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Internal
Assignment Applicable for December 2017 Examination
Strategic
Financial Management
Q.1. Mr. Das is a CFO of ABC Ltd. The
Company proposes to establish overseas subsidiaries in European countries to
expand its business. However before any final decision, Mr. Das has to make
detailed report on following points (a) Tax implication exchange gain &
loss and capital investment (b) Incentive available for export business (c)
Other important tax related matters Prepare brief note on the above three (3) points.
(10 Marks)
Q.2. Action Investor LLP, is a Private
Equity (PE) firm with 46% stake in OPS Ltd. Along with the stake, the PE firm
also has a board seat and veto power on major financial decision of the
Company. The performance of OPS Ltd is far below expectation over past two
years & the PE firm believes that there is need to look at various
restructuring steps. What are different types of restructuring that PE firm can
propose in board meeting? (10 Marks)
Q.3 a) SFL Ltd. is considering launching
of new product to supplement its existing range of product. As per the
projection done by the finance team, there will be initial capital investment
of Rs. 70 lakhs in current year. After that the first year will need capital
infusion of Rs. 1 Crs. Below are the after tax cash inflow projection; Year 2:
Rs. 25 lakhs Year 3: Rs. 30 lakhs Year 4: Rs. 35 lakhs From 5th year onwards
the cash inflow will be Rs. 40 lakhs through out till end of 10th year. The
Company expects the new product shelf life to be of 10 years.
Assuming 15% discount rate what will be
the NPV of this new project . Based on your NPV calculation, whether launching
of this new product line is acceptable or not? (5 Marks)
Q.3. b) MNP Ltd has recorded earnings
before interest and tax (EBIT) of Rs. 50 Crs for FY17. The Company has
outstanding debt of Rs. 10 Crs and pays 10% interest on its debt. Applicable
tax rate for the Company is 30%. What is the valuation of MNP Ltd if the
expected return on its equity shares is at 18%?
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