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Strategic Financial Management: Question Bank End Term

1. The document contains questions related to strategic financial management and mergers and acquisitions. It includes questions on types of mergers, valuation methods for acquisitions like NPV, business alliances, takeover regulations and guidelines, valuation approaches, synergy gains, and anti-takeover defenses. 2. The questions cover topics like types of acquisitions, exchange ratios, comparable company method of valuation, restructuring after acquisitions, payment methods, choosing target firms, and creating synergies. Valuation methods like discounted cash flow, adjusted book value and comparable company approaches are also discussed. 3. Regulations around takeovers in India, guidelines for corporate valuation, forms of demergers and restructuring

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279 views

Strategic Financial Management: Question Bank End Term

1. The document contains questions related to strategic financial management and mergers and acquisitions. It includes questions on types of mergers, valuation methods for acquisitions like NPV, business alliances, takeover regulations and guidelines, valuation approaches, synergy gains, and anti-takeover defenses. 2. The questions cover topics like types of acquisitions, exchange ratios, comparable company method of valuation, restructuring after acquisitions, payment methods, choosing target firms, and creating synergies. Valuation methods like discounted cash flow, adjusted book value and comparable company approaches are also discussed. 3. Regulations around takeovers in India, guidelines for corporate valuation, forms of demergers and restructuring

Uploaded by

9832155922
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Question Bank End term

Strategic Financial Management


1. a. State the number ways that a firm can be acquired and different types of mergers (3marks) II-3,4 b. Firm A plans to acquire firm B. The relevant financial details of the two firms, prior to the merger announcement are A B Market price per share Rs.50 Rs.20 Number of shares 1,000,000 500,000 Market value of the firm Rs.50 mln Rs.10 mln The merger is expected to bring gains which have a present value of Rs.10 mln. Firm A offers 250,000 shares in exchange for 500,000 shares to the shareholder of firm B. Compute NPV to A and NPV to B (7 marks) II-169 to 172 c. i. write a note on business alliance and its common forms (5 marks) II123 to 127 ii. discuss SEBI takeover and the purpose of its guidelines (5 marks) II-111 to 115 2. a. State the takeover restrictions (3marks) II-102 b. Explain different types of acquisitions (7 marks) II-4 to 10 c. i. Write a note on discounted cash flow approach for valuing firms (5 marks) III-33 to 36 ii. write a note anti-takeover defence in India (5 marks) II-121,122 3. a. What do you understand by divestitures (3marks) II-138,139 b. Visdesh ltd is keen on reporting an earnings per share of Rs.6 after acquiring Swadesh ltd. The following financial data are given; Videsh Swadesh Earnings per share Rs.5.00 RS.5.00 Market price per share Rs.60.00 Rs.50.00 Number of shares 1,000,000 800,000 There is an expected synergy gain of 5 %. What exchange ratio will result in a post-merger earnings/share of Rs. 6 for Videsh ltd (7 marks) II-174 c. Discus guidelines for corporate valuation (10 marks) III-37 to46

4. a. Explain the term Cater to managerial self interest (3marks) II-32 b. write a note on adjusting book value to reflect replacement cost and liquidation values (7 marks) III-8 to14 c. Alpha corpn. Plans to acquire Beta corpn. The following information is available; Alpha Beta Total current earnings E Rs. 50 mln Rs.20 mln Number of outstanding shares S 20 mln 10 mln Market price per share P Rs.30 Rs.20 i. What is the maximum exchange ratio acceptable to the shareholders of Alpha corpn, if the P/E ratio of the combined entity is 12 and there is no synergy gain? ii. what is the minimum exchange ratio acceptable to the shareholders of Beta corpn., if the P/E ratio of the combined entity is 11 and there is a synergy benefit of 5% iii. assuming that there is no synergy gain, at what level of P/E multiple will the lines ER1 and ER2 intersect? (10 marks) II-181,182 5. a. state the broad approaches to valuation (3marks) III-2 b. Black & co. plans to acquire white & co. The relevant financial details of the two firms prior to the merger announcement are: Black White Market price per share Rs.70 Rs.32 Number of outstanding shares 20 mln 15 mln The merger is expected to generate gains which have a present value of Rs. 200mln. The exchange ratio agreed to is 0.5. what is the true cost of merger from the point of view of Black & co.? ( 7 marks) II-177 c. write a note on forms of demerger and equity carve out (10 marks) II-145 to 149 6. a. explain demerger (3marks) II-144 b. The following financial information is available for company D, a pharma co. Profit before depreciation interest and taxes (PBDIT); Rs 17.5 mln Book value of assets; Rs.90 mln Sales: Rs. 130 mln

