Year 1 2 3 4 5 6 7 8

Cashinflow (Rs, Cr) 0 20 30 50 40 35 35 36

Cash outflow (Rs, Cr) 220
Salvage value by selling
project (Rs, Cr) 200 180 160 140 120 100 80 60

Dicount rate 15%

Risk free rate 6%

Year Cashflow Salvage va Total Cash Discount factor

1 -220 200 -20
2 20 180 200
3 30 160 190
4 50 140 190
5 40 120 160
6 35 100 135
7 35 80 115
8 36 60 96
9 40 40 80
10 54 20 74
 9 10
40 54

40 20
Market Data
State price Discount Factor
Expected market return 12% qu 0.30874
Sigma of arket return 30% qd 0.634656
Risk free rate of return 6%

One period UP and Down of market

UP 1.521962
Down 0.83527

Year 0 Year 1 Year 2 Year 3 Year 4

390

380

370

350

320

300

285
200

250

225

210

180
80

50
100
30
 -20

-35

-50

-75

-110

-150

-170

-150

-225

-230

-245

-250

-265

-280

-290
 State Dependent present value factor
Year 5 Year 0 Year 1 Year 2 Year 3

400

380
0.029429
375

360
0.095321
340

300
0.060496
290

280 0.30874

260

240
0.060496
220

200

100 0.195944

50
0.124357
40 1

20

-10
 -30
0.060496
-40

-60
0.195944
-100

-120
0.124357
-150

-200
0.634656
-220

-230
0.124357
-240

-250
0.402788
-260

-270
0.255632
-280

-300
 NPV of Cashflow -192.09

ctor
Year 4 Year 5 Year 0 Year 1 Year 2

0.002805
0.009086
0.005766

0.005766
0.018677
0.011854
33.36218
0.005766
0.018677
0.011854

0.011854
0.038394
0.024367 61.74804

0.005766
0.018677
0.011854

0.011854
0.038394
0.024367

0.011854 35.26989
0.038394
0.024367

0.024367 100
0.078924
0.05009

0.005766
0.018677
0.011854

0.011854
0.038394
0.024367
-14.69579
0.011854
0.038394
0.024367

0.024367
0.078924
0.05009
-95.1984
0.011854
0.038394
0.024367

0.024367
0.078924
0.05009
-100.6971
0.024367
0.078924
0.05009

0.05009
0.162238
0.102966
Year 3 Year 4 Year 5

1.122086
3.543541
2.191265
11.18313
2.162432
6.910663
4.267356

1.960605
5.97679
3.55613
18.14872
3.437593
10.94229
6.822753

1.499286
4.669367
2.844904
13.61154
2.607829
8.062737
4.873395

1.185377
3.071519
1.218349
6.217847
0.974679
2.367716
1.00179

-0.057665
 -0.373549
-0.355613
-2.117351
-0.474151
-1.919699
-1.462018

-1.185377
-4.223338
-2.924037
-18.65354
-3.655046
-13.41706
-10.0179

-2.607829
-8.638647
-5.604404
-28.60209
-5.848074
-19.33635
-12.52238

-6.335413
-20.91483
-13.52417
-71.57696
-14.02506
-47.04913
-30.88967
Company No of outstanding shares (000s) Market Price (Rs.)

Company A 5000 600

Company B 4000 400
Company C (Subsidiary of company A) 2000 800
Company D (Subsidiary of company A) 3000 700
Company E (Subsidiary of company A) 5000 1000

Synergy ( Increase in value) Rs. Crores

Reduction in COGS 300
Increase in Revenue 400
Reduction in Admin cost 200

Company B is asking for 60% of synergy value as premium over its market value but it is finalised as 50% of synergy value.

Deal Structure I

Cash 20%
Share of A 40%
Shares of E 20%
Shares of C 10%
Shares of D 10%
s 50% of synergy value.

Deal Structure II

Cash 0%
Share of A 0%
Shares of E 20%
Shares of C 40%
Shares of D 40%
 Intermediary Cost of lease (Lease Rent)

EMI LEASE RENT

BANK LESSOR LESSEE

LOAN Right to use Asset
Ownership
COST

Property/Asset
Cost of lease (Lease Rent)

Credit payment in order to acquire Asset/Property

Commission Fee
Additional Services
Profit
VAT
Input Data

(Rs. Cr) Current Year Previous Year

Credit Sales 260 220

Cost of Goods Sold (COGS) 200 180
Average Inventory 80 70
Average Receivables 60 50
Average accounts payables 40 30
Purchases* 120 100