VPM's

DR VN BRIMS, Thane
Programme: MMS (2021-23)

Third Semester Regular Examination February 2023

Course Name: Course Code F316
Roll No. Marks 60
Total No. of 6 Duration 3 Hours
Total No. of printed pDate 15/02/2023
Course Outcome Statements:
CO1: RECALL the basic terminologies related to financial modeling.
CO2: UNDERSTAND concepts, frameworks, tools and techniques used in financial modeling.
CO3: MAKE USE OF financial statements, revenue drivers, sensitivity and scenario analysis using advanced excel to so
CO4: EXAMINE financial statements, segment revenue, geographic and product drivers to predict the future financial
CO5: COMPARE the financial model with equity reports to assess its viability
CO6: DEVELOP financial models of listed Indian companies for investment decision making.

Instructio
ns: -
Q. No 1
(All
Questions
are
Compulso
ry)
 VPM's
DR VN BRIMS, Thane
Programme: MMS (2021-23)

Third Semester Regular Examination February 2023

nologies related to financial modeling.

frameworks, tools and techniques used in financial modeling.
statements, revenue drivers, sensitivity and scenario analysis using advanced excel to solve managerial problems
ments, segment revenue, geographic and product drivers to predict the future financial performance of companies.
model with equity reports to assess its viability
els of listed Indian companies for investment decision making.
Name
Roll No
Division
Case/Case-let Study
ABC Pty Ltd intends to form a special purpose vehicle (SPV) in Australia. This will involve building new water treatment facilitie

The project is to be developed using a BOT arrangement where WaterSolution will finance and build, operate and transfer the
There are three off-take agreements:
to sell CallWater Pty Ltd 450,000 cubic litre of treated water per day at a price of $0.025 per cubic litre. This agreement will ex
to sell APWater Limited 550,000 cubic litre of treated water per day at a fixed price of $0.020 per cubic litre. This agreement w
to sell Nuwater Pty Ltd 600,000 cubic litre of treated water per day at a fixed price of $0.030 per cubic litre. This agreement w
The capital expenditure (include construction cost plus all relevant professional fees, insurance) is estimated at $85,000,000 in
WaterSolution has an agreement to buy untreated water from DirtyWater Ltd at a price of $0.012 per cubic litre. The price of
The annual operation cost (starting from year 1) is estimated to be as follows:
a. Management fees $350,000 per annum with an increase of 10% per annum
b. Maintenance works $600,000 per annum with an increase of 10% per annum
c. Insurance cost $150,000 per annum with an increase of 5% per annum
d. Miscellaneous cost is fixed at $100,000 per annum
Also assume the following:

Current interest-free rate (based on Government bond) is 3.5%

ABC Pty Ltd's beta is estimated to be 0.9 (based on the ratio of the standard deviation of the firm's return to the standard dev
Expected market return of the water industry where ABC Pty Ltd's main business lies, is 15%
WaterSolution will borrow 75% of the capital expenditure from a consortium of banks at a cost of 12%. The repayment will sta
Assume construction completed in year 0 and operation begin immediately in year 1
Assume there is no tax involved

Q1 a Analyze the total cost and returns of ABC limited from new water treatment facilities
Q1b Evaluate the proposed project and identify if this project can be undertaken by ABC limited under the project finan
 ralia. This will involve building new water treatment facilities. ABC Pty Ltd intends to undertake the development of the proposed water tr

aterSolution will finance and build, operate and transfer the facilities back to the state government at the end of 20 years.

ay at a price of $0.025 per cubic litre. This agreement will expire at the end of 20 years. The contract allows for the price to increase by 7%
y at a fixed price of $0.020 per cubic litre. This agreement will expire at the end of 20 years. The contract allows for the price to increase b
y at a fixed price of $0.030 per cubic litre. This agreement will expire at end of 20 years. The contract allows for the price to increase by 5%
professional fees, insurance) is estimated at $85,000,000 incurred at year 0
yWater Ltd at a price of $0.012 per cubic litre. The price of untreated water will increase by 3% per annum.

per annum
% per annum

standard deviation of the firm's return to the standard deviation of the stock market return)
main business lies, is 15%
onsortium of banks at a cost of 12%. The repayment will start immediately in Year 1 and should be repaid fully in year 20. The remaining 2
mediately in year 1

