| ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS) | |||||||||||||||||||||||||||
| END SEMESTER EXAMINATION – SEPT/OCT. 2015 | |||||||||||||||||||||||||||
| M.COM – III SEMESTER | |||||||||||||||||||||||||||
| P111301:STRATEGIC FINANCIAL MANAGEMENT | |||||||||||||||||||||||||||
| Duration: 3 Hours Max. Marks: 100 | |||||||||||||||||||||||||||
| SECTION – A | |||||||||||||||||||||||||||
| I. | Answer any SEVEN questions. Each carries 5 marks. (7×5=35) | ||||||||||||||||||||||||||
| 1. | Write a brief notes on Leverage Buy-out. | ||||||||||||||||||||||||||
| 2. | Define Strategic Financial Management. | ||||||||||||||||||||||||||
| 3. | What is swap ratio and how is it calculated? | ||||||||||||||||||||||||||
| 4. | What are the strategic financial planning for dividend declaration? | ||||||||||||||||||||||||||
| 5. | Explain the valuation of Intangible assets. | ||||||||||||||||||||||||||
| 6. | Write short notes on : Sales tax impact on mergers. | ||||||||||||||||||||||||||
| 7. | Explain Income tax provisions 2(IB) and Section 72A of Income tax Act. | ||||||||||||||||||||||||||
| 8. | What is adjusted Book value? How do you calculate? | ||||||||||||||||||||||||||
| 9. | Mention the type of merger since year 2000 in India and compare with earlier mergers. | ||||||||||||||||||||||||||
| 10. | Write note on stock option and Indexed stock option. | ||||||||||||||||||||||||||
| SECTION – B | |||||||||||||||||||||||||||
| II. | Answer any THREE questions. Each carries 15 marks. (3×15=45) | ||||||||||||||||||||||||||
| 11. | Income based approach to valuation
The dilemma under this approach is that defining income stream for discounting. There are different meanings of income stream. It includes EBIT, EBITDA, Free Cash Flow, Operating Cash flow, Economic Value Added (EVA) etc. FCF accounts for future investments that must be made to sustain cash flow whereas EBDIT ignores any and all future required investments. The following information related to target company Ltd and the future plans of the acquiring company is given below.
From the given above information, Calculate the following: a) EAT b) EBDIT c) Gross cash inflow d) Operating free cash inflow e) Total Free cash inflow
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| 12. | Write a brief notes on stock vs Cash to settle the dealing at the time of mergers. | ||||||||||||||||||||||||||
| 13. | Explain the following terms with suitable examples:
a) EVA b) Alcar approach c) CFROI |
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| 14. | Explain the advantages and disadvantages of Strategic Financial Management. | ||||||||||||||||||||||||||
| 15. | Explain Anti-Take over defenses. | ||||||||||||||||||||||||||
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SECTION – C |
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| III. | Case Study (1×20=20) | ||||||||||||||||||||||||||
| 16. | a) Ke= 12%;Kd= 8%; Equity capital Rs. 60 crores and Debt Rs. 40 crores. Calculate: WACC and what is the minimum rate of return expected?
b)
c) ASST Ltd considers the proposal of acquiring BS Ltd. for Rs. 50crores. ASST Ltd’s Balance sheet discloses the following:
The following assets will be sold immediately after acquisition are as follows: Educational software will be sold at market value of Rs.15crores and building for Rs. 8 crores. The annual free cash inflow once the company is acquired will be Rs. 8 crores for 10 years. The cost of capital is 12%. Calculate initial cash outflow and evaluate the proposal by using NPV method. d)
If Firm B firm is offered at Rs. 22per share by A and acquires all the shares of B Ltd by exchange of stock: Calculate : a) Number of shares to be issued by A to B b) Calculate combined EPS immediately after merger c) Calculate P/E ratio paid. d) Compare P/E ratio paid to current P/E ratio of A Ltd. Will there be dilution of EPS for the combined entity? e) If P/E ratio of A continues after merger, what could be the maximum exchange ratio.
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