Based on an evaluation of several pharma companies A, B and C have been found to be comparable to company D. the financial information of these companies are given below; A B C PBDIT* 12 15 20 Book value of assets* 75 80 100 Sales * 80 100 160 Market value (MV) 150 240 360 MV/PBDIT 12.5 16.0 18.0 MV/book value 2.0 3.0 3.6 MV/sales 1.9 2.4 2.3 * Rs. In Million With the given information find the value of company D. (5 marks) III-29 to 31 c. i. write a note on partial sell off (10 marks) II-140 to 143 ii. Explain the three steps of structuring the acquisition (5 marks) II65,66

Compulsory
7. Discuss in detail valuing a firm for acquisition (20 marks) II-39 to 50 or 8. write a detailed note on direct comparison approach while valuing a firm (20 marks) III-17 to 27 9. a. state categories of anti-takeover defences (3marks) II-116 b. write a note on diversify to reduce risk (7 marks) II-24,25 c. state pre-takeover and post takeover defences practiced (10 marks) II-116 to 120 10. a. why is revaluation necessary? (3marks) III-47 b. write a note on take over poorly managed firms and change management (7 marks) II-30,31 c. what is the role played by accounting considerations in acquisitions (10 marks) II-81 to 93 11. a. why equity carve out is resorted to (3 marks) II-149 b. why do mergers fail (7 marks) II-97 to101 c. b. Write a note on Empirical evidence On the Value Effects of takeovers and mention basic steps in acquisition (7 marks) II-18 to 20

12.a. what is leveraged buyout (3 marks) II-154 b. write a note on takeovers and its pro and cons (7 marks) II-10 to 105 c. write a note on biases and common errors, and misuse of multiples during takeover valuation of firms (10 marks) II- 51 to 56 13. a. what is business process re-engineering (3marks) II-165 b. discuss which approach to follow while making payments to target firm (7 marks) II-77 to 80 c. Write a note on mismatching inputs during the takeover valuation (10 marks) II-57 to 63 14. a. explain enterprise resource planning (3marks) IIb. what is the objective of revaluation, and concept and measure of revaluation (7 marks) III-77 to 82 c. Discuss Deciding on an acquisition price (10 marks) II-66 to72 15. a. Important difference between cash and stock compensation: (3marks) II-173 b. write a note on payment for the target firms(7 marks) II_72 to 76 c. write a detailed note on ownership restructuring (10 marks) II-150 to 157 16. a. how is finished goods inventory valued (3marks) III-10 b. write a note on regulation of takeovers (7 marks) II-106 to 111 c. what are the advantages and disadvantages of holding company(10 marks) II-158 to 161 17. a. Firm A has a value of Rs.20 mln and firm B has a value of Rs.5 mln. If the two firms merge, cost savings with a present value of Rs.5 mln would occur. Firm A proposes to offer Rs. 6mln cash compensation to acquire firm B. Calculate NPV of the merger of the two firms (3 marks) II-168 c. write a note on organistional restructuring (10 marks) II-162 to167 18 a. what are non-operating assets (3 marks) III-12 b. Write a note on acquiring an undervalued firm (7 marks) II-21 to 23 c. Explain process of acquisition (7 marks) II-12 to 17 19. a. explain stock and debt approach (3 marks) III-15

b. write a note on adjusted book value approach (7 marks) III-3 to 7 c. write a note on creating operating or financial synergy (10 marks) II-26 to 29 20.a. state the commonly used basis for revaluing assets (3 marks) III-81 b. c. discuss Choosing a target firm for acquisition (10 marks) II-34 to 38 21.a. state myths and reality surrounding valuation (3 marks) III-75 b. What makes a business alliance succeed and what do you understand by Strategic and operational plans, and deal structuring (7 marks) II-132 to 137 c. discuss rationale for business alliance (10 marks) II-138 to 142

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