Marks BL CO

new water treatment facilities 6 Level 4 CO4

ct can be undertaken by ABC limited under the project finance scheme. 6 Level 5 CO5
of the proposed water treatment facilities through a project financing approach. The constructed facilities will be used as the business sol

e price to increase by 7% per annum.

or the price to increase by 10% per annum.
e price to increase by 5% per annum.

year 20. The remaining 25% is raised through equity.

e used as the business solution in providing clean water to the local community. The following are some of the in-principle agreements wi
n-principle agreements with the various parties after much negotiation:
Q. 2 Answer Any one from the following.
 Evaluate the initiating coverage report of Asian
Paints
and make investment recommendations
Q2 a accordingly
Q2b

Compare and comment on

relative and absolute
valuation methods (Do necessary calculations
where ever needed)

Discounted Cash Flow

General assumptions
Company Name Siemens
Ticker SIE.DE
Share price as of last close €95.31
Latest closing share price date 7/21/2016
Latest fiscal year end date 9/30/2015
Latest basic share count 823.408
Weighted average cost of capital (WACC) 5.2%
Free cash flow buildup
Fiscal year 2013A 2014A 2015A
Fiscal year end date 9/30/13 9/30/14 9/30/15

EBITDA 8,609 9,577 9,826

Depreciation and amortization 2,804 2,387 2,549
EBIT 5,805 7,190 7,277
tax rate 28.1% 27.6% 25.9%
NOPAT 4,174 5,208 5,393
Adjust :
Depreciation and amortization
Accounts receivable
Inventory
Accounts payable
Other current assets
Deferred tax assets (DTAs)
Other assets
Other non current liabilities
Non-cash (PIK) interest
Unlevered CFO
Less: Capital expenditures
Less: Purchases of intangible assets
Unlevered FCF
% growth

Discount factor due to being in the mid of year

Midperiod adjustment factor
Present value-UFCF

Terminal Value Calculation

Relative valuation
Perpetuity approach Exit EBITDA multiple app
Normalized FCF in last forecast period (t) Terminal year EBITDA
Normalized FCFt+1 Terminal value EBITDA multip
Long term growth rate (g) Terminal value
Terminal value Present value of terminal valu
Present value of terminal value Present value of stage 1 cash f
Present value of stage 1 cash flows Enterprise value
Enterprise value
Implied TV exit EBITDA multiple

Comment
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Marks BL CO
Level 5 CO5

Level 5 CO5

6
 2016E 2017E 2018E 2019E 2020E
9/30/16 9/30/17 9/30/18 9/30/19 9/30/20

10,707 11,086 11,446 11,833 12,368

3,007 2,968 2,892 2,808 2,842
7,700 8,118 8,554 9,025 9,526
26.7% 26.3% 26.5% 26.4% 26.5%
5,642 5,982 6,285 6,641 7,005

3,007 2,968 2,892 2,808 2,842

(600) (552) (1,099) (1,188) (1,263)
(311) (620) (1,166) (1,261) (1,341)
365 463 589 579 646
0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
269 269 269 269 269
0 0 0 0 0
8,373 8,511 7,771 7,848 8,158
(1,999) (2,131) (2,267) (2,415) (2,572)
(2,384) (2,203) (1,996) (1,761) (1,640)
3,989 4,177 3,508 3,672 3,947
4.7% (16.0%) 4.7% 7.5%

lative valuation
it EBITDA multiple approach
rminal year EBITDA
rminal value EBITDA multiple
rminal value
esent value of terminal value
esent value of stage 1 cash flows
terprise value
 Q. 3 Answer Any one
from the
following.

