3/23 1801E1653 Candidate’s Seat No - M.B.A-II (Sem.-4) Examination Corporate Finance & Restructuring Time : 2-30 Hours} January 2019 [Max. Marks : 70 Instructions: (1) This paper contains five questions (2) Questions 1 and 5 are compulsory (3) Questions 2, 3 and 4 have internal options (4) Figures in the right side in the parenthesis indicate marks @1 Dream well company Ltd is expecting an annual income of Rs.50000, (07) (a) whose cost of equity is 12.5%. The company at present has the debt of Rs, 300000 of 5% interest. You are required to determine the value of the company's present situation and its following cases. Case (1) If the company has to raise the debt by Rs. 200000. Case (2) If the company has to reduce the debt to Rs. 100000. QL Suppose you invest 47% of your portfolio in Reliance Energy and 53% in (07) Grasim Industries. The expected return on your Reliance Energy stock is 8.5% and on Grasim is 7%. The standard deviation of their annualized daily retums is 18.5% and 16.5%, respectively. Assume a correlation coefficient of 1.0 and calculate the portfolio variance. Q2 ‘The certainty equivalent approach is theoretically superior to the risk- (07) (a) adjusted discount rate.’ Do you agree? Give reasons. Q-2 A company has two mutually exclusive projects under consideration — (07) (©) Project A and Project B. Each project requires an initial cash outlay of Rs, 600000 and has an effective life of 10 years. The company’s cost of capital is 12%. The below mentioned table shows the forecasts of the Cashflows made by the management, ‘Scenarios | Project A Cashinflows | Project B Cashinflows | Pessimistic | __Rs. 131 ~___Rs.50000 _Expected Rs. 15 Rs.150000 [Optimistic [Rs 180000 | ___ Rs. 200000 Eildie wiih rei score ly a ee project is more risky. Or Q2 Describe the sources for obtaining the working capital finance and long (07) (a) term finance for an organization? Q-2 In order to provide a better finish to the products, it has been suggested (07) (b) that a new polishing process should be introduced in the production schedule. A new machine will be required for this purpose so long the firm is operating. Two suppliers have been short listed for acquisition of the machine. However the relevant details as provided here under explain that the two machines differ. Particulars: ‘Machine A ‘Machine B Cost Rs. 50000 ‘| Rs. 90000 wal Operating Cost Rs. 10000 Rs. 8000 _ Rs. 5000 Rs. 7000 4 years: | T years 1 PTO.Q3 @) Q3 (b) Q3 (a) Q3 (b) Q4 (a) Q4 (b) Q4 (a) (b) E)6s3 ~2 Which machine is accepted given that the rate of discount is 10%. Tax may be ignored. Define the following: 1, Equity Carve out, 2. Joint Venture. 3. Divestiture, 4. Consolidation 5. Leverage Buyout. Merger of ICICI with ICICI Bank exploits the loopholes of Accounting Standard 14? Discuss or ‘What is Delisting of Securities? Explain its types? What are the Delisting guidelines given under SEBI? Explain Legal provisions of Company Law with respect to Mergers & Acqusition. Explain Exchange Ratio and Different Methods of Determining the Exchange Ratio in case of the Merger and Acquisition, ‘The following data is available for the two firms X and Y for the year ending on 31/3/2018. Particulars - | | Barings after tax —_[ 37500 ‘Number of Shares Outstandin, 7500 ‘Earnings per Share [Rs. 5 P/E Ratio _ Rs.8 | [Market Price Rs. 40 ‘Firm X intends to acquire fitm Y and offered one share tor every 1.5 shares of ¥ Ltd, Assume that Firm X expects to have the same earnings and P/E ratios after the merger as before (no synergy effect), Show the extent of the gain accruing to the shareholders of both the companies as 2 result of merger. Are the shareholders better off or worse off than they were before merger? Or Ram Ltd was worth Rs.900 lakhs and Kapoor Ltd had a market value of Rs. 750 lakhs, Ram Ltd acquired Kapoor Ltd for Rs. 850 lakhs because they thought the combination of the Ram Ltd and Kapoor Ltd was worth 1850 lakhs. What is the synergy and NPV from the merger/acquisition of Ram Ltd and Kapoor Ltd? Explain as to which synergy is realized in undermentioned cases: 1. Kingfisher Airlines acquired Deccan Airways 2. Oriental Bank of Commerce's (OBC) takeover of Global Trust Bank (GTB) 3, Hindustan Lever Limited (HLL) acquired Lakme’s Brand and Business. ‘Mergers & Acqusitions in Automobile Sector. Indian automobile giants have restructured their roles from being exporters to overseas investors. The auto majors wanted to integrate low cost sourcing of components and technical know-how to compete successfully in the international market. Domestic auto companies are increasingly opting for acquisitions to gain access to global clients. The acquisition of small and midsized companies provide Indian auto component majors proximity to regulated markets like the US and Europe, and also provide an opportunity to attain higher margins. The 2 (07) (07) 07) 7 07) (07) (07) (07) (4)El6s3-3 automobile industry, especially the auto ancillary/component companies, has been at the forefront of the acquisition spree. Various reasons can be attributed for acquiring business abroad. It gives the Indian companies easier access to foreign original equipment (OEM). It helps them to broaden customer base, capturing more market share, and enhance product portfolio. Buying a foreign company helps in expanding the client base and orders. Tata Motors acquired the Korean arm of Daewoo Motors truck business and M&M acquired the tractor manufacturing assets of Jiangling Tractor, a fully owned company of Jiangling Motor. In 2004, Tata Motors had acquired South Korea’s Daewoo Commercial Vehicle Corporation (DCVC) for Rs 459 crore. Daewoo Motors, the parent company of DWCV, was started in 1970, and had gradually become Korea’s second largest conglomerate. With increasing debt burden, it became bankrupt in the year 2000. The Daewoo acquisition gave the company entry into China, the world’s most lucrative automobile market. The automobile industry, especially the auto ancillary/component companies, has been at the forefront of the acquisition spree. Various reasons can be attributed for acquiring business abroad. It gives the Indian companies easier access to foreign original equipment (OEM). It helps them to broaden customer base, capturing more market share, and enhance product portfolio. Buying a foreign company helps in expanding the client base and orders. Indian auto ancillary companies are increasingly looking at foreign acquisitions to grow and sustain their market competitiveness. Acquiring overseas firms facilitate Indian companies by reducing delivery time. Indian auto component majors’ proximity to regulated markets like the US and Europe give them an opportunity to attain higher margins. With an emphasis on diversification, Bharat Forge grew from a primarily automotive ancillary to an engineering enterprise focusing on technological supremacy, resilience and total customer orientation, Bharat Forge