Define: 1) Vertical Merger 2) Going private 3) Pac-man and White Knight 4) Amalgamation 5) Escrow Account 6) Buy-back through book building 7) ESOP Q.2 (A) Define corporate restructuring and what are various implications of corporate restructuring? Q.2 (B) Define Cross border expansion. Discuss Reasons and benefits of Cross border expansion.
[7 marks]Q.2 (B) Acompany issues 1000 equity shares of Rs 100 each at a premium of 10%. The company has been paying 20% dividend to equity shareholders and expecting to keep same performance in future years. Compute the cost of equity capital will it make any difference if the market price of equity share is Rs 160? Q.3 (A) Following are the particulars of two companies, Altd and Bltd. You are required to calculate exchange ratio and value of firm based on the market price. Consider Altd as acquirer & Bltd as Target firm. Particulars Altd Bltd EAT 2,00,000 60,000 No of Equity Share 8,000 4,000 Outstanding P/E Ratio 8 (B) Why do Firms Merge? And why do M & Aquite often fail? Discuss.
[7 marks]Q.3 (A) What are the main Powers of the Court with regards to sanctioning the scheme of amalgamation? Discuss (B) Altd is considering takeover of Bltd and Cltd. The financial data for the three companies are as follows. Particulars Altd Bltd Cltd Equity Share Capital of Rs 10 each 450 180 90 Earnings 90 18 18 Market price of each share 60 37 46 Calculate: 1) Price earnings ratios Page 1 of 2) Earnings per share of Altd after the acquisition of Bltd and Cltd separately. Will you recommend the merger of either/ both of the companies? Justify your answer. Q.4 (A) Discuss various pre offer and post offer anti takeover Defense strategy (B) Following are the Balance sheets of ABC ltd and XYZ ltd AS ON 31st March,2021 Particulars ABC ltd XYZ ltd 1) Equity and Liabilities
[7 marks]Shareholders’ funds
[ marks]Shares capital • Equity shares of Rs 10 5,00,000 4,00,000
[ marks]Reserve and Surplus • Revenue reserve 1,75,000 25,000 ii) Non-current Liabilities
[ marks]9% debentures 1,00,000 50,000 iii) Current liabilities
[ marks]Sundry Creditors 60,000 45,000
[ marks]Provision for taxation 40,000 25,000 Total 8,75,000 5,45,000 2) Assets
[ marks]Non- current Assets
[ marks]Fixed assets 3,75,000 2,45,000
[ marks]Investment 1,00,000 50,000 ii) Current Assets
[ marks]Stock 2,15,000 1,40,000
[ marks]Debtors 1,50,000 85,000
[ marks]Bank Balance 35,000 25,000 Total 8,75,000 5,45,000 ABC ltd. takes over the business of XYZ ltd. on the following terms; 1) Fixed assets of ABC Ltd, and XYZ Ltd are to be considered worth ₹ 5,00,000 and ₹ 3,00,000 respectively 2) ABC ltd agreed to discharge 9% debentures of XYZ Ltd. 3) Shares of both the companies are to be valued on the basis of its intrinsic value. Determine the ratio of exchange and calculate purchase consideration if: 1) Shares to be issued at par 2) Shares are to be issued on the basis of its intrinsic value. 3) Shares are issued on the basis of its market price of ₹ 20 each.
[ marks]Q.4 (A) Calculate the present value of the stock from the following formula:
[7 marks]Astock is expected to experience supernatural growth in dividend of 10% , g over the next five years ii) Following this period, dividends are expected to grow at a constant rate of 4%, g. iii) The stock paid a dividend of ₹4 last year. iv) The required rate of return on the stock is 5% (B) Explain the statement “Conglomerate firm shares tend to have higher market value due to lower cost of capital”.
[7 marks]CASE STUDY A Ltd. is considering merger with B Ltd. Altd. Shares are currently traded at INR 20. It has 2, 50,000 shares outstanding and its EAT is INR 5, 00,000. B.Ltd. has 1, 25,000 shares outstanding and its current MPS is INR 10 and EAT is INR 1, 25,000. The merger will be effected by the means of stock swap. B. Ltd. has agreed to plan under which Altd, will offer the current market value of B Ltd. shares. Questions: 1. What is the pre-merger EPS and P/Eof both companies. Page 2 of 2. If B Ltd., P/Eratio is 6.4 what is the current market price? What is the exchange ratio? What will be A Ltd. Post merger EPS will be? 3. What should be the exchange ratio, if ALtd. Pre-merger and post-merger EPS are to be same?
[3 marks]CASE STUDY In 2018, the Vraj ltd had revenues of 16 crore on which it earned 7 crore before interest and taxes. It had capital expenditure of 530 lac and depreciation of 410 lac in 2018.working capital as a percentage of revenue, averaged at 5% between 2017 and 2018(working capital increases by 150 lac in 2018) the beta of comparable firms in the industry is 1.05 and the average debt ratio of this firms is 24.79%(the cost of debt for the largest of this firms is approx 8%).The long term bond rate is 7.5% and market premium is 5.5%.tax rate is assumed to be 30%.FCFF is expected to grow 5% a year in the long term. Compute the value of the firm Page 3 of
[3 marks]