PG 7 8 5

LIs AR
l Semester
M.B.A. Degree Examination,
(CBCS) (2014e Examination,
15 &
Jan./Feb.
Jan.ir 2018 Ai E

Onwards)
Paper 3.3.3 MANAGEMENT
Corporate Valuation
:
Valuation and Restructuring9
and Resu
3 Hours Max. Marks: 70

SECTION-A
Swer any five of the following questions. Each question carries five maik
5-25)
From the following data, calculate the cost
of merger.
.When merger is financed by cash and
20. When merger is financed by stock

Firm A Firm B

Market Price per share As.6 Rs. 15

Number of shares 1,00,000 50,000

Market value of Firm Rs. 60,00,000 Rs. 7,50,000

Firm A intends to pay Rs. 10,00,000 cash for B if B's market price reflects only
its value as a separate entity.

Following is the condensed income statement of a firm for the current year
Income Statement (in Rs. Lakhs)
500
Sales Revenue
300
Operating costs
12
Interest costs
188
Earnings before tax
75.2
Taxes40%
112.8
Earnings after taxes

P.T.O.
 PG 785
The firm's existing capital consists of Rs. 15O lakh equity funds, having 15 perce. dden
e c o n o m i c value adde
D e t e r m i n e the
12 percent debt.
cost and Rs. 100 lakh
during the year
What is the Earnings
after Tax arn
is Rs. 330 Lakhs.
n
revenue
Assume the sales
EVA?
a rate of 14 perce
of Rs. 1,000 par value bond carrying coupon
3. The market price the yield to Maturty
on this bond
is Rs. 1,050. What is
and maturing after 5
years

to acquire XYZ Ltd. by merger and the following information

4. ABC Ltd. Is intending
isavailable in respect to the companies.

ABC Ltd. XYZ Ltd.

Particulars

10,00,000 6,00,000
Number of equity shares

Eamings after tax Rs. 50,00,000 Rs. 18,00,000

Market value per share Rs. 42 Rs 28

H the proposed merger takes place, what would be the newW earnings per share
for ABC Ltd. ?

ASsume that the merger takes place by exchange of equity shares and the
exchange ratio is based on the current market price
5. Briefty discuss various valuation approach for corporate valuation.

6. Discuss various types of Corporate Restructuring Activities.

7. What is Tobin's Q? Discuss its importance.

SECTION-B
Answer any three of the following questions. Each question carries ten marks.
(3x10
8. KTR is
popular restaurant in South India, owned and run by
a
Radhaswamy,
star chef specializing in South Indian cuisine. You are interested
restaurant and have been provided with the in buying

The restaurant can seat 100

following data.
dinners. It
seating for dinner. The restaurant remainshas two seatings for lunch ano
open for 340 days a
public. The average price of a lunch is Rs. 40 and year o
the average price of a
dininer
 Rs. 50. The PG 785
cost of tood is
25
employees
lakhs a year. on the staff approximately
of the
30% of the price of the meal
prIce There are

ne
The annual rent for the restaurarant and
the mounts toto Rs.
payroll anounts Rs. 10

year restaurant
is space used by K 40. 000.
ater that. Youexpected at present to grow ars aand 3%a
be 0.70. The estimate the unlevered beta6%of a year tor 3yeats
rate is 8% andaverage debt to capital publicly irduTho
the market risk ratio for these forms is T070 risk free
ou are premium is 5.5%
40% required
and the cost of
to estimate the value of
Restaurant (assume the tax rate i>

borrowing is 9%).
The
9. key financial parameters of
Digvijay Cement Company Ltd., are as tolows
EBDIT
Rs. 36 Lakhs
Book value of assets Rs. 180 Lakhs
Sales
Rs.250 Lakhs
ased on the evaluation of several cementcompanies X Ltd., Y LId., and Z Ltd.
nave been found to be comparable to Digvijay Cement Company Ltd. Their key
financial data are as follows:
(Rs. in Lakhs)

Company X Company Y Company Z

24 30 40
EBDIT
150 160 200
Book Value of Assets
160 200 320
Sales
300 480 720
Market Value
Cement Company Ltd., using Comparable Company
Find the value of
Digvijay
Approach.
notes on (any two).
Write short
D.
Resource
Accounting
Human
1)
Score Card
Balanced
2)
Approach
(EVA)
Stewart
3) Stem
of antitakeover defense strateav
and post-offer
Discuss
the pre-offer
1.
 2 MBA Thind Semester
c)Assuming that there is no synergy (V
will tthe ines ERI and FR2
gain, at what level of P .
ti mul
inmersect
10) Explain different methoxds fer vafnatiom of Inteflectual
Capital
1) Discrs the pre offer and
pont offer antitskeover defence strat
examples gies
Section-
ompuksory) f1x| S=15)
2Sammadra Indastries deals in
pmdtu tiei t e o
crmamer drd
expected ales revermaes for the nett K year fin mihrn)
are givenn inin dhe
Yenr te
4 6|7
SaesRevenue (80 10 150 220| 0260
ts condensed Balance Sheet March 2019
as on
1. is as follows
i n million)
Liabilities Assets
Equity Funds 120 Current Assets 30
12% Debt
80 Long-Term Assets 170
200

Additional Information:
a) Its variable will
expenses anount
to aO% of sales revenue.
Fixed ca
operating costs are estimated to be
<l6 million per ycar for the first
years and at 20 million tor
advertisement campaign will be
years -8. In addition, an extensy
launched, requinng annual outlays
follows:

Years 4-6 7-8

Rin Million 30 10
b) Long-term assets are
subject to
depreciation on straight-ine method
c) The company has planned the
have been incurred in the
tolowing capital expenditure (assumed
beginning of each year) for the next 8
yeas
Year 2 34|56| 7
in Million 58 20 25 35 25 15 810
d) Working capital in terims of investment in current assets is estumated
20% of sales revenue. a

e) Given the tax benefits available to Samudra, the etfective tax rate
estimated is 30%.
)The cost
of equity capital
The free cash flow of the
is estimated at 16%.
g) firi are
after 8 years. expected to grow at 5% per annum

Determine the Discounted Cash Flow (DCF)

value of the:
i) Firm, and
ii) Equity.