had made several strategic acquisitions during the period 2005-06. The company’s global acquisition strategy consisted of two key aspects. ‘The company aimed to broaden its customer base by bringing in a wider portfolio of product offering to a larger group of customers. The company also wanted to have global facilities that would assist the company in working with Original Equipment Manufacturers (OEMs) as an engineering and development partner. Thus, the company focused on acquiring such companies that had product complementarities and manufacturing facilities, which could be leveraged for cost effective and flexible production system. Question Discuss the case in context of corporate restructuring and comment upon the activities mentioned in the case which can be termed as corporate restructuring.632 Time : 2.30 Hours} 2101E706 _ M.B.A-2 (Sem-4) Examination Finance: Corporate Finance & Restruct January 2020 Candidate's Seat No uring Instructions: (1) This paper contains five questions (a) Q2 (2) Questions 1 and 5 are compulsory (3) Questions 2, 3 and 4 have internal options (4) Figures in the right side in the parenthesis indicate marks Identify the Synergy and Answer with reason as to which synergy is indicated in the under mentioned deals. 1. Tata Motors acquisition of Daewoo’s commercial vehicle unit; 2. Kingfisher Airlines acquired Deccan Airways 3. Hindustan Lever Limited (HLL) acquired Lakme’s brand and business 4, Oriental Bank of Commerce’s (OBC) takeover of Global Trust Bank (GTB) 5. Daiichi Sankyo and Ranbaxy deal White Limited agreed to acquire the business of Green Limited as on 31st March 2010 as on which the Balance Sheet of Green Ltd was summarized as follows. Liabilities Rs__| Assets Rs Capital (in fully paid | 600000 Goodwill 100000, shares of Rs. 10 each) _ ‘General reserve 170000 Land and Building | 300000 | [Profit and Loss Account| 110000 | Plant 340000 [ 6% Debentures ‘| 100000 Stock [168000 Creditors 20000 | Debtors 36000 — Cash 36000 1000000 [io00000 ‘The consideration payable by White Ltd was: Cash payment Rs 2.50 for every shares in Green Ltd, The issue of 90,000, Rs 10 shares at an agreed value of Rs 12.50 per share, and 6% debentures of Green Ltd are taken over by White Ltd and are discharged by the issue of such an amount of fully paid 5% debentures in White Ltd at 96% as is sufficient to discharge the 6% debenture in Green Ltd at a premium of 20%, Calculate the amount of purchase consideration to be discharged according to Accounting Standard 14. Bharat Soaps Ltd is proposing to market a new brand of soap. The product will first be (est marketed for two years in Pune at an initial cost of Rs. 5,00,000. The test launch is not expected to produce any profits but should reveal consumer preferences. There is a 60% chance that demand will be satisfactory. In this case BSL will spend Rs. 50 million to launch the soap nationwide and will receive an expected annual profit of Rs. 7,00,000. If the demand is not satisfactory, the soap will be withdrawn, Once the consumer preferences are known, the soap will be subject to an average degree of risk, and therefore BSL requires a return of 12% on its investment. However the initial test market phase is viewed as much riskier and BSL demands retum of 40% on its initial expenditure. Calculate the NPV of the soap project. or Explain with illustration the Miller and Modigtiani’s proposition on dividend irrelevance Explain with suitable illustration Certainty Equivalent Method of Analyzing the 1 PTO [Max. Marks : 79 O (07) (4) (07) 7)(a) ) Q4 fa) Q4 () (a) Qs Eb -Q risk in a project, Do you agree that the main motive behind the merger of ICICI with ICICI Bank was survival of ICICI? Say whether you think it Yes or NO and give reasons for your answer Differentiate between the Friendly Takeover and Hostile Takeover? Describe various globally prominent defence tactics employed the so that the takeover does not take place Or What is Corporate Restructuring? Describe the Motives behind Corporate Restructuring? Also state the dimensions of Corporate Restructuring? Explain in detail: General conditions and obligations of companies opting for buy-back under ‘SEBI buy-back regulations ‘What is leverage buyout ? Explain in detail characterstics of leverage buyout. From the following information calculate the value of subsidiary. Revenue Rs, 16 crores, EBIT Rs. 7 crores, Capital Expenditure Rs, $30 crores, Depreciation Rs. 410 lakhs, Changes in Working Capital = 150 lakhs, Beta 1.05, Average Debt Ratio 24.79% , cost of debt 8%, Tax Rate 30%, Growth Rate in free cash flow to the firm 5%, Risk free rate of return 7.5%, Market Risk Premium 5.5%, or Following are the particulars of two companies, A Ltd and T Lid Particulars Ald [TLid ‘Earnings after Tax 200000 | 60000 ‘No, of Equity Shares Outstanding 000 [4000 [EPS 25 15 P/E Ratio 8 3 Market Price. 150 73 Calculate: Exchange Ratio (Swap Ratio) based on EPS and Market Price and Value of ‘the Firm. Enterprise Value of a company is the sum total of the NPVs of net cash flows for the years for which projections have been done plus the NPV of cash flows beyond the projection horizon captured through what is known as continuing value (CV) at the tend of the projection period.’ State the steps to be followed for computing present values of projected cash flows and of continuing value? Taking advantage of the Wall Street meltdown and global financial crunch, the cash- rich IT an BPO firms were on a bargain-hunting spree on the deal street late 2008 and carly 2009.The Indian IT and ITES companies witnessed Mé&A and PE investments worth $3.8 billion in the year up to December 15, 2008 surpassing $3.62 billion in 2007, including the WIPRO’s acquisition of CITI Technology Services, the India-based captive IT unit of Citigroup Inc at $127 million. Of the total M&camp;A & PE deals worth $3.8 billion, as many as 72cross- border deals added to nearly $2.69 billion ($2.51 billion in 2007), according to advisory firm Grant Thornton. This jnchuded $2.27 billion of outbound acquisitions and $306 million in inbound deals However, even as the IT companies went on an acquisition overdrive, the PE deals between Tanuary and December 15, 2008 slumped to $488 million ($744 million in 2007), The acquisition spree is with valuable reason. A CFO of a large Indian TT services company said that the valuations, which were earlier ruling at 15-2 time's sales, became more realistic. "slt came down to one time sales. Also, many ‘customers were trying to hive off their non-core business and picking-up such assets can bring commitied revenue and access to new customers, he said. CITI &sale of its captive BPO unit to Tata Consultancy Services in a $505- million deal in October anc! HCL Technologies buy-out of UK consulting firm Axon for $658 million earlier this 2 (07) 7) 7) (07) (07) (07) (07) (07) (4)2101E706- S Candidate's Seat No + M.B.A.