Q3 a Analyze the sensitivity table and comment on the impact on output (price) based on the different scenarios of inpu

Sensitivity analysis

Equity value per share

Stable long term growth rate (g):
1.2% 1.5% 1.7% 2.0% 2.2%
6.2% 68.5 72.7 77.2 82.4 88.2
5.7% 78.7 83.9 89.8 96.4 104.0
WACC:
5.2% 91.4 98.2 105.9 114.8 125.2
4.7% 107.8 116.8 127.4 139.8 154.8
4.2% 129.6 142.3 157.5 176.1 199.3

Q3 b Analyze the Revenues of Starbucks Corporation

Particulars(in millons, USD, un 2011A 2012A 2013A 2014A 2015A

Segment Revenue Data (Based on Geographical Segments)

Americas 9,065.00 9,936.00 11,000.80 11,980.50 13,293.40
China /Asia pacific 552.3 721.4 917.00 1,129.60 2,395.90
EMEA 1,046.80 1,141.30 1,160.00 1,294.80 1,216.70
Channel Development 860.5 1,292.20 1,420.70 1,546.00 1,730.90
Others 175.8 208.6 393.7 496.9 525.8
Total 11,700.40 13,299.50 14,892.20 16,447.80 19,162.70

You can do vertical and horizontal analysis to support your analysis

 Marks BL CO

ifferent scenarios of input (WACC & growth rate) 6 Level 4 CO4

6 Level 4 CO4
 Q. 4 Answer Any two from the following.

The book value of an asset 10 years from now

is expected to be. USD 40 million.
The average age of the asset is 7 years from that
point.
The expected inflation rate is 3%. Calculate the
expected liquidation value of the asset.

Q4a

Consolidated Balance Sheets

Assets 2018 2019 2020

Current Assets
Cash and cash equivalents 1,315 1,535 726
Receivables 1,411 1,480 1,400
Inventories 1,171 1,221 1,250
Other current assets 441 403 417
Total current assets 4,338 4,639 3,793

Property, plant and equipment, net 3,840 4,072 3,881

Goodwill, net 2,107 2,218 2,530
Other intangible assets, net 1,313 1,341 1,637
Deferred income taxes 301 188 152
Other assets 224 218 168
Total assets 12,123 12,676 12,161
 Liabilities and Shareholders' Equity
Current Liabilities
Notes and loans payable 13 11 12
Current portion of long-term debt
Accounts payable 1,124 1,212 1,222
Accrued income taxes 441 354 411
Other accruals 1,727 1,831 1,696
3,305 3,408 3,341

Additional information

Sales 15195 15454 15544

COGS 6072 6174 6313
Purchases 6224 6342
Q4b Calculate solvency ratio (Based on colgate's financials)

Q4c Calculate turnover ratio (Based on colgate's financials)

 Marks BL CO

Level 3 CO3

2021 2022

883 888
1,440 1,264
1,400 1,673
456 513
4,179 4,338

3,750 3,716
3,508 3,824
2,667 2,894
177 291
753 857
15,034 15,920
 260 258
254 9
1,237 1,393
370 403
1,917 2,341
4,038 4,404

15693 16471
6368 6454
6518 6727
6 Level 3 CO3

6 Level 2 CO2
 Q. 5

Q5a Explain the concepts of Macros and steps for recording of M

Q5b Illustrate what drives account receivables and complete the

Revenues
Accounts receivable
Beginning of period
Increases / (decreases)
End of period

AR as % of sales
Days sales outstanding (DSO)

Q6. Summarize drivers for PROPERTY, PLANT & EQUIPMENT and INTANGIBLE ASSETS and complete the schedule below.

PROPERTY, PLANT & EQUIPMENT and INTANGIBLE ASSETS

Revenues
Beginning of period
Plus: Capital expenditures
Less: Depreciation and Amortization
End of period
 Answer Any two from the
following.

concepts of Macros and steps for recording of Macros.

at drives account receivables and complete the schedule below ( no of days are 365)
2014 2015 2016 2017 2018 2019
71227 75636 79721 80721 81721 82721

14526 15982

ASSETS and complete the schedule below.

2014 2015 2016 2017 2018 2019

71227 75636 79721 80721 81721 82721

14198 18287
 6 Level 2 CO2

6 Level 2 CO2
2020
79721

6 Level 2 CO2

2020
79721
 Q. 6 Answer
Any two
from the
following
.

Marks

Q6 a Recall 5 important aspects covered in a particular annual report? 6

Q6 b List down the steps that are followed to prepare a financial model 6

Q6c What is meant by portfolio optimization? 6

 BL CO

Level 1 CO1

Level 1 CO1

Level 1 CO1