Advanced Financial Management - December 2021

M/s KPMS Ltd. wants to purchase M/s. BRB Ltd., by exchanging 0.7 of its share for each share of M/s BRB Ltd., relevant financial data are as follows: M/s KPMS Ltd. | M/s BRB Ltd. Equity shares outstanding 20,00,000 8,00,000 EPS (#) 40 28 Market price per Share (@) 250 160 (i) _ Illustrate the impact of merger on EPS of both companies (ii) The management of M/s. BRB Ltd., has quoted share exchange ratio of 1:1 for the merger.…

(a) Following is the information of M/s. DY Ltd. for the year ending 31/03/2021: Particulars Sales % 1000 Lakh Operating Expenses Including Interest ? 620 Lakh 8% Debentures % 250 Lakh Equity Share Capital (Face value of 7 10 each) % 250 Lakh Reserves and Surplus % 250 Lakh Market Value of DY Ltd 900 Lakh Corporate Tax Rate 30% Risk free Rate of Return 7% Market Rate of Return 12% Equity Beta 1. 42 FINAL (NEW) EXAMINATION: DECEMBER, 2021…

Mr. K Invested in the following companies to make his portfolio: Name of Company No. of Equity Face Value per | Purchase Price Share Purchase Equity Share | per Equity Share PK Ltd. 2000 710 210 KD Ltd. 1000 710 ₹290 Mr. K expects that- (i) Dividend for the financial year 2020-21 of PK Ltd. & KD Ltd. will be 40% & 50% respectively. (ii) Probabilities of the Market Price as on 31/03/2021 as under- Probability Market Value per Equity…

(a) AUS company wants to setup a manufacturing plant in India which requires an initial outlay of ₹8 Million. It is expected to have a useful life of 5 years with a salvage of ₹2 Million. The company follows straight line method of depreciation. To support additional level of activity, investment would require one time additional working capital of ₹1 Million. Since the cost of production lower in India, the variable cost of production would be ₹30 per unit. Additional…

TN Ltd. has ₹600 lakh 10% bonds outstanding with 5 years remaining to maturity. Since interest rate is falling, TN Ltd. is planning of refunding these bonds with a # 600 Lakh issue of 5 years bonds carrying a coupon rate of 7%. Issue cost of new bond will be ₹12 Lakh and call premium is 3%. % 18 lakh being the unamortised portion of issue cost of old bonds can be written off. Tax Rate applicable to TN Ltd.…

(a) Following are the details of X Ltd. and Y Ltd.: Particulars X Ltd. Y Ltd. Dividend per Share 74 74 Growth Rate 10% 10% Beta 0.9 1.2 Current Market Price per Share 7150 770 Other Information: Risk Free Rate of Return 7% Market Rate of Return 14% (i) Calculate the price of shares of both the companies. (ii) Write the comment on the valuation on the basis of price calculated and current market price. (iii) As an investor what…