-2 (Sem-4) Examination HR-HR Policy Formulation Time : 2.30 Hours] January 2020 [Max. Marks : 70 Note: Please make ail your answers concise, 2 Define the following concepts: 4 (1) Elements of organization design (2) Rule (3) Compliance policies (4) Discretionary policies (6) Policy formulation (6) Policy validity (7) Management Philosophy 2 Answer the following (Any One): “4 {1) Explain the meaning and importance of Policies as an element of organization design and a transactional element of change. Present diagram when necessary. (2) What ate policies? How do they relate to the corporate values, managemeni. pnilosophy, and organization culture? 3 Write short notes on (Any Two}: M4 (2) Process of HR Policy formulation (2) Elements of an effectively drafted policy document. (3) Criteria of evaluating effectiveness of HR policy 24 Read the following section from a policy document. Iéentify its positive aspects as 14 \well as areas of improvement. Present improved draft. Employee Recognition Policy Employee recognition is not just a nice thing to do for people. Employee recognition is a communication tool thar zeinforces and rewards che most Impowane outcomes people ereace for your business. When you recognize people effectively, you reinforce, with your chosen means of recognition, the tions and behaviors you most want to see people repeat Eligibility: Quarterly Awards; All employes of Deepak Foundation who have participared in teamwork, went the extra mile sad contributed to the organization's success, apatt from their regular work without compromising their routine activities are cligible to be nominated. Detail criteria of eligibility ia nomination teem. Awaeds will be distributed subject wo the following conditions. 1, Maximum six awards can be distributed in a quarcer. 2. Maximum cwo employees per block can be awarded in a quarter, 3, At the most one employee per team can be awarded in a quarter. 4. Tn any case decision taken by the Award Commitece will be considered final ‘Annual Award: One employee from each of the following five categories will be awarded in the Annual General Meeting. Frequency: Quarterly (June, September, December and March) Budget: Rs.10,000/-. Awards worth Rs.150/-cach w be disteuted quarterly and Rs.1000/-each to be distributed annwally. Decision Makets: A award committee consisting of all HODs bas also been constituted, Procedure: > An award nomination form rust be filled by TCs and above who want to nominate any employs ¢ for an award, » Form should be sent to HR before the 15" of May, August, December and March, > Forms will be scrutinized by che committee as to who all should be Peweas awarded. Emme & se Quterly award winness will be announced in dhe Planning ane Roley meetings and Annual award winners will be announced in the ‘Annual General Meeting. ead the following text and answer the question(s) appearing in the enc Nibvant Dyeenem Ltd. had recently gone public with a successful public bffering of shares worth rupees one crore. With the funds flowing the company's path to further growth was made smooth, Vibrant made dyes that were finding increasing acceptance in the textile industry ‘that Surrounded it in the Western and Southern parts of India Vibrant had started as an experiment by two entrepreneurial brothers it he back yard of their house. After a few small successful experiments, the trothers had managed to get small orders from the small and them medium sized firms, and now they even had export orders. the dyes that Vibrant made did not require very High technology oF sophisticated equipment. However, the precision and skill of the workers sopiereated the meaterie! in the process was very important. small stake could ruin the batch and cause losses. Initially the brothers Themselves supervised the process, but as the scale of thelr operation grew, they hired more staff. ‘Today, Vibrant has 250 workers and 15 supervisors in Its production department. They also have four senior men who share the responsibilities Sf solving production-related problems, purchasing, storage and operations, Since the developed nations of the world have stopped the manufacture of chemicals, the business is increasingly shifting to developing ‘countries. Indis and China are among the countries who are receiving much of this shifting business. That also means that export (5 @ huge opportunity, and ne two brothers need to learn how to export, how to compete and how to grow in the globalizing world. They need more sophistication, and also aend to develop relations with banks, export agents and foreign agents of large companies. However, of late the two brothers have sensed that they #6 spending oven at their time 07 helping thelr senior men solve problems related to aff on some day, the four senior men would come with some Complaints regarding indiscipline, some day they would want the opinion sf the two brothers on whorn to hire from among the candidates who had Sppited for a job. Some other day, they would want 9 opinion on how arin money they should give to the person who was gO'n8 to Mumbai for purchasing some material, and where that person should stay. Sometimes they would want to discuss the salary and promotion, The two brothers fiked the fact that their team members were keeping them informed about the work on hand, but these discussions are taking to ‘much of their time wghich they just don’t Rave. They wish these problems could be solved by themselves and that they could do the business the Wey they liked, with the Kind of people they liked and with the subordinates on board who could help. Question: If you weve the consultant to the broxhers = vibrant Byechem Gta what would yok advise? How would they imelement ‘their advice? “Gujarat University B.K.School of Professional and Management Studies Subject: Corporate Finance & Restructuring, Mid Semester Examination MBA IL S&M-IV [Felt Time 25, April, 2023 Total Marks: 50 QU. What is Corporate Restructuring? (10) Q2. Explain forms of Corporate Restructuring. (10) OR Q2. What are the objectives of a takeover or a merger? (10) Q3. Explain advantages of a merger or a takeover, (10) OR Q3. Explain Trautwein’s Merger Motive Model. (10) Q4. Explain financial anti-takeover measures. (10) OR Q4. What are the differences between Friendly V/S Hostile takeovers? (10) Q5. Explain various types of Amalgamation. (10) {HESS HH nepinonninio icece coh3/43 1205M162 Candidate’s Seat No: M.B.A.-II (Sem.-IV) Examination Corporate Finance & Restructuring Time ; 3 Hours] May-2017 (Max. Marks : 100 Instructions: 1. Attempt all questions. 2. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q.1) Explain the concept of Corporate Restructuring and different forms of it in detail, 20) Q.2) AB Ltd. plans to acquire XY Ltd, The following information is available 20) XY Ltd. Rs. 20 Mili | Rs. 60 Million Earnings Per Share, EPS Price-Earnings Ratio, PE ‘What is the maximum exchange ratio acceptal Ratio of the combined entity is 152 ii, What is the minimum exchange'ratio acceptable to the shareholders of XY Ltd, i the P/E Ratio of the combined entity is 20? iii, At what point do the lines ERI and ER? intersect? e sharcholders of AB Lid, ifthe P/E OR 2.2) (A) Meera Company decided to buy Krish Company. Both have revenues of Rs. 20,000 each, Operating margin of 15%, tax rate 30%, investment rate 10% and growth rate is 15%, Beta of Meera ‘Company has a 1.2, and Krish Company has a 1,4. Both the firm have 40% debt and a cost of debt is 99%. Because of the synergies anticipated in the acquisition the combined firm is expected to have a beta of 13. (10) 1) If the risk free return is 8% and the equity risk premium is 5%. Calculate the cost of | capital for the two firms and the combined firm. (Po)MLe2~ 2) Assuming the value drivers remains constant (and revenues are simply combined), what would be the value of the combined company? Q.2.(B) Explain the approaches to enterprise/equity valuation in detail 0) Q3 (A) Explain Watter’s model and Gordon”s model in detail 0) Q3 (B) The Operating and cost data of a firm are as follows: Sales- Rs, 20,00,000 Variable Cost- 14,00,000 Fixed Cost- 4,00,000 ( including 15% interest on Rs. 10,00,000) Calculate its operating, financial & combined leverage (ao) Or Q.3(A) What is capital structure and which are the factors that need to be consider while designing an appropriate Capital structure (10) Q.3 (B) X limited has capital of Rs.1000000 in equity share of Rs.100 each. The shares are currently quoted at par. The company proposes to declare dividend of Rs.10 per share. K is 12%.What will be market price of share at the end of year | (i) Hfno dividend is dectared Gi) IFRs.10 dividend is declared ‘Assume that the company pays dividend and has net profit of Rs.500000 and wants to pay investment of Rs.10 lacs. How many new shares should be issued? (10) Q.4) (A) Suppose there is & project which involves initial cost of Rs 20,000 (cost at t= 0). Risk free rate is 10%. It is expected to generate net cash flows during the first 3 years with the probability as follows: ‘Year 1 “Year 2 Year 3 Net cash flows | Probability | Net cash flows | Probability [Net cash flows, 0.10 Rs 6,000, Rs 4,000, 0.10 ~_Rs 2,000 0.25 8,000 6,000 0.25 4,000 0.30 10,000 8,000 0.30 _____ 6,000. 0.25 12,000, 10,000, 0.25, 8,000 [010 14, 12,000 0.10 10,000 Calculate the NPV and comment whether the project should be accepted or not? Q.4 (B) Explain Sensitivity analysis & Decision tree approach in detail a9)MLe223 Or Q.4(A) Explain Agency theory in detail and ways through which we can deal with this problem (10) Q.4 (B) Suppose a firm has an investment proposal, requiring an outlay of Rs 2,00,000 at present (t= 0). ‘The investment proposal is expected to have 2 years’ economic life with no salvage value. Discounting rate is 8%. In year 1, there is @ 0.3 probability (30 per cent chance) that CFAT will be Rs 80,000; a 0.4 probabil (40 per cent chance) that CFAT will be Rs 1,10,000 and a 0.3 probability (30 per cent chance) that CFAT will be Rs 1,50,000. In year 2, the CPAT possibilities depend on the CFAT that occurs in year 1, Thatis, the CFAT for the year 2 are conditional on CFATT for the year 1. Accordingly, the probabilities assigned with the CFAT of the year 2 are conditional probabilities. The estimated conditional CFAT and their associated conditional probabilities are as follows: IFCFATI = Rs 80,000 TFCFATI =Rs 1,10,000 IFCEATT = Rs 150,000 CFAT2 Probability CFAT2 Probability CFAT2__| Probability Rs 40,000 02) RS1,30,000 03] RS1,60,000 ai i 06 1,30,000 04 2,00,000 08 150,000 02 160,000 03 240,000 0 ‘| Calculate the expected NPV. (a0) Q.5) Write Short note on: Any 4 (5 marks each) (20) a) Competition Act b) Accounting Standard 14 ©) Accounting for Demerger d)Share buyback’s guideline as per SEBI ¢ )Classification of Amalgamation eeoe ABA ate age gilda i ean he 1A ae aH LAE aii nn brcsqpis cocaine sprdbnoets Lares wit a rabsicnny ott ci‘Time : 3 Hours} incremental cash flow is Rs. 80 million. Weighted averag: cost of capital (9) of cash flow is 15%, risk free interest rate for 3 year ma urity is 5%. 2612M111 Candidate's Seat No :____ M.B.A-II (Sem-IV) Examination Corporate Finance and Restructuring 1. A, Explain each of the following terms (associated with mergers and acquisitions) in 2 or 3 sentences. [0] a. Dawn raid b. Bear hug ©. Proxy fight 4. Poison pill ©. Poison put £ Pacman g. Green mail h. Crown jewels i. White knight i. People pill B. Explain various trigger points of open offer unde regulation 10, 11 and 12 of SEBI ‘Takeover Code. * [9] 2. A. A project needs investment of Rs. 100 million in 3 years. Present value of 12%, volatility (i) What is the NPV of the project? (ii) What would be the value of the project under real option framework using Black-Scholes options pricing model? {10} B. The Stone Company is similar to and is in the same industry as the Sting Company. Both the companies have a cost of equity of 15%, cost of debt of 9% and 40% debt. If Sling has revenues of Rs. 1000, opereting margin of 15%, a tax rate of 35%, investment rate of 10%, growth rate of 12%, end 5 years of supernormal growth and zero growth thereafter, what value should Store Company be willing to pay for Sling Company? {10} 3. A. An auto plant that cost Rs. 100 million to build can p-oduce a new line of cars that wil, generate cash flows with a present value of Rs. 140 million if the line is successful, but only Rs, 50 million if it is unsuccessful. You believe that probab lity of failure is 50 percent. ‘a. Would you build the plant? b. Suppose that the plant can be sold for Rs. 90 million to another automaker if the line is not successful. Now would you build the slant? Page 1 of 2 Pre] (Max, Marks : 100612M IN-% c. What kind of real option has been suggested though the information provided in {question (by? Illustrate the real option using a desi 10) B. Differentiate between buy-back of securities and reduction of capital referring various regulations pertaining to both. (10) 4, A. Calculate NPV and IRR for each of the following investments. Opportunity cost of capital is 20% for all investments. Investment = Tnitial Cash Flow ______| Cash flow in Year 1 1 10000 +18000. 2 =5000 ~ #9000 3 5000) #5700 4 2000 +4000 Which investment is most valuable? ii, Suppose each investment requires some panel of land, Which one would you prefer? (15) B. Explain in brief, backward, forward and horizontal integyation. 15] 5. A. What are the two ways that firms pay out cash to it. shareholders? Deseribe pros and cons of both the methods, [10] B. What are the three ways that assist in identifying prin-ipal threats to projects success? Describe each in detail [10] Page 2of2222 1505M379 Candidate's Seat No _ M.B.A-IL (Sem.