Advanced Financial Management - November 2022

(a) Alfa Ltd. wants to acquire Beta Ltd. and has offered a swap ratio of 1 : 2 8 (0.5 shares for every one share of Beta Ltd.). Following information is provided : Alfa Ltd. ] Beta Ltd. Profit after tax (®) 18,00,000 | 3,60,000 Equity shares outstanding (Nos.) | 6,00,000 1,80,000 EPS (®) 3 2 PE Ratio 10 times 7 times Market price per share (®) 30 14 MPG P.T.O. (b) (2) 3 (i) You are required to determine…

During high growth period, Revenues & Earnings Before Interest & Tax (EBIT) will grow at 18% p.a. and capital expenditure net of depreciation will grow at 12% p.a. From 4" year onwards, i.e. normal growth period revenues and EBIT will grow at 8% p.a. and incremental capital expenditure will be offset by the depreciation. During both high growth & normal growth period, net working capital requirement will be 25% of revenues. Corporate Income Tax rate is 30%. The Weighted Average…

3. (a) Details about long term portfolio of shares of an investor is as below : 8 Shares | No. of shares (Lakh) | Market Price per share | Beta K Ltd. 6 250 1.4 L Ltd. 8 375 1.2 M Ltd. 4 125 1.6 The investor thinks that the risk of portfolio is very high and wants to reduce the portfolio beta to 0.91. He is considering below mentioned alternative Strategies : (i) Dispose a part of his existing…