South China sea
and Himalayas, What should be Apple’s strategy? CLO1
(5)

Question 7
Compare cash flow characteristics of Swedish Match with any of the Indian company which were
part of your Project Work Schedule.doc. CLO3
(5)

Question 8
Why different investors (FB, KKR, Google and others) paid different prices for their investment in
RIL-Jio platform? It means that valuation of RIL-Jio platform was very volatile between March 2020
and July 2020. Do you agree or disagree with this statement? Why? CLO1
(5)

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Exhibit 1

Exhibit 2

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 Exhibit 3
Ford Motor Company
NYSE - NYSE Price. Currency in USD

Date Open High Low Close Volume

01-09-08 4.67 5.7 4.17 5.2 1435125400

01-09-09 7.51 7.77 6.75 7.21 1410174900

01-09-10 11.53 12.75 11.46 12.24 1108738500

01-09-11 11.14 11.27 9.32 9.67 1226287900

01-09-12 9.37 10.66 9.35 9.86 767225900

01-09-13 16.42 17.77 16.21 16.87 771336600

01-09-14 17.48 17.87 14.49 14.79 655672700

01-09-15 13.95 14.88 13.01 13.57 744638400

01-09-16 12.66 12.77 11.93 12.07 746043700

01-09-17 11.18 12.06 11.14 11.97 682274700

01-09-18 9.53 9.94 9.09 9.25 803729200

01-09-19 9.18 9.65 9.04 9.16 659445200

31-08-20 6.9 6.93 6.79 6.82 49182305

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 2016 2017 2018 2019 2020
2019 30,2020

Exhibit-5

4.750

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Exhibit 6

Exhibit 7

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