-[V) Examination Corporate Finance and Restructuring Time : 3 Hours] May-2015 [Max. Marks : 100 Instructions: (1) This paper contains five questions, (2) Questions 1 and 5 are compulsory. (3) Question 2, 3, 4 have. internal options. (4). Figures in the right side in the parenthesis indicate marks OF — “7 (@)_ | Explain the mechanics of cafeulating the present value of cash flows. | (10) (b) | Suppose you invest 47% of your portfolio in Reliance Energy and 53% | (10) in Grasim Industries, The expected retum on your Reliance Energy stock is 17% and on Grasim is 14%, The standard deviation of their annualized daily retums are 37% and 33%, respectively. Assume a correlation coefficient of 1.0. You are required to calculate: (1) The | Expected Return on the Portfolio and (2) The Portfolio Variance @-2 | Define Merger? Explain in brief: (1) Horizontal Merger, (2) Vertical | (10) (2)__ | Merger, (3) Conglomerate Merger, and (4) Reverse Merger. _ Q-2 | Explain as to which synergy is realized in undermentioned cases: | (10) 6) 1. Kingfisher Airlines acquired Deccan Airways 2. Oriental Bank of Commerce’s (OBC) takeover of Global ‘Trust Bank (GTB) 3. Hindustan Lever Limited (HLL) acquired Lakme’s Brand and | Business. |. Videsh Sanchar Nigam Limited (VSNL) acquired Tyco. Dilip Piramal acquired Universal Luggage. ‘OR 2 [What is Corporate Restructuring? Describe which “activities are | (10) (a) | considered as Corporate Restructuring and Which Activities are not considered as Corporate Restructuring? __| | Q2 | How is Coxporate Restructuring undertaken through the mechanism of | (10) )_| Divestitures @.3 | A company is considering two mutually exclusive projects A and B. the | (10) (a) _| possible cash flows from these projects and their probability distribution is given below, Both the projects will require an outlay of Rs. 3,000. [ Year Project A Project B Cashinflow | Probability | Cash Inflow | Probability = (Rs) ee Rs) I 2400 0.10 "7200 0.10 2 3000 0.20 6000 “0. [3_ __3600_ 0.40 4800 4 4200 0.30 | _3600 5 4800 0.10 2400 Which project would you recommend? Which project is more risky? 3 _| Explain the assumptions and implications of the NIapproach and the | (10) PTOOR | Gamma Lid is considering the purchase o} i existing machine that has the book value of Rs, 24000 and can be sold | for Rs, 12000. The salvage value of the old machine in 4 years is zero. | and is depreciated on straight-line basis. The proposed machine will perform the same function which the old machine is performing however improvements in technology will enable the firm to reap the cash benefits before depreciation and taxes of Rs. 56000 per year in materials, labour and overhead. The new machine has the life of 4 years and costs Rs. 112000. It can be sold for an expected Rs. 16000 at the end of the 4" year, Tax rate is 40%. Compute the cash flows associated with this repfacement, ‘What are the advantages of using certainty-equivalent approach? Does it suffer from any limitation? year ending on 31/3/2015. liculars wnings Afte [Rs, 280000__[ Rs. 7 if Shares Outstanding | _ 40000 Earnings Per Share | =RS.7 Price EamingRatio | —_—*10. 7 Market Price Per Share Rs. 70 Firm POR intends to acquire firm LMN and offered one share for every two shares of LMN Ltd. Assume that Firm PQR Ltd expects to have the same carnings and P/E ratios after the merger as before (no synergy effect), Show the extent of the gain accruing to the shareholders of both the companies as a result of merger. Are the shareholders better off or worse off than they were before merger? Bring out the difference between the Purchase N od with respect to Accounting Standard 14? OR XYZ Lid was worth Rs430 lakhs and ABC Lid had Rs. 375 lakhs. Firm XYZ Ltd acquired Firm ABC Ltd for Rs. 425 lakhs | ‘because they thought the combination of the new Firm XYZ Ltd and ABC Itd was worth 925 lakhs. What is the synergy and NPV from the mergerlacquisition of XYZ Ltd and ABC Ltd? @4 [Bring out the difference between the Enterprise Cash Flow Model and | (10) (b)___| Dividend Discount Model for valuing the target company? | @-5 | Write Short Notes (Any 4) ~ 7 (20) ‘Competition Law & Mergers and Acquisitions | Leverage Buyout | Intent & Motives of Target Companies | ‘Annual Equivalent Value for Capital Budgeting Decisions. i Time Value of Money Replacement Decision with respect to Capital Budgeting | Decisions. | ay aene eens naneaanie1405N107 Candidate’s Seat No; 2168 = M.B.A-II (Sem.-4) Examination Finance : Corporate Finance & Restructuring Time : 2-39 Hours] May 2019 IMax. Marks : 70 Instructions: (1) This paper contains five questions (@) Q2 (b) @ Q3 (b) (2) Questions 1 and 5 are compulsory (3) Questions 2, 3 and 4 have internal options (4) Figures in the right side in the parenthesis indicate marks Suppose you invest 48% of your portfolio in Reliance Industries and 5206 in Tala Steel. The expected return on your Reliance Industry's stock is 17% and on Tata Steel is 14%. The standard deviation of their annualized daily retums are 37% and 33%, respectively. Assume a correlation coefficient of 1.0 and calculate the portfolio variance. Explain Equivalent Annual Cost Method with example in context of Investment Appraisal Decision. XYZ Ltd has invested in the infiastructure project, The project entails the initial cost of Rs. $00 thousand. The market presents three economic scenarios, viz High Growth, Average Growth and No Growth. The estimated details for the three years are as under; (Rs in ‘000) [Year [Economic Con: cash Flows | Probability _ | 1 High Growth 200 030 ‘Average Growth 150. 0.60 | No Growth 40 0.10 2 | High Growth 300 0.30 ‘Average Growth 200 0.50 ‘No Growth 500 0.20 | 3 High Growth 400 0.20 ‘Average Growth 250 0.60 | ‘No Growth T 30. 10 The discount rate is 102%. Determine the Net Present Value for each respective years and suggest whether the infrastructure project is financially viable as per NPV rules or not. Or Explain different issues in case of dividend policy decision, Dream well company Ltd is expecting an annual income of Rs. 50000, whose cost of equity is 12.59%. The company at present has the debt of Rs. 300000 of 5% interest, You are required to determine the value of the company’s present situation and its following cases as per Net Income Approach of Capital Structure Decision. Case (1) Ifthe company have to raise the debt by Rs. 200,000. Case (2) If the company have to reduce the debt to Rs. 100,000, What is Corporate Restructuring? Explain Spin off and Split up as form of Corporate Restructuring, Explain with the relevant examples the motives of mergers in the context of corporate restructuring oa Rye (07) (07) rc) (07) (07) 07) on(a) @) (a) Qa (b) NOY. 2 What do you mean by Takeover? Explain reasons which are the successfill takeover tactics in India, Explain Divestiture as a form of Corporate Restructuring? brief takeover tactics. Also state with Explain the provisions of Companies Act with respect to Merger and Acquisitions. Explain Free Cash Flow to Equity Model with illustration in context of valuation of target company. Or Explain Comparable Company Approach with illustration in context of valuation of target company. What do you mean by Leverage Buy Out? What are its characteristics? State the prerequisites to success of leverage buy out. Sagar Ltd and Sarita Ltd were amalgamated on and from 1" April, 2018. A new ‘company Sangam Ltd was formed to take over the business of existing companies. 2 are as under Balance sheet of both the companies as on Liabilities Sagar | Sarita sets, Sagar | Sarita | utd | Ltd Ltd. Ltd Ley | ey | s)_|_®s) Equity Share Capital of | 600000 | 500000 [Land and} $00000 | 300000 Rs. 100 each fully paid Building up fee 12% Preference Share | 200000 | 150000 | Piant and | 300000 | 200000 Capital of Rs. 100 each Machinery fully paid il eect ‘General Reserve 150000 | 100000 | Tnvestments | 200000 | 100000 Investment Allowance | 50000 |~ 30000 | Stock 730000 | 70000 | Reserve oe Export Profit Reserve | $0000 | 40000 _| Debt {00000 | 150000 Profit & Loss Alc___| “40500 | Cash & Bank | 65000 | 125500 12% Debentures 50000 |~35000 | Creditors 90000 | ~40000_— ___| [Bills Payable | _15000_| 10000 ‘295000 | 945500 ~—_[izss000 | 945500 ‘Additional Information (i) 12% Debenture holders of Sagar Ltd and Sarita Ltd are discharged by Sangam Ltd by issuing such number of 15% Debentures of Rs, 100 each so as to maintain the same amount of interest. Gi) Sangam Ltd will issue 4 Equity shares for each 3 Equity shares of Sagar Ltd and 3 Equity share for each 4 Equity shares of Sarita Ltd. The shares are to be issued at Rs. 110 each, having face value of Rs. 100 per share. (iii) Preference shareholders of the two companies are issued equivalent number of 15% Preference shares of Rs. 100 each of Sangam Ltd at a price of Rs. 120 per share. (iv) Statutory Reserves are to be maintained for 2 more years. You are required to prepare Balance Sheet of Sangam Ltd after the amalgamation has been carried out in nature of merger by taking in to consideration the provisions of Accounting Standard 14. on on on on (07) on (4)3/102 0905M316 Candidate’s Seat No : M.B.A-II (Sem.-IV) Examination Corporate Finance & Restructuring (CFR) Time : 3 Hours] [Max, Marks : 100 Note: 1) Question 1 & S are compulsory 2) Question 2, 3 & 4 have internal options 3) Value on the right side indicate the marks 4) Scientific Calculator is allowed Q.1) Explain the concept of Corporate Restructuring and different forms of it in detail. (20) Q.2) (A) Right Company decided to buy Wrong Company. Both have revenues of Rs. 20,000 each. Operating margin of 15%, tax rate 30%, investment rate 10% and growth rate is 15%. Beta of Right Company has a 1.3, and Wrong Company has a 1.5. Both the firm have 40% debt and a cost of debt is, 9%. Because of the synergies anticipated in the acquisition the combined firm is expected to have a beta of 1.2. If the risk free return is 7% and the equity risk premium is 5%. Calculate the cost of capital for the two firms and the combined firm. Assuming the value drivers remains constant (and revenues are simply combined), what would be the value of the combined company (19) Q.2 (B) Explain in different takeover & defence tactics (10) Or Q.2 (A) Explain various motives for mergers & Acquisition (10) Q.2) (B) Find the Value of XYZ Ltd. on the base of comparable companies approach, which is a prospective target, from the following information: (10) (Particulars a c Market / Net Income (P/E Ratio) 30 is | 40 | Market / Book 2.56 3.04 farket / Sales 2.46 [22] ‘The Current Sales of XYZ Ltd. is Rs. 400 lakhs, Book value of equity Rs. 250 lakhs and Net Income is Rs. 250 lakhs Q3 (A) Explain in detail what is “Accounting Standard 14”, (10) Q3 (B) Explain the determinants of Dividend policy (10) (3.0) OrM1316-2. Q.3 (A) A growing company is confronted with a choice between 15% debt issue and equity issue to finance its new investments. Its pre-expansion income statement is as follows: Sales 4300000 Fixed Cost 500000 Variable cost(2/3 of sales) 3000000, EBIT 1000000 Interest at (0.125) 100000 EBT 900000 Income tax(0.35) 315000 ‘Net Income 585000 EPS. W7 ‘The expansion programme is estimated to cost Rs. 500000. Ifthis is financed through debt, the rate of interest will be 15% and P/E ratio will be 10. If expansion programme is financed through equity, new shares can be sold at Rs.100 per share, and the PYE ratio will be 12. Expansion will generate additional sales of Rs.1275000, No additional fixed cost would need and variable cost is based on sales, change in sales will change variable cost. If the company is to follow a policy of maximising the market value (MV) of its shares, which form of financing should be employed by the company? a) 3 (B) Write short note on: Buy back of share as per SEBI's guidelines (10) Q44) (A) Ray Ltd is examining two mutually exclusive proposals. The management of the company uses certainty equivalent (CE) approach to evaluate new investment proposals, From the following information pertaining to these projects, advice the company as to which project should be taken up. Risk free borrowing rate is 6%. (19) TP Proposal X > [Proposal ¥ Year | Cash flow after tax [CE Cash flow aftertex [CE 0 25000) 10 (25000) 10 1 15000. 0.8) 9000 09 2 15000 07, 18000 08, 3 15000 06, 12000 07 4 15000 05 15000 0.4 Q.4 (B) Explain Sensitivity analysis & Scenario analysis with example (19)M 31603 Q.4(A) Explain Agency theory in detail and ways through which we can deal with this problem (10) Q.4 (B) Ayush Ltd, has made the following estimates of the CFAT associated with an investment. proposal. The company intends to use a decision tree to get a clearer picture of the project's cash inflows. The project has an expected life of 2 years. FATT Probability Rs.25000 04 Rs.30000 06 CFAT(E2) = 7 TEGRAT Rs.25000 for Rs.12000 02, year 1 Rs.16000 03 Rs.22000 05 TECFAT Rs.30000 for Rs.20000 04 year | Rs.25000 05) _| Rs.30000 Ot Caleulate the expected NPV. (10) Q.5) Write Short note on: ($ marks each) 20) 1) Competition Act for M & A 2) Leverage Analysis with example 3) Bonus Shares 4) SynergyB.K, SCHOOL OF BUSINESS MANAGEMENT MBA III SEMESTER-VI BATCH: 2015- 2018 (EVENING PROGRAM) MID SEM (INTERNAL) EXAMINATION F04: CORPORATE FINANCE & RESTRUCTURING (CF&R) Date: 11/04/2018 Total Marks: 50 Instructions: _All questions are compulsory Ql. Define the following: (10 Marks) 1, Equity Carve Out, 2, Joint Venture. 3. Divestiture, 4. Consolidation 5. Leverage Buyout, OR QI. Merger of ICICT with ICICI Bank exploits the loopholes of Accounting Standard 14? Discuss (10 Marks) 2. Ambuja Cement Ltd is a large company operating in the cement industry. Given its large size it is unlikely that the firm will grow at a rate faster than the economy in the long. term, The free cash flow to the firm in the year 2009 was Rs. 4 per share. The following, additional information for the year 2010 is available: EPS = Rs. 4.5, Capital Expenditure per share = Rs. 4.15, Depreciation per share = Rs. 3.30, Change in the WC per share = Rs, 1, Debt Financing Ratio = 30%, The earnings, capital expenditure, depreciation and working capital are all expected to grow at 6% a year. The beta of the stock is 1.1. The treasury bill rate is 7%. Estimate the value per share using the free cash flow to equity method. (10 Marks) OR 2. What is Delisting of Securities? Explain its types? What are the Delisting guidelines given under SEBI? (10 Marks) Q3. Explain the synergies involved in the below mentioned acquisitions? (10 Marks) ‘A. Kingfisher Airlines acquired Deccan Airways B. Oriental Bank of Commerce’s (OBC) takeover of Global Trust Bank (GTB) C. Videsh Sanchar Nigam Limited (VSNL) acquired Tyco D, Hindustan Lever Limited (HLL) acquired Lakme’s brand and business E. Dilip Piramal acquired Universal Luggage. OR Q3. Explain the process of Mergers and Acquisitions in det (10 Marks) Q4. What do you mean by Mergers and Acquisitions? Describe different defence tacties applied at the instance of the target companies in case of takeover? (10 Marks) OR Qt. ABC Ltd and XYZ Ltd were amalgamated on and from 1* April 2003 and GTPL Co. Ltd was formed. The Balance Sheets of both the Companies as on 31-3-2003 are given below: Balance Sheets Liabilities” [ABC Ltd] Vishal Assets ABC Lid | XYZ Lid Rs. Rs. Rs, Rs, Share Fixed Assets 3400000 | 3000000 Capital Equity 2400000 | 2800000 | Investments 420000 | 220000 Shares of Rs.Qs. 600000 | 800000 | Stock 500000] 1100000 400000 | 200000 | Debtors 700000 | 1550000 ~ 200000 ' 40000 | Bills Receivable 20000 | $0000 Allowance Reserve _ Export Profit | 20000 | 40000 | Cash- Bank 780000 | 166000 Reserve 14% 7200000 | 1600000 Debentures Creditors 300000 | 400000 Bills Payable [100000 [200000 5220000 | 6080000 5220000 | 6080000 ‘The new company issued equity shares to make the payment to the equity shareholders of both the companies. Calculate the purchase consideration as per Pooling of Interest Method and prepare the Balance Sheet of GTPL Ltd as per Pooling of Interest Method. (10 Marks) Write Short notes on (Any 2) (10 Marks) L. Legal provisions of Company Law with respect to M&A. IL Tax Aspects of Mergers and Acq IIL Take Over Tactics IV. Valuation Approaches in Case of M&A. tion.(10) (10) (10) (ao) a9) (10) (10) (a0) 3p? 1701E576 Candidate’s Seat No MBA-I (Sem.-IV) Examination Corporate Finance & Restructuring ‘Time : 3 Hours) January-2017 (Max. Marks : 100 Instructions: (1) This paper contains five questions. (2) Questions 1 and 5 are compulsory. (3) Question 2, 3, 4 have internal options. (@) Figures in the right side in the parenthesis indicate marks a (a) Describe the sources for obtaining the working capital finance and long term finance for an organization? (©) How do you ascertain the value of share under Capital Asset Pricing Model? Q-2 The stability of the dividend decision can be in any threé forms: (1) Constant Dividend per (®) shave, (2) Constant Dividend Payout Ratio and (3) Constant Dividend per share plus extra dividend. Explain in brief the three forms of dividend decision. Q2 A machine purchased four years ago has been depreciated @25 percent on reducing (b) balance of Rs. 50000. The machine originally had a life of 10 years and zero salvage value. ‘A new machine will cost Rs. 80000. Its installation cost estimated by the technician is Rs, 20000. It is also estimated that the installation of new machine will result in a reduced operating cost of Rs. 30000 per year for next 6 years. The old machine could be sold for Rs. 20000. The new machine will have 6 years life with no salvage value. The company’s normal income is taxed at 35%. Cost of capital is 10% Determine whether the existing machine should be replaced. This 25% block of assets will cease to exist at the end of 6 years. oR Q-2 Outline the key steps in decision tree analysis with respect to capital budgeting, decision with an (2) appropriate example? Q-2 A company is considering two mutually exclusive projects A and B. In both the cases, the (>) initial investment will be Rs. 1,00,000 and the useful life of both will be 10 years. No roject has any scrape value. The probable cash flow will be as follows: Scenario Project A (Rs) Project B (Rs) Optimistic 40000, "70000 Most Likel 35000 35000 Pessimistic 18000. 4000 IF the rate of discount is 10%, calculate the present value and state which project is better out of the two. The annuity of Rs. 1 at 10% for 10 years is Rs. 6.145, 3 Do you agree that the main motive behind the merger of ICICI with ICICI Bank was (® survival of ICICI? Say whether you think it Yes or NO and give reasons for your answer? Q-3 ABC Limited agreed to acquire the business of XYZ Limited as on 31st March 2016 as on (©) which the Balance Sheet of XYZ Ltd was summarized as follows. Liabilities Rs, Assets Bs. Capital (in fully paid shares [300000 | Goodwill 50000 of Rs, 10 each) General reserve 5000 |Tand and Building | 150000 CPT-0)Q3 @ Q3 © Qa @ Qa oO os (a) Qa by Os Profit and Loss Account 170000 (6% Debentures [84000 Creditors _ Debtors 28000 _ Cash 18000) 500600, 500000 ‘The consideration payable by ABC Ltd was: Cash payment Rs 7.50 for every shares in XYZ Ltd. The issue of 45,000, Rs 10 shares at an agreed value of Rs 12.50 per share, and 6% debentures of XYZ Ltd are taken over by ABC Ltd and are discharged by the issue of such an amount of fully paid 5% debentures in ABC Ltd at 96% as is sufficient to discharge the 6% debenture in XYZ Ltd at a premium of 20%. Calewlate the amount of purchase consideration to be discharged according to Accounting Standard 14 oR Differentiate between Strategic Alliance and Joint venture as a form of corporate restructuring. Justify with appropriate examples. - Differentiate between the Friendly Takeover and Hostile Takeover? Deseribe various globally prominent defence tactics employed the so thatthe takeover doesnot take place? ‘Explain the provisions of Competition Act for Mergers and Acqusitions? 1. Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share, The after-merger earnings will be $6,500. What will the earnings per share be after the merger? IL. Fitm Ais planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently bas 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. What is the value of the merged firm? OR Explain in brief the four different approaches to enterprise/ equity valuation? Following are the particulars of two companies, Acquirer Ltd and Target Ltd: Particulars ‘Acquirer Ltd_| Target Lid | ‘Barings after Tax : 400000 120000 ‘No. of Equity Shares Outstanding | 16000 8000 EPS : [25 5 PIE Ratio : 8 peal isi . “Market Price 150 3 Calculate: Exchange Ratio Swap Ratio) based on EPS and Market Price and Value of the Firm. ‘Master Acquirer-The Story of Cisco Cisco has long been recognized as a pioneer in using the Internet and its own network to improve its business practices. Cisco believes in acquisition guidelines of shared vision, focus on creation of short term gains, for employees in the aequired firm, strategic fit of the acquired company with Cisco's operations, cultural similarity and eompatibitity. ‘The strategic vision is to achieve corporate growth by acquiring firms with products and technologies that the firm cannot or does not want fo develop internally. In the period, 1993 to June 2008, Cisco acquired 127 companies, with 79 of these during the period 2000 to June 2008. The peak period of acquisitions was in the year 2000 when 22 companies were acquired Cisco's emergence to a position of dominance in the industry can be attributed to its ‘strategy of partnering with other companies that has led to its rapid rise as a manufacturer of routers-devices capable of switching data and voice messages at ultra speed. Cisco (19) (19) 0) (io) (10) (10) 20)partnered with many other organizations, including INS, in the provision of network solutions requiring extensive consulting, integration services, software applications, network and system management services and software control Cisco has repeatedly succeeded in using acquisitions to reshape itself and remove the lacunae in its product lines. Cisco extended its networking technology expertise, in the enterprise and service provider markets, into the high growth consumer networking market By 2004, the networking giant had acquired and successfully absorbed 36 firms. Cisco entered into more than 100 alliances in the same period and managed them well. Largely owing to Cisco's dual growth strategy, between 1993 and 2003, the company’s sales and market capitalization grew by an average of 36% and 44%, respectively. A key factor for ils M&A success can be attributed to the policy of having one senior vice president in charge of corporate development who is responsible for M&A, strategic alliances and technology incubation. By placing all three fictions under the same person, Cisco is able to look internally first, and then if there are no viable options for meeting its objectives, consider either an alliance or an acquisition. The VPs head teams that have honed the ability to execute acquisitions and alliances. Usually Cisco first assesses whether the target company has technology critical to Cisco's core products. The target company’s technology, when combined with Cisco's technologies, must provide solutions to meet customers’ demand immediately and in the future. If that seems likely, Cisco will acquire the business right away. Cisco avoids deals that require employees to relocate, because they usually leave the company instead of moving. Thus, Cisco rarely buys companies that are not located in its general neighborhood. When there is high degree of uncertainty around technologies, Cisco uses alliances as stepping stones to acquisitions. Approximately, 25% of Cisco's acquisitions start as small equity investments. This helps Cisco to get partners to accelerate development of produets, take options on competing technologies and evaluate firms to determine if acquisitions will work. According to the company, it takes beoween 12 to 18 ‘months to build trust amongst partners and decide if the companies can work together. The ‘equity relationships also help Cisco to move quickly to pre-empt rivals and acquire firms when the time is right. Cisco has been able to use both acquisitions and alliances successfully because it has developed processes that help it to determine when 0 use which strategy. Questions: 1a) What is Synergy? Explain different types of Synergies covered under corporate restructuring in context of the given case. b) Do you think that Cisco has been able to use both strategy of acquisitions and alliances successfully? Justify3/43 1205M162 Candidate's Seat No: M.B.A-II (Sem-IV) Examination Corporate Finance & Restructuring ‘Time : 3 Hours] May-2017 IMax. Marks : 100 Instructions: 1, Attempt all questions. Make suitable assumptions wherever necessary. 3. Figures to the right indicate full marks. Q1) Explain the concept of Corporate Restructuring and different fornis of it in detail (20) Q.2) AB Ltd. plans to acquire XY Ltd, The following information is available 20) | Abita [XY Total Current Earnings Rs. 60 Million |" Rs. 20 Million [ No. of Outstanding Shares 15 Million | n| Market Price per Share Rs. 40 ‘Earnings Per Share, _ a amnings Ratio, Pl 2 2 i. What is the maximum exchange ratio acceptable to the shareholders of AB Ld. ifthe P/E Ratio of the combined entity is 15? ii, What is the minimum exchange’ Ratio of the combined entity is 202 iii, At what point do the lines ERI and ER2 intersect? acceptable to the shareholders of XY Ltd, if the P/E OR Q.2) (A) Meera Company decided to buy Krish Company. Both have revenues of Rs. 20,000 each, operating margin of 15%, tax rate 30%, investment rate 10% and growth rate is 15%, Beta of Meera Company has a 1.2, and Krish Company has a 1,4. Both the firm have 40% debt and a cost of debt is 9%, Because of the synergies anticipated in the acquisition the combined firm is expected to have a beta of 13. (10) 1) If the risk free retum is 8% and the equity risk premium is 5%, Calculate the cost of ‘capital for the two firms and the combined firm. n (PIC)MtLé2~2 2) Assuming the value drivers remains constant (and revenues are simply combined), what would be the value of the combined company? Q.2 (B) Explain the approaches to enterprise/equity valuation in detail (10) 3 (A) Explain Walter’s model and Gordon’s model in detail () Q.3 (B) The Operating and cost data of a firm are as follows: Sales- Rs. 20,00,000 Variable Cost- 14,00,000 Fixed Cost- 4,00,000 ( including 15% interest on Rs. 10,00,000) Calculate its operating, financial & combined leverage (10) Or Q.3(A) What is capital structure and which are the factors that need to be consider while designing an appropriate Capital structure (10) Q3 (B) X limited has capital of Rs.1000000 in equity share of Rs.100 each. The shares are currently {quoted at par. The company proposes to declare dividend of Rs.10 per share. K is 12%.What will be market price of share at the end of year | (i) Tino dividend is declared (ii) IFRs.10 dividend is declared ‘Assume that the company pays dividend and has net profit of Rs.500000 and wants to pay investment of Rs.10 lacs. How many new shates should be issued? (10) Q.4) (A) Suppose there is a project which involves initial cost of Rs 20,000 (cost at t= 0). Risk free rate is 10%. It is expected to generate net cash flows during the first 3 years with the probability as follows: ‘Year 1 ‘Year 2 Year 3 Probability | Net cash flows | Probability | Net cash flows |" Probability [Net cash flows 0.10 Rs 6,000 0.10 Rs 4,000 0.10 ~ Rs 2,000 0.25 8,000 0.25 6,000 0.25 4,000 030 10,000 0.30 8,000 0.30 6,000 0.25 12,000 0.25 10,000 0.25 8,000 0.10 14,000 0.10 12,000 0.10 10,000 Calculate the NPV and comment whether the project should be accepted or not? Q. 4 (B) Explain Sensitivity analysis & Decision tree approach